1.

The most important general ledger account included in and affecting several cycles is the: (Points : 10) cash account. inventory account. income tax expense and liability accounts. retained earnings account. 2. The detail tie-in is part of the classification valuation and allocation rights and obligations completeness 3. !anagement assertions are: (Points : 10) implied or expressed representations about accounts" transactions" and disclosures in the financial statements. stated in the footnotes to the financial statements. explicitly expressed representations about the financial statements. provided to the auditor in the assertions letter" but are not disclosed on the financial statements. 4. The occurrence assertion applies to . (Points : 10) presentation and disclosure matters classes of transactions and events during the period account balances proper classification of income statement accounts 5. The detail tie-in ob#ective is not concerned that the details in the account balance: (Points : 10) agree $ith related subsidiary ledger amounts. are properly disclosed in accordance $ith %&&P. foot to the total in the account balance. agree $ith the total in the general ledger. 6. 'hich of the follo$ing statements about the existence and completeness assertions is not true( (Points : 10) The existence and completeness assertions emphasi)e different audit concerns. *xistence deals $ith overstatements and completeness deals $ith understatements. *xistence deals $ith understatements and completeness deals $ith overstatements. The completeness assertion deals $ith unrecorded transactions. 7. To be considered reliable evidence" confirmations must be controlled by: (Points : 10) a client employee responsible for accounts receivable. a financial statement auditor.

assertion for account balances. (Points : 10)

a client+s internal audit department. a client+s controller or ,-.. 8. 'hich of the follo$ing is not one of the ma#or types of analytical procedures( (Points : 10) ,ompare client $ith industry averages. ,ompare client $ith prior year. ,ompare client $ith budget. ,ompare client $ith /*, averages. 9. The primary purpose of performing analytical procedures in the planning phase of an audit is to: (Points : 10) help the auditor obtain an understanding of the client+s industry and business. assess the going concern assumption. indicate possible misstatements. reduce detailed tests. 10. The &uditing /tandards 0oard has concluded that analytical procedures are so important that they are re1uired during: (Points : 10) planning and test of control phases. planning and completion phases. test of control and completion phases. planning" test of control" and completion phases. 11. 'hich of the follo$ing is not a correct combination of terms and related type of audit evidence( (Points : 10) -oot 2 reperformance. ,ompare 2 documentation. 3ouch 2 documentation. Trace 2 analytical procedures. 12. 'hich of the follo$ing statements regarding analytical procedures is not correct( (Points : 10) &nalytical tests emphasi)e a comparison of client internal controls to %&&P. &nalytical procedures are re1uired on all audits. &nalytical procedures can be used as substantive tests. -or certain accounts $ith small balances" analytical procedures alone may be sufficient evidence. 13. 'hich of the follo$ing normally signs the engagement letter for an audit of a public company( (Points : 10) ,orporate treasurer. ,hief financial officer. ,hairman of the board of directors. &udit committee. 14. 'hich of the follo$ing is not li4ely to be a related party( (Points : 10)

&ffiliated companies. & ma#or stoc4holder of the company. & $arehouse employee. The chief executive officer. 15. &n engagement letter sent to an audit client usually $ould not include a(n): (Points : 10) reference to the auditor+s responsibility for the detection of errors or irregularities. estimation of the time to be spent on the audit $or4 by audit staff and management. statement that management advisory services $ould be made available upon re1uest. reference to management+s responsibility for the financial statements. 16. 'hich of the follo$ing statements is not correct $ith respect to analytical procedures( (Points : 10) &uditing standards emphasi)e the need for auditors to develop and use expectations. &nalytical procedures must be performed throughout the audit. &nalytical procedures may be performed at any time during the audit. &nalytical procedures use comparisons and relationships to assess $hether account balances appear reasonable. 17. 'hich of the follo$ing is correct $ith respect to a company+s corporate charter( (Points : 10) The corporate charter is granted by the federal government and is re1uired to recogni)e the corporation as a separate entity. The corporate charter includes the rules and procedures used to operate a corporation. The corporate charter includes the exact name of the corporation" the date of incorporation" and the types of business the corporation is authori)ed to conduct. The corporate charter must be annually revie$ed by the P,&.0. 18. The first standard of field $or4" $hich states that the $or4 is to be ade1uately planned and that assistants" if any" are to be properly supervised" recogni)es that: (Points : 10) early appointment of the auditor is advantageous to the auditor and the client. acceptance of an audit engagement after the close of the client+s fiscal year is generally not permissible. appointment of the auditor subse1uent to the physical count of inventories re1uires a disclaimer of opinion. performance of substantial parts of the examination is necessary at interim dates. 19. .ne accounting issue that does not re1uire management to use significant #udgments is: (Points : 10) the allo$ance for doubtful accounts. the useful life of e1uipment for tax purposes. obsolete inventory. the liability for $arranty payments. 20. &cceptable audit ris4 is ordinarily set by the auditor during planning and: (Points : 10) held constant for each ma#or cycle and account.

held constant for each ma#or cycle but varies by account. varies by each ma#or cycle and by each account. varies by each ma#or cycle but is constant by account. 21. 5f planned detection ris4 is reduced" the amount of evidence the auditor accumulates $ill: (Points : 10) increase. decrease. remain unchanged. be indeterminate. 22. 'hen discussing control ris4 (,6) and the audit ris4 model" $hich of the follo$ing is false( (Points : 10) ,6 is a measure of the auditor+s assessment of the li4elihood that misstatements $ill not be prevented or detected by internal control. 5f the auditor concludes that internal control is completely ineffective to prevent or detect errors" he7she $ould assign a lo$ value (e.g." 08) to ,6. The relationship bet$een control ris4 and detection ris4 is inverse. The relationship bet$een control ris4 and evidence needed to support account balances is direct. 23. 'hen setting a preliminary #udgment about materiality: (Points : 10) more evidence is re1uired for a lo$ dollar amount than for a high dollar amount. less evidence is re1uired for a lo$ dollar amount than for a high dollar amount. the same amount of evidence is re1uired for either lo$ or high dollar amounts. there is no relationship bet$een it and the dollar amount of evidence needed. ,hapter 19 24. To $hat extent do auditors typically rely on internal controls of their public company clients( (Points : 10) *xtensively .nly very little 5nfre1uently :ever 25. & procedure designed to test for monetary misstatements directly affecting the correctness of financial statement balances is a: (Points : 10) test of controls. substantive test. test of attributes. monetary-unit sampling test. 26. Tests of transactions are used to determine $hether compliance test re1uirements.

have been satisfied. (Points : 10)

balance coverage re1uirements. transaction-related audit ob#ectives. existence assertions 27. 'hen the auditor finds that there are missing controls in an area of the accounting system" the audit program in that area $ould be modified in such a $ay as to: (Points : 10) increase the amount of tests of controls. increase the reliance on tests of controls. cause the issuance of a 1ualified or adverse opinion. eliminate the need for a test of controls. 28. 'hich of the follo$ing is not appropriate for purposes of testing the effectiveness of controls( (Points : 10) !a4e in1uiries of client personnel. *valuate prior experience $ith the client. .bserve control-related activities. 6eperform client procedures. 29. The primary emphasis in most tests of details of balances is on the: (Points : 10) balance sheet accounts. revenue accounts. cash flo$ statement accounts. expense accounts. 30. The most important consideration in developing the audit plan and audit program is the: (Points : 10) client+s si)e. client+s industry. audit firm+s available personnel. the audit ris4 model used in its planning form.