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I.

Identify the type of assertion for each transaction below

1.

Salaries and wages expense has been incurred during the period in respect of the personnel employed by the

2.

entity. Salaries and wages expense does not include the payroll cost of any unauthorized personnel. Inventory recognized in the balance sheet exists at the period end.

3.

All related parties, related party transactions and balances that should have been disclosed have been

4.

disclosed in the notes to financial statements. Review of bank confirmations for any liens on receivables.

5.

Test sample of vouchers for the presence of an authorized purchase order and receiving report.

6.

All inventory units that should have been recorded have been recognized in the financial statements. Any

7.

inventory held by a third party on behalf of the audit entity has been included in the inventory balance. Audit entity owns or controls the inventory recognized in the financial statements. Any inventory held by the

8.

audit entity on account of another entity has not been recognized as part of inventory of the audit entity. Related party transactions, balances and events have been disclosed accurately at their appropriate amounts.

9.

Obtain an aged trial balance of accounts receivables and agreed the total to general ledger control accounts.

10. Confirmation of selected account receivable performance.

II. Write your answer on the space provided for.

1.

Which of the following is one of the procedures in the audit acceptance phase?

a. Prepare the audit program

b. Determine need for other professionals

c. Investigate legal information

d. Perform audit procedures to understand the entity and its environment

2.

A preliminary examination of both new and existing clients includes all of the following procedures, except:

a. Accessing public news and public information

c. having discussions with the client’s management and staff

b. Assess risk and set materiality

d. visiting their premises

3.

One objective of the client acceptance phase of the audit is to:

a. Determine risk of the audit

b. Determine the amount and type of evidence and review required to give the auditor assurance that there is no material misstatement of the financial statements

c. Determine the type and amount of staff

d. Review financial statements and other report material

4.

The nature of an audit procedure refers to:

a. The quantity to be performed, for example, a sample size or the number of observation of a control activity

b. Its purpose (that is, test of controls or substantive procedure) and its type (that is inspection, observation, inquiry,

confirmation, recalculation, reperformance or analytical procedure)

c. When it is performed, or the period or date to which the audit evidence applies

d. The type of audit opinion that will be required

5.

When an auditor increases the assessed level of control risk because certain control procedures were determined to be ineffective, the auditor would most likely increase the

a. Extent of tests of controls

c. Level of detection risk

b. Extent of tests of details

d. Level of inherent risk

6.

As the acceptable level of detection risk decreases, an auditor may

a. Reduce substantive testing by relying on the assessments of inherent risk and control risk

b. Lower the assessed level of control risk from the maximum level to below the maximum

c. Eliminate the assessed level of inherent risk from consideration as a planning factor

d. Postpone the planned timing of substantive test from interim dates to the year-end

7.

A control deficiency that is more than a significant deficiency is most likely to result in what form of audit opinion relating to internal control?

a. Qualified

c. Unqualified with explanatory language

b. Unqualified

d. Adverse

8.

An auditor concludes that a clients illegal act, which has a material effect on the financial statements, has not been properly

accounted for or disclosed. Depending on the materiality of the effect on the financial statements, the auditor should express either a (n)

a. Qualified opinion or an adverse opinion

b. Adverse opinion or a disclaimer opinion

c. Disclaimer of opinion or an unqualified opinion with a separate explanatory paragraph

d. Unqualified opinion with a separate explanatory paragraph or a qualified opinion

9.

When financial statements of a company that follows GASB standards would be misleading due to unusual circumstances

depart from those standards, the auditor should explain the unusual circumstances in a separate paragraph and express an opinion that is

a. Qualified

c. Adverse

b. Qualified or adverse, depending on materiality

d.

10. An auditor may express an opinion on an entitys accounts receivable balance even if the auditor has disclaimed an opinion on

the financial statements taken as a whole provided the

a. Report on the accounts receivable discloses the reason for the disclaimer of opinion on the financial statements

b. Report on the accounts receivable is presented separately from the disclaimer of opinion on the financial statements

c. Auditor also reports on the current asset portion of the entitys balance sheet