1.

Those procedures specifically outlined in an audit program are primarily designed

to *
10 points

a. Gather evidence.
b. Detect errors or irregularities.
c. Test internal systems.
d. Protect the auditor in the event of litigation

2. The following are the matters to be considered by the auditor in establishing the
overall audit strategy, except *
10 points

a. Defining the scope of the examination

b. Assess risk and materiality
c. Computation of audit fees
d. Ascertaining the reporting objectives of the engagement

3. Which of the following is not one of the three main reasons why the auditor should
properly plan engagements? *
10 points

a. To enable proper on-the-job training of employees

b. To enable the auditor to obtain sufficient appropriate evidence.
c. To avoid misunderstandings with the client.
d. To help keep audit costs reasonable.

4. A listing of all the things which the auditor will do to gather sufficient, competent
evidence is the: *
10 points

a. Audit strategy
b. Audit program
c. Audit procedure
d. Audit risk model
5. The overall audit strategy should be updated and changed as necessary during the
course of the audit. The overall audit plan should be updated and changed as
necessary during the course of the audit. *
10 points

a. True, True
b. False, True
c. False, False
d. True, False

6. Which of the following is not typically included in initial audit planning? *

10 points

a. Client acceptance/continuation decisions.

b. Determination of the purpose of the audit.
c. Obtain an understanding with the client.
d. Perform analytical procedures as substantive tests.

7. This involves establishing the overall audit strategy for the engagement and
developing an audit plan, in order to reduce audit risk to an acceptably low level. *
10 points

a. Audit procedures
b. Audit planning
c. Audit program
d. Audit working papers

8. In planning an examination, the auditor would consider all of the following matters,
except *
10 points

a. Anticipated reliance on internal controls.

b. Preliminary judgment about materiality levels for audit purposes.
c. Financial statement items likely to require adjustment.
d. The kind of opinion (unqualified, qualified, disclaimer, or adverse), likely to be
given.
9. The audit program usually cannot be finalized until the *
10 points

a. consideration of the entity’s internal control structure has been completed.

b. engagement letter has been signed by the auditor and the client.
c. reportable conditions have been communicated to the audit committee of the board of
directors.
d. search for unrecorded liabilities has been performed and documented.

10.Which item would not be contained in an audit program? *

10 points

a. Staff assigned to the audit.

b. List of specific procedures (tasks) to be performed and the objectives to be met that
relate primarily to financial statements assertions.
c. Documentation of system being reviewed.
d. Estimated time required to perform each task.

11.In planning an audit engagement, the auditor is required to develop and document
a(an): I. Overall Audit Plan. II.Flowchart. III. Overall Audit Strategy *
10 points

a. Both II and III

b. Both I and II
c. Both I and III
d. I, II and III

12.The overall audit strategy sets the scope, timing and direction of the audit, and
guides the development of the more detailed audit plan. The audit plan is more
detailed than the overall audit strategy and includes the nature, timing and extent of
audit procedures to be performed by engagement team members in order to obtain
sufficient appropriate audit evidence to reduce audit risk to an acceptably low
level. *
10 points

a. True, True
b. True, False
c. False, False
 d. False, True

13.Which of the following parties would normally attend a planning meeting held
before the beginning of an audit engagement to discuss relevant client
information and the audit approach to be taken in performing the
engagement? *
10 points

a. Engagement partner and the client’s chief financial officer

b. Engagement partner and audit manager
c. Engagement partner, audit manager, and senior auditor
d. Engagement partner, audit manager, senior auditor, and junior audit staff
members

14.Overall audit plan should: 1. Precede action, 2. Be flexible, 3. Be cost

beneficial *
10 points

a. yes, yes, yes

b. no, no, yes
c. yes, yes, no
d. no, yes, yes

15.Which of the following would be least likely to be considered an audit

planning procedure? *
10 points

a. Use an engagement letter.

b. Develop the overall audit strategy.
c. Perform risk assessment.
d. Develop the audit plan.

16.In developing the overall audit strategy for a new client, factor not be
considered is: *
10 points

a. The terms of the engagement and any statutory responsibilities.

 b. The client’s business, including the structure of the organization and accounting
system used.
c. The specific procedures to be performed to gather audit evidence.
d. The audit risk, and procedures to be performed to achieve audit objectives.

17.The nature and extent of planning will vary according the following, except *
10 points

a. Size of the auditing firm

b. Complexity of the entity
c. Auditor’s experience with the entity
d. Changes in circumstances that occur during the audit engagement

18.Adequate audit planning helps ensure that appropriate attention is devoted:

1. To important areas of the audit, 2 So that potential problems are promptly
identified and resolved, 3. So that the work is performed in an effective and
efficient manner *
10 points

a. yes, yes, no
b. yes, yes, yes
c. yes, no, no
d. yes, no, yes

19.The audit plan includes: *

10 points

a. a description of the nature, timing and extent of planned risk assessment procedures
sufficient to assess the risk of material misstatement
b. a description of the nature, timing and extent of planned further audit procedures at
the assertion level for each material class of transactions, account balances and
disclosures
c. Other planned audit procedures that are required to be carried out so that the
engagement complies with our audit approach
d. All of the above

20.An audit should design the written audit program so that *

10 points
 a. all material transactions will be selected for substantive testing.
b. substantive tests prior to the balance sheet date will be minimized.
c. the audit procedures selected will achieve specific objectives.
d. each account balance will be tested under either tests of controls or tests of
transactions.
21.When determining the need to use the work of an expert, the auditor would
consider the following, except *
10 points

a. The professional certification or licensing by, or membership in, an appropriate

professional body.
b. The quantity and quality of other audit evidence available.
c. The materiality of the financial statement item being considered.
d. The risk of misstatement based on the nature and complexity of the matter being
considered.

22.The independent auditor should acquire an understanding of a client’s internal

audit function to determine whether the work of internal auditors will be a factor in
determining the nature, timing and extent of the independent auditor’s procedures.
The work performed by internal auditors might be such a factor when the internal
auditor’s work includes *
10 points

a. Verification of the mathematical accuracy of invoices

b. Review of administrative practices to improve efficiency and achieve management
objectives
c. Study and evaluation of internal accounting control
d. Preparation of internal financial reports for management purposes

23.The scope and objectives of internal auditing vary widely and depend on the size
and structure of the entity and the requirements of its management (engagement
objectives). Ordinarily, internal auditing activities include one or more of the
following, except *
10 points

a. Review of the economy, efficiency and effectiveness of operations including non-

financial controls of an entity.
b. Review of compliance with laws, regulations and other external requirements and with
management policies and directives and other internal requirements.
 c. Examination of financial and operating information including review of the means to
identify, measure, classify and report such information and specific inquiry into
individual items including detailed testing of transactions and recommending
improvements thereto.
d. Establishment of adequate accounting and internal control systems.

24.An initial audit requires more audit time to complete than a recurring audit. One of
the reasons for this is that *
10 points

a. new auditors are usually assigned to an initial audit.

b. predecessor auditors need to be consumed.
c. the client's business, industry and internal control are unfamiliar to the auditor
and need to be carefully studied.
d. a larger proportion of customer accounts receivable need to be confirmed on an initial
audit.

25.Each of the following procedures requires the assistance of an expert, except *

10 points

a. Determining the physical condition or quantity of underground mineral.

b. Determining the value of works of art.
c. Determining the adequacy of disclosure in the notes to the financial statements.
d. Interpreting major contracts.

26.An auditor who, at the request of the group engagement team, performs work on
financial information related to a component for the group audit is a *
10 points

a. Group Auditor
b. Component Auditor
c. Group Engagement Team
d. Component Engagement Team

27.To assess the objectivity of the internal auditors, an independent auditor would
most likely *
10 points
 a. Consider the professional qualifications and experience of the internal auditors.
b. Consider the proper planning, supervision and documentation of internal auditor’s
work.
c. Consider the nature and extent of the internal auditors’ assignment.
d. Consider the organizational level to which the internal auditors report the
results of their work.

28.During an audit, the auditor may need the assistance of an expert in obtaining
sufficient appropriate evidence. A common example is *
10 points

a. Determining the sufficiency and appropriateness of evidential matter obtained.

b. Evaluating the potential financial statements effect of an employee fraud.
c. Evaluating the integrity of management.
d. Determination of amounts using actuarial computations.

29.Which of the following is most correct regarding external auditors use of internal
auditors directly on the audit engagement? *
10 points

a. Discourage
b. Prohibit
c. Encourage
d. Permit

30.To operate effectively, an internal auditor must be independent of *

10 points

a. The entity
b. The audit committee of the board of directors
c. The employer-employee relationship which exists for other employees
d. The line functions of the organization

31.The work of internal auditors may affect the independent’s auditor’s I. Procedures
performed in obtaining an understanding of internal control II. Procedures
performed in assessing the risk of material misstatement. III. Substantive
procedures performed in gathering *
 10 points

a. I and III only

b. I and II only
c. II and III only
d. I, II and III

32.The risk that an expert’s objectivity will be impaired increases when the expert is
related in some other manner to the entity (e.g., by being financially dependent
upon or having an investment in the entity) and the expert is *
10 points

a. Engaged by the entity

b. Employed by the entity
c. Engaged by the auditor
d. Employed by the auditor

33.When planning to use the work of an expert, the auditor should assess the
objectivity of the expert. This will involve considering the expert's: I. Professional
certification or licensing by, or membership in, an appropriate professional body. II.
Experience and reputation in the field in which the auditor is seeking audit
evidence. III. Relationship to the entity. *
10 points

a. I, II, III
b. I and II
c. I and III
d. III only

34.Which statement is incorrect regarding the auditor’s use of the work of an expert? *
10 points

a. When using the work performed by an expert, the auditor should obtain
sufficient appropriate audit evidence that such work is adequate for the
purposes of the audit.on 1
b. “Expert” means a person or firm possessing special skill, knowledge and experience in
a particular field other than accounting and auditing.
c. The auditor's education and experience enable the auditor to be knowledgeable about
business matters in general, but the auditor is not expected to have the expertise of a
 person trained for or qualified to engage in the practice of another profession or
occupation.
d. When the auditor uses the work of an expert employed by the auditor, that work is
used in the employee's capacity as an assistant on the audit.

35.To maximize independence, the internal auditors should report to the *

10 points

a. Audit committee of the board of directors

b. CEO/President
c. Controller
d. Chief Financial Officer

36.Which of the following is an effective audit planning procedure that helps prevent
misunderstandings and inefficient use of audit personnel? *
10 points

a. Arrange to make copies, for inclusion in the audit files, of those client supporting
documents examined by the auditor.
b. Arrange to provide the client with copies of the audit programs to be used during the
audit.
c. Arrange a preliminary conference with the client to discuss audit objectives,
fees, timing, and other information.
d. Arrange to have the auditor prepare and post any necessary adjusting or
reclassification entries prior to final closing.

37.Which of the following is least likely to be included in the auditor’s engagement

letter? *
10 points

a. Details about the preliminary audit strategy

b. Overview of the objectives of the engagement
c. Statement that management is responsible for the financial statements
d. Description of the level of assurance obtained when conducting the audit

38.Which of the following in relation to the relationship between internal auditing and
the external auditor is false? *
10 points
 a. All judgments relating to the audit of the financial statements are those of the external
auditor.
b. Internal auditors should exercise the same degree of independence as required
of the external auditor.
c. The role of internal auditing is determined by management and its objectives differ
from those of the external auditor who is appointed to report independently on the
financial statements.
d. The external auditor has the sole responsibility for the audit opinion expressed
and that responsibility is not reduced by any use mane of internal auditing.

39.Which of the following statements in relation to the preliminary assessment of

internal auditing is false? *
10 points

a. During the course of planning the audit, the external auditor should perform a
preliminary assessment of the internal audit function when it appears that internal
auditing is relevant to the external audit of the financial statements in specific audit
areas.
b. The external auditor should obtain a sufficient understanding of internal audit activities
to assist in planning the audit and developing an effective audit approach.
c. Effective internal auditing will often allow a modification in the nature, timing,
reduction in the extent and even eliminate in its entire some procedures
performed by the external auditor.
d. In some cases, after having considered the activities of internal auditing, the external
auditor may decide that internal auditing will have no effect on external audit
procedures.

40.A CPA is conducting the first examination of a client’s financial statements. The
CPA hopes to reduce the audit work by consulting with the predecessor auditor and
reviewing the predecessor’s working papers. This procedure is *
10 points

a. Acceptable if the CPA refers in the audit report the reliance upon the predecessor
auditor’s work.
b. Required if the CPA is to render an unqualified opinion.
c. Acceptable if the client and the predecessor auditor agree to it.
d. Unacceptable because the CPA should bring an independent viewpoint to a new
engagement.