Question 1 / 61

In assessing whether to accept a client for an audit engagement, a CPA should consider Client Business Risk A. B. C. D. Yes, Yes Yes, No No, Yes No, No Acceptable Audit Risk

Question 2 / 61
Which of the following controls most likely will be effective in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debt write-offs? A. Employees responsible for authorizing sales and bad debt write-offs are denied access to cash.

B. Shipping documents and sales invoices are matched by an employee who does not have the authority to write off bad debts. D. Subsidiary accounts receivable records are reconciled to the control account by an employee independent of the authorization of credit.

Question 3 / 61
In general, an internal control deficiency may be defined as a condition under which misstatements would ordinarily not be detected within a timely period by

A. risk. B. C. D.

an auditor during the typical obtaining of an understanding of internal control and assessment of control a controller when reconciling accounts in the general ledger. employees in the normal course of performing their assigned functions. the chief financial officer when reviewing interim financial statements.

Question 4 / 61
A sales invoice for $5,200 was computed correctly, but, by mistake, was key-entered as $2,500 to the sales journal and to the accounts receivable master file. The customer remitted only $2,500, the amount on his monthly statement. Select the control that should have prevented the misstatement.

A. B.

Prelistings and predetermined totals are used to control postings. Sales invoice numbers, prices, discounts, extensions, and footings are independently checked.

C. The customers monthly statements are verified and mailed by a responsible person other than the bookkeeper who prepared them. D. Unauthorized remittance deductions made by customers or other matters in dispute are investigated promptly by a person independent of the accounts receivable function.

Question 5 / 61
An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed

control when the

A. B. C. D.

sample exception rate plus the allowance for sampling risk equals the tolerable rate. sample exception rate is less than the expected rate of exception used in planning the sample. tolerable rate less the allowance for sampling risk exceeds the sample exception rate. sample exception rate plus the allowance for sampling risk exceeds the tolerable rate.

Question 6 / 61
An auditor uses assessed control risk to

A. B. C. D.

evaluate the effectiveness of the entitys internal controls. identify transactions and account balances where inherent risk is at the maximum. indicate whether materiality thresholds for planning and evaluation purposes are sufficiently high. determine the acceptable level of detection risk for financial statement assertions.

Question 7 / 61
When an auditor issues an unqualified opinion about internal control over financial reporting for a public company, the auditor has obtained reasonable assurance that

A. B. C. D.

the likelihood of fraud is minimal. there are no control deficiencies. internal control over financial reporting is operating effectively. the financial statements are fairly presented in all material aspects.

Question 8 / 61
Analytical procedures used in planning an audit should focus on identifying

A. B. C. D.

material weaknesses of internal control. the predictability of financial data from individual transactions. the various assertions that are embodied in the financial statements. areas that may represent specific risks relevant to the audit.

Question 9 / 61
For which of the following tests would an auditor most likely use attribute sampling? a. b. c.

A. B. C.

Selecting accounts receivable for confirmation of account balances. Inspecting employee time cards for proper approval by supervisors. Making an independent estimate of the amount of a LIFO inventory.

D.

Examining invoices in support of the valuation of fixed asset additions.

Question 10 / 61
Which of the following is least likely to be comparable between similar corporations in the same industry line of business?

A. B. C. D.

Accounts Receivable turnover Earnings per Share Gross Profit percent Return on Assets before interest and taxes