AUDITING A RISK BASED APPROACH 11TH EDITION KARLA M – Test Bank

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1. The auditing standards issued by the PCAOB are identical to the auditing standards issued by the AICPA.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 12:25 AM
DATE MODIFIED: 1/20/2018 6:53 AM
2. Auditors in the U.S. follow guidance issued by the PCAOB, AICPA, and the IAASB.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 12:29 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 1Chapter 05
3. The PCAOB is committed to merging its standards with those of the AICPA and the IAASB.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 12:30 AM
DATE MODIFIED: 1/20/2018 6:53 AM
4. An auditor would follow the PCAOB’s guidance when auditing a company whose stock is traded on the London
Stock Exchange if the company conducts operations in multiple U.S. cities.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 12:31 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 2Chapter 05
5. The AICPA’s fundamental principles can be divided into four sections: purpose of the audit, responsibility of the
auditor, performance of the audit, and reporting of the results.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Principles Underlying the Auditing Standards
DATE CREATED: 1/19/2018 12:32 AM
DATE MODIFIED: 1/20/2018 6:53 AM
6. Auditors are responsible for having the appropriate competence and capabilities to perform the audit, complying with
ethical requirements, and maintaining professional skepticism throughout the audit.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Principles Underlying the Auditing Standards
DATE CREATED: 1/19/2018 12:33 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 3Chapter 05
7. An audit must be performed by persons who can make sound judgments relating to complex accounting issues.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Principles Underlying the Auditing Standards
DATE CREATED: 1/19/2018 12:34 AM
DATE MODIFIED: 1/20/2018 6:53 AM
8. The auditor needs to obtain absolute assurance as to whether the financial statements are free from material
misstatement.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Principles Underlying the Auditing Standards
DATE CREATED: 1/19/2018 12:35 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 4Chapter 05
9. PCAOB guidance includes standards on certain auditor responsibilities related to SEC filings.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 12:46 AM
DATE MODIFIED: 1/20/2018 6:53 AM
10. In some circumstances, the auditor will not express an opinion on the financial statements but will instead state that
an opinion cannot be expressed.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 12:47 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 5Chapter 05
11. The common purpose of auditing standards created by the various authorities is to provide reasonable assurance that
audits are conducted in a quality manner.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 12:47 AM
DATE MODIFIED: 1/20/2018 6:53 AM
12. The AICPA principles governing an audit explicitly state that an audit has inherent limitations prohibiting an auditor
from obtaining reasonable assurance that the statements are free from misstatement.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 12:48 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 6Chapter 05
13. If controls are effective, there is a higher likelihood that the financial statements are free of material misstatement.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.03
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Opinion Formulation Process
DATE CREATED: 1/19/2018 12:49 AM
DATE MODIFIED: 1/20/2018 6:53 AM
14. The activities performed by the auditor throughout the opinion formulation process are determined by whether the
auditor is conducting a financial statement audit only or an integrated audit.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.03
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Overview of the Audit Opinion Formulation Process
DATE CREATED: 1/19/2018 12:50 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 7Chapter 05
15. The cycle approach to auditing is a convenient way to break the audit into manageable time periods.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.04
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Cycle Approach to Auditing
DATE CREATED: 1/19/2018 12:51 AM
DATE MODIFIED: 1/20/2018 6:53 AM
16. Comparability is one of the five management assertions.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 12:52 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 8Chapter 05
17. Making client acceptance and continuance decisions is the first phase of the audit opinion formulation process.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.03
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Opinion Formulation Process
DATE CREATED: 1/19/2018 12:53 AM
DATE MODIFIED: 1/20/2018 6:53 AM
18. An auditor should give equal emphasis to all management assertions when testing accounts.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 12:54 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 9Chapter 05
19. The revenue cycles includes transactions related to revenue such as sales, receivables, and gain or loss from disposal
of equipment.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.04
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Accounting Cycles
DATE CREATED: 1/19/2018 12:55 AM
DATE MODIFIED: 1/20/2018 6:53 AM
20. An audit firm’s portfolio management includes client acceptance and continuance decisions that occur before the
audit opinion formation process is initiated.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Client Acceptance and Continuance Decisions
DATE CREATED: 1/19/2018 12:56 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 10Chapter 05
21. Evidence is required to be sufficient and appropriate in order to provide a reasonable basis for the auditor’s opinion.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Evidence Requirements
DATE CREATED: 1/19/2018 12:57 AM
DATE MODIFIED: 1/20/2018 6:53 AM
22. Audit documentation would not include analyses prepared by the client.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.07
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Documentation
DATE CREATED: 1/19/2018 12:58 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 11Chapter 05
23. Developing an understanding of the client’s business and industry is essential to the auditor’s assessment of risk.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Risk Assessment
DATE CREATED: 1/19/2018 12:59 AM
DATE MODIFIED: 1/20/2018 6:53 AM
24. Tests of controls are a type of substantive procedure.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Procedures
DATE CREATED: 1/19/2018 1:01 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 12Chapter 05
25. The Public Company Accounting Oversight Board (PCAOB) does not set specific standards for audits of public
companies.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 1:02 AM
DATE MODIFIED: 1/20/2018 6:53 AM
26. Tests of controls are procedures are procedures performed by the auditor to obtain information for identifying and
assessing the risks of material misstatement in the financial statements.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Procedures
DATE CREATED: 1/19/2018 1:03 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 13Chapter 05
27. The auditor performs substantive procedures to detect material misstatements in account balances.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Procedures
DATE CREATED: 1/19/2018 1:04 AM
DATE MODIFIED: 1/20/2018 6:53 AM
28. Audit procedures can be classified as risk assessment procedures, tests of controls, or substantive procedures.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Procedures
DATE CREATED: 1/19/2018 1:05 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 14Chapter 05
29. Assertions about existence address whether assets and liabilities exist, and assertions about occurrence address
whether recorded transactions, such as sales transactions, have occurred.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertion
DATE CREATED: 1/19/2018 1:06 AM
DATE MODIFIED: 1/20/2018 6:53 AM
30. The first phase in the audit opinion formulation process is performing a risk assessment.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.03
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Opinion Formulation Process
DATE CREATED: 1/19/2018 1:08 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 15Chapter 05
31. Physically inspecting a client’s assets is an audit procedure.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Procedures
DATE CREATED: 1/19/2018 1:09 AM
DATE MODIFIED: 1/20/2018 6:53 AM
32. Audit documentation is frequently referred to as working papers.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.07
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Documentation
DATE CREATED: 1/19/2018 1:10 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 16Chapter 05
33. Control risk refers to the risk that a misstatement could occur in an assertion about a class of transaction, account
balance, or disclosure, and which could be material, either individually or when aggregated with other misstatements,
will not be prevented, or detected and corrected, on a timely basis by the entity’s internal control.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Types of Audit Risk
DATE CREATED: 1/19/2018 1:12 AM
DATE MODIFIED: 1/20/2018 6:53 AM
34. Inherent risk refers to the susceptibility of an assertion about a class of transaction, account balance, or disclosure to
a misstatement that could be immaterial, either individually or when aggregated with other misstatements, before
consideration of any related controls.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Types of Audit Risk
DATE CREATED: 1/19/2018 1:13 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 17Chapter 05
35. There is an inverse relationship between the assessment of risk of material misstatement in an account and the
amount of evidence required.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Performing Risk Assessment
DATE CREATED: 1/19/2018 1:14 AM
DATE MODIFIED: 1/20/2018 6:53 AM
36. The purpose of the audit program is to list the audit procedures to be followed in gathering audit evidence and to help
those in charge of the audit to monitor the progress and supervise the work.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Program
DATE CREATED: 1/19/2018 1:15 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 18Chapter 05
37. The effectiveness of entity-wide controls may reduce the extent of testing of transaction controls.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Evidence about Internal Control Effectiveness
DATE CREATED: 1/19/2018 1:17 AM
DATE MODIFIED: 1/20/2018 6:53 AM
38. When assessing the effectiveness of controls for relevant assertions, the auditor tests only transaction controls.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Evidence about Internal Control Operating Effectiveness
DATE CREATED: 1/19/2018 1:18 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 19Chapter 05
39. The auditor is not required to test every control related to relevant assertions in a significant account.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Evidence about Internal Control Operating Effectiveness
DATE CREATED: 1/19/2018 1:19 AM
DATE MODIFIED: 1/20/2018 6:53 AM
40. For an integrated audit, the auditor’s opinion about internal control effectiveness is based on control effectiveness at
year-end as opposed to throughout the year.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Evidence about Internal Control Operating Effectiveness
DATE CREATED: 1/19/2018 1:20 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 20Chapter 05
41. A controls reliance audit includes substantive procedures and does not include tests of controls.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Auditor’s Reliance on Internal Controls
DATE CREATED: 1/19/2018 1:21 AM
DATE MODIFIED: 1/20/2018 6:53 AM
42. Assertions are relevant to the audit process because they are the representations of management embodied in the
financial statements.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 1:22 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 21Chapter 05
43. Presentation and disclosure assertions address whether components of the financial statements are properly
classified, described, and disclosed.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 1:23 AM
DATE MODIFIED: 1/20/2018 6:53 AM
44. The PCAOB does not currently have a mandate for convergence with other auditing standards.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Describe the Assertions Contained in Financial Statements
DATE CREATED: 1/19/2018 1:24 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 22Chapter 05
45. Substantive analytical procedures are optional for significant accounts and disclosures.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Substantive Evidence
DATE CREATED: 1/19/2018 1:25 AM
DATE MODIFIED: 1/20/2018 6:53 AM
46. In performing substantive tests on account balances, the auditor performs tests for all five assertions.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Substantive Evidence
DATE CREATED: 1/19/2018 1:26 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 23Chapter 05
47. If the auditor assesses internal controls to be effective, substantive testing likely will be performed for some, but not
all, significant accounts and disclosures.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Substantive Evidence
DATE CREATED: 1/19/2018 1:27 AM
DATE MODIFIED: 1/20/2018 6:53 AM
48. If the auditor’s assessment is that there is high risk due to the subjectivity of the accounting process, substantive
procedures should be more rigorous.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Substantive Evidence
DATE CREATED: 1/19/2018 1:28 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 24Chapter 05
49. An integrated audit requires the issuance of separate reports for the opinions expressed on the financial statements
and on internal control.
a. True
b. False
ANSWER: False
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Completing the Audit and Making Reporting Decisions
DATE CREATED: 1/19/2018 1:31 AM
DATE MODIFIED: 1/20/2018 6:53 AM
50. In an integrated audit, the auditor issues an opinion on both the financial statements and internal control.
a. True
b. False
ANSWER: True
POINTS: 1
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Completing the Audit and Making Reporting Decisions
DATE CREATED: 1/19/2018 1:32 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 25Chapter 05
51. The PCAOB’s General Auditing Standards requires that an audit be performed by which type of person?
a. An auditor with seasoned judgment in varying degrees of supervision and review.
b. An auditor having the appropriate professional qualifications.
c. An auditor with adequate technical and leadership skills.
d. All of the above.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 1:34 AM
DATE MODIFIED: 1/20/2018 6:53 AM
52. Which auditing standards apply to private companies?
a. The AICPA Standards.
b. The IASSB Standards.
c. The Standards of the PCAOB.
d. All of the above.
ANSWER: a
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 1:35 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 26Chapter 05
53. The AICPA Principles Governing an Audit include which of the following categories that guide the conduct of an
audit?
a. Purpose of an audit and premise upon which an audit is conducted.
b. Responsibilities.
c. Performance.
d. All of the above.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 1:36 AM
DATE MODIFIED: 1/20/2018 6:53 AM
54. What is the scope of applicability of the auditing standards of the AICPA?
a. Nonpublic companies traded in non-U.S. markets.
b. Nonpublic companies in the U.S.
c. Public companies traded in non-U.S. markets.
d. Public companies traded in the U.S.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 1:37 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 27Chapter 05
55. Which of the following is not required by the PCAOB’s General Auditing Standards category?
a. Exercise due professional care.
b. Obtain reasonable assurance as to whether internal controls are effective.
c. Maintain an independence in mental attitude.
d. Exercise professional skepticism.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 1:38 AM
DATE MODIFIED: 1/20/2018 6:53 AM
56. Which of the following organizations provides auditing standards for public companies?
a. GAO.
b. AICPA.
c. GAAP.
d. PCAOB.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 1:40 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 28Chapter 05
57. Which of the following factors has the greatest effect on the reliability of financial statements?
a. The size of the client
b. The industry of the client
c. The client’s internal control structure.
d. The client’s trend of earnings.
ANSWER: c
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.03
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Opinion Formulation Process
DATE CREATED: 1/19/2018 1:49 AM
DATE MODIFIED: 1/20/2018 6:53 AM
58. What is management’s responsibility with respect to the conduct of an audit?
a. Preparing financial statements.
b. Maintaining internal control over financial reporting.
c. Providing the auditor with relevant information and access to personnel.
d. All of the above.
ANSWER: a
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Responsibilities of Management
DATE CREATED: 1/19/2018 1:50 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 29Chapter 05
59. Which of the following assertions address whether accounts have been included in the financial statements at
appropriate amounts?
a. Completeness assertion.
b. Valuation or allocation assertion.
c. Rights and obligations assertion.
d. None of the above.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 1:51 AM
DATE MODIFIED: 1/20/2018 6:53 AM
60. Which of the following is the primary assertion related to testing inventory on hand to see if it includes consignment
goods?
a. Existence.
b. Completeness.
c. Valuation.
d. Rights and Obligations.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 1:52 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 30Chapter 05
61. Which assertion is most closely related to the determination of the adequacy of the allowance for doubtful accounts?
a. Existence.
b. Valuation.
c. Rights and Obligations.
d. Presentation and Disclosure.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 1:53 AM
DATE MODIFIED: 1/20/2018 6:53 AM
62. Which assertion addresses whether all transactions and accounts that should be included in the financial statements
are included?
a. Existence.
b. Valuation.
c. Completeness.
d. Rights and Obligations
ANSWER: c
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 1:55 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 31Chapter 05
63. Which assertion addresses whether the financial statement items are properly classified in the financial statements?
a. Completeness.
b. Existence.
c. Valuation.
d. Presentation and Disclosure.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 1:56 AM
DATE MODIFIED: 1/20/2018 6:53 AM
64. Which of the following groups are committed to the convergence of the auditing standards?
a. IAASB.
b. PCAOB.
c. AICPA.
d. Both A and C.
e. All of the above.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 1:57 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 32Chapter 05
65. Which of the following is a procedure that requests a direct written response to the auditor from a third party?
a. Inquiry.
b. Confirmation.
c. Inspection.
d. Observation.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Evidence and Audit Procedures
DATE CREATED: 1/19/2018 1:58 AM
DATE MODIFIED: 1/20/2018 6:53 AM
66. Which of the following is a procedure which analyzes plausible relationships among financial and nonfinancial data?
a. Analytical procedures.
b. Scanning.
c. Reviewing.
d. Observation.
ANSWER: a
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Evidence and Audit Procedures
DATE CREATED: 1/19/2018 1:59 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 33Chapter 05
67. What does the quality of the evidence an auditor collects depend upon?
a. The nature of the procedures.
b. The extent of the procedures.
c. The timing of the procedures.
d. Both A and C.
e. All of the above.
ANSWER: e
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Evidence and Audit Procedures
DATE CREATED: 1/19/2018 2:00 AM
DATE MODIFIED: 1/20/2018 6:53 AM
68. Which of the following terms describes procedures designed to detect material misstatements in accounts?
a. Substantive procedures.
b. Control tests.
c. Risk assessment procedures.
d. Business risk procedures.
ANSWER: a
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Evidence and Audit Procedures
DATE CREATED: 1/19/2018 2:01 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 34Chapter 05
69. When testing accounts receivable, which of the following audit procedures would an auditor likely use with respect
to accounts with unusual sales terms?
a. Inquiries.
b. Confirmation.
c. Contract review.
d. Aging of receivables.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Generally Accepted Auditing Standards and IAASB Principles
DATE CREATED: 1/19/2018 2:02 AM
DATE MODIFIED: 1/20/2018 6:53 AM
70. Which of the following statements accurately describes the auditor’s reporting responsibility for a financial statement
audit?
a. The auditor will state explicitly whether the financial statements are fairly presented in accordance with the
applicable financial reporting framework.
b. The auditor will identify in the auditor’s report those circumstances in which auditing principles have not been
consistently observed in the current period in comparison to the preceding period.
c. The auditor will review adjusting journal entries for accuracy, and if the auditor concludes those entries are not
reasonably accurate, the auditor must so state in the auditor’s report.
d. The auditor will express an unqualified opinion on the financial statements or will conduct additional audit
procedures until such an opinion can be expressed.
ANSWER: a
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 2:03 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 35Chapter 05
71. Which of the following statements about the auditing standards issued by the AICPA is true?
a. The auditing standards issued by the AICPA are no longer recognized by the PCAOB.
b. The auditing standards issued by the AICPA are no longer recognized by the profession because the AICPA
voted itself out of existence.
c. The auditing standards issued by the AICPA continue to be issued by that organization for audits of public
companies.
d. The auditing standards issued by the AICPA were used by the PCAOB as a starting point.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Professional Auditing Standards
DATE CREATED: 1/19/2018 2:05 AM
DATE MODIFIED: 1/20/2018 6:53 AM
72. Which of the following is a reason why an auditor needs an understanding of internal controls?
a. To provide individual comments on internal control non-compliance.
b. To become comfortable that the client will pay its audit bills.
c. To assess materiality.
d. To assess the risk of possible misstatements in the financial statements.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Performing Risk Assessment
DATE CREATED: 1/19/2018 2:06 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 36Chapter 05
73. Which of the following is not a reason why an auditor obtains an understanding of internal controls?
a. Understanding the entity’s internal control is a requirement of professional auditing standards.
b. The auditor must use the information to assess the risk of material misstatements arising from the lack of
internal control.
c. It is the primary basis for the audit report.
d. It assists the auditor in designing the nature, timing, and extent of further audit procedures.
ANSWER: c
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Performing Risk Assessment
DATE CREATED: 1/19/2018 2:07 AM
DATE MODIFIED: 1/20/2018 6:53 AM
74. Which type of audit documentation is required by PCAOB standards?
a. Flowcharts.
b. Narratives.
c. Questionnaires.
d. A specific form of documentation is not required.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.07
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Documentation
DATE CREATED: 1/19/2018 2:08 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 37Chapter 05
75. Which of the following is not a typical accounting cycle?
a. Revenue.
b. Inventory.
c. Cash.
d. Internal controls.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.04
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Accounting Cycles
DATE CREATED: 1/19/2018 2:09 AM
DATE MODIFIED: 1/20/2018 6:53 AM
76. Which of the following statements about assertions is true?
a. All assertions are equally important for all accounts.
b. The importance of an assertion depends upon the account.
c. Assertions are not related to accounts.
d. None of the above.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 2:10 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 38Chapter 05
77. Which of the following assertions would the auditor usually consider most relevant for accounts payable?
a. Existence.
b. Valuation.
c. Disclosure.
d. Completeness.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Financial Statement Assertions
DATE CREATED: 1/19/2018 2:11 AM
DATE MODIFIED: 1/20/2018 6:53 AM
78. Which of the following is a use of audit documentation?
a. Assisting the engagement team in planning and performing the audit.
b. Assisting members of the engagement team responsible for supervising and reviewing the audit work.
c. Retaining a record of matters of continuing significance to future audits of the same organization.
d. All of the above.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.07
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Documentation
DATE CREATED: 1/19/2018 2:12 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 39Chapter 05
79. Which of the following factors influence the risk of material misstatement?
a. Business risks.
b. Management incentives.
c. IT risks.
d. All of the above.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Risk Assessment
DATE CREATED: 1/19/2018 2:13 AM
DATE MODIFIED: 1/20/2018 6:53 AM
80. What does business risk include?
a. Economic factors.
b. Competitive factors.
c. Regulatory risk.
d. All of the above.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Risk Assessment
DATE CREATED: 1/19/2018 2:14 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 40Chapter 05
81. At what level does the auditor assess the risk of material misstatement?
a. The financial statement level.
b. The company level.
c. The assertion level.
d. Both A and C.
e. All of the above.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Risk Assessment
DATE CREATED: 1/19/2018 2:15 AM
DATE MODIFIED: 1/20/2018 6:53 AM
82. What does the effectiveness of internal controls influence?
a. Inherent risk.
b. Control risk.
c. Risk of material misstatement.
d. Both B and C.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Effectiveness of Internal Controls
DATE CREATED: 1/19/2018 2:16 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 41Chapter 05
83. Which of the following is not a control that the PCAOB has identified that auditors should consider in evaluating
whether or not an organization has sufficiently addressed fraud risk?
a. Controls over significant, unusual transaction.
b. Controls over related-party transactions.
c. Controls related to marketable securities.
d. Controls related to significant management estimates.
ANSWER: c
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Performing Risk Assessment
DATE CREATED: 1/19/2018 2:18 AM
DATE MODIFIED: 1/20/2018 6:53 AM
84. Which statement is true concerning materiality?
a. Misstatements are material if they could reasonably be expected to influence the decisions of users of the
financial statements.
b. Materiality guidelines are specifically prescribed by the PCAOB.
c. Materiality is not a useful concept in assessing internal control effectiveness.
d. Materiality is a concept applied to financial statement presentation but not to disclosures.
ANSWER: a
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Performing Risk Assessment
DATE CREATED: 1/19/2018 2:19 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 42Chapter 05
85. Which of the following statements is true regarding client acceptance or continuance decisions?
a. An audit firm cannot discontinue providing audit services to a client without just cause.
b. Potential audit fees are not a valid consideration in the acceptance or continuance decision.
c. The client acceptance/continuance decision is one of the most important factors in audit quality.
d. Audit firms are not permitted to conduct background checks on the management of a potential client.
ANSWER: c
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Client Acceptance or Continuance Decisions
DATE CREATED: 1/19/2018 2:20 AM
DATE MODIFIED: 1/20/2018 6:53 AM
86. Which of the following is not a component of business risk?
a. Regulatory risk and changes.
b. Economic or competitive changes.
c. Changes in stock market performance.
d. Changes in fair market values of assets or liabilities.
ANSWER: c
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Components of Business Risk
DATE CREATED: 1/19/2018 2:21 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 43Chapter 05
87. With a substantive audit strategy, what is an auditor likely to do?
a. Extensively tests internal controls.
b. Limit the testing of internal controls.
c. Not assess control risks.
d. Issue an adverse opinion on the financial statements.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Risk Assessment
DATE CREATED: 1/19/2018 2:23 AM
DATE MODIFIED: 1/20/2018 6:53 AM
88. Which of the following is not a question an auditor considers in deciding whether to pursue a lower control risk
approach prior to substantive testing?
a. Is the design of the control effective?
b. Does the control promote operational efficiency?
c. Is it cost effective to test controls?
d. Are controls operating effectively?
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Evidence about Internal Control Effectiveness
DATE CREATED: 1/19/2018 2:24 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 44Chapter 05
89. Which of the following would not affect an auditor’s judgment concerning internal controls?
a. The assertion being tested.
b. The design of the control.
c. The operation of the control.
d. The level of inherent risk.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Risk Assessment
DATE CREATED: 1/19/2018 2:25 AM
DATE MODIFIED: 1/20/2018 6:53 AM
90. With a dual-purpose test, what is an auditor likely to do?
a. Perform a substantive procedure concurrently with a test of a control.
b. Perform a substantive procedure concurrently with a risk assessment test.
c. Perform a risk assessment test concurrently with a test of a control.
d. None of the above.
ANSWER: a
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Procedures
DATE CREATED: 1/19/2018 2:26 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 45Chapter 05
91. Which statement is correct?
a. Assertions affected by highly objective estimates usually require direct tests of balances.
b. The materiality of the account totally dictates the substantive procedures to be performed.
c. The evidence the auditor obtains from risk assessment procedures does not influence the substantive
procedures to be performed.
d. The extent and results of control tests performed by the auditor will influence the substantive procedures to be
performed.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Substantive Evidence about Accounts
DATE CREATED: 1/19/2018 2:27 AM
DATE MODIFIED: 1/20/2018 6:53 AM
92. Which of the following factors affect the substantive procedures performed in an audit?
a. The subjectivity of the accounting process.
b. Size of the account.
c. Effectiveness of the relevant controls.
d. All of the above affect the substantive procedures that are performed.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Procedures
DATE CREATED: 1/19/2018 2:27 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 46Chapter 05
93. If the auditor’s assessment of the materiality of the account balance is high, what would be the respective effect on
(1) the extent of substantive testing and (2) the nature of procedures performed?
a. (1) Less (2) More rigorous
b. (1) Less (2) Less rigorous.
c. (1) More (2) Less rigorous
d. (1) More (2) More rigorous
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Obtaining Substantive Evidence about Accounts
DATE CREATED: 1/19/2018 2:28 AM
DATE MODIFIED: 1/20/2018 6:53 AM
94. An auditor gathers evidence on internal controls for which respective time periods for the purposes of expressing an
opinion on (1) control effectiveness and for (2) testing controls in the financial statement period?
Control Effectiveness Financial Statement
a. (1) As of year-end (2) As of year end
b. (1) As of year-end (2) Throughout the year
c. (1) Throughout the year (2) As of year end
d. (1) Throughout the year (2) Throughout the year
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.09
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Example: Assessing Control Design Effectiveness
DATE CREATED: 1/19/2018 2:30 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 47Chapter 05
95. Which of the following would not be a factor in whether a control weakness would be considered to be a material
weakness as opposed to a significant deficiency?
a. The materiality of the related balance.
b. The volume of transactions affected.
c. The subjectivity of the account balance.
d. The nature of the client’s industry.
ANSWER: d
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.09
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Example: Assessing Control Effectiveness
DATE CREATED: 1/19/2018 2:31 AM
DATE MODIFIED: 1/20/2018 6:53 AM
96. Which of the following statements is correct concerning the auditor’s opinion on internal control effectiveness?
a. The report describes any material weaknesses and discusses actions taken by management to remediate the
problems.
b. The report does not discuss whether the control weaknesses were first identified by management or the
auditor.
c. The report does not recognize the integrated nature of the audit and the effect of the material weakness on
the planning of the financial statement audit.
d. The report identifies management’s actions to remedy the prior year’s control weaknesses.
ANSWER: b
POINTS: 1
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.08
NATIONAL STANDARDS: United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinkingTOPICS: Completing the Audit and Making Reporting Decisions
DATE CREATED: 1/19/2018 2:32 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 48Chapter 05
97. The auditing standards
What is the structure or format of each auditing standard issued by the AICPA and by the IAASB? What is the
purpose of each section?
ANSWER: Introduction explains the purpose and scope of the standard.
Objective defines the context in which the requirements are set.
Definitions include, where relevant, specific meanings of terms in the standards.
Requirements identify what the auditor is required to do to achieve the objective of
the standard. Requirements are expressed using the words “the auditor should” or “the
auditor must.”
Application and Other Explanatory Material include cross-references to the
requirements and provide further guidance for applying the requirements of the
standard
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Communications
United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Generally Accepted Auditing Standards and IAASB Principles
DATE CREATED: 1/19/2018 2:33 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 49Chapter 05
98. What are the AICPA’s fundamental principles?
ANSWER: The AICPA has developed seven fundamental principles that govern audits. The four
categories, with their specific principles, are:
Purpose of an Audit and Premise upon Which an Audit Is Conducted
1. The purpose of an audit is to enhance the degree of confidence that users can place
in the financial statement. This purpose is achieved when an auditor expresses an
opinion on the financial statements.
2. An audit is based on the premise that management has responsibility to prepare the
financial statements, maintain internal control over financial reporting, and provide the
auditor with relevant information and access to personnel.
Responsibilities
3. Auditors are responsible for having the appropriate competence and capabilities to
perform the audit, should comply with ethical requirements, and maintain professional
skepticism throughout the audit.
Performance
4. The auditor needs to obtain reasonable assurance as to whether the financial
statements are free from material misstatement.
5. Obtaining reasonable assurance requires the auditor to plan and supervise the work,
determine materiality levels, identify risks of material misstatement, and design and
implement appropriate audit responses to the assessed risks.
6. An audit has inherent limitations such that the auditor is not able to obtain absolute
assurance about whether the financial statements are free from misstatement.
Reporting
7. The auditor expresses an opinion as to whether the financial statements are free of
material misstatement or states that an opinion cannot be
expressed.
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.0
NATIONAL STANDARDS: United States – BUSPROG: Communications
United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: AICPA’s Fundamental Principles
DATE CREATED: 1/19/2018 2:35 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 50Chapter 05
99. Phases of the Audit Opinion Formulation Process
Identify the five phases involved in the audit opinion formulation process.
ANSWER: Phase I Making Client Acceptance and Continuance Decisions
Phase II Performing Risk Assessment
Phase III Obtaining Evidence about Internal Control Operating Effectiveness
Phase IV Obtaining Substantive Evidence about Accounts, Disclosures,
andAssertions
Phase V Completing the Audit and Making Reporting Decisions
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.03
NATIONAL STANDARDS: United States – BUSPROG: Communications
United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Overview of the Audit Process
DATE CREATED: 1/19/2018 2:39 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 51Chapter 05
100. Financial Statement Assertions
Identify and describe the five management assertions inherent in financial statement. Provide examples.
ANSWER: Existence or Occurrence: Assertions about existence address whether assets and
liabilities exist and assertions about occurrence address whether recorded transactions,
such as sales transactions, have occurred.
Example: Management asserts that sales recorded in the income statement
represent transactions in which the exchange of goods or services with customers
for cash or other consideration had occurred.
Completeness: Assertions about completeness address whether all transactions and
accounts that should be included in the financial statements are included.
Example: Management asserts that notes payable in the balance sheet include all
such obligations of the organization.
Valuation or Allocation: Assertions about valuation or allocation address whether
accounts have been included in the financial statements at appropriate amounts.
Example: Management asserts that trade accounts receivable included in the
balance sheet are stated at net realizable value.
Rights and Obligations: Assertions about rights address whether assets are the
rights of the organization, while assertions about obligations address whether liabilities
are the obligations of the organization.
Example: Management asserts that amounts capitalized for leases in the balance
sheet represent the cost of the entity’s rights to leased property and that the
corresponding lease liability represents an obligation of the entity.
Presentation and Disclosure: Assertions about presentation and disclosure address
whether components of the financial statements are properly classified, described, and
disclosed.
Example: Management asserts that obligations classified as long-term liabilities
in the balance sheet will not mature within one year.
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.05
NATIONAL STANDARDS: United States – BUSPROG: Communications
United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Describe the Assertions Contained in Financial Statements
DATE CREATED: 1/19/2018 2:40 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 52Chapter 05
101. What are the five categories of PCAOB standards? What is included in each category?
ANSWER: The categories are:
1) General Auditing Standards—Standards on broad auditing principles, concepts,
activities, and communications
2) Audit Procedures—Standards for planning and performing audit procedures and
for obtaining audit evidence
3) Auditor Reporting—Standards for auditors’ reports
4) Matters Relating to Filings Under Federal Securities Laws—Standards on
certain auditor responsibilities relating to SEC filings
5) Other Matters Associated with Audits–Standards for other work performed in
conjunction with an audit
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.02
NATIONAL STANDARDS: United States – BUSPROG: Communications
United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Overview of PCAOB Standards
DATE CREATED: 1/19/2018 2:41 AM
DATE MODIFIED: 1/20/2018 6:53 AM
102. Identify at least five purposes served by audit documentation.
ANSWER: The overall purpose of audit documentation is to provide evidence that the audit was
planned and performed in accordance with professional auditing standards. Auditing
standards note that audit documentation serves other purposes, including: *Assisting the
engagement team in planning and performing the audit.
*Assisting members of the engagement team responsible for supervising and reviewing
the audit work.
*Retaining a record of matters of continuing significance to future audits of the same
organization.
*Enabling internal or external inspections of completed audits.
*Assisting auditors in understanding the work performed in the prior year as an aid in
planning and performing the current engagement.
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.07
NATIONAL STANDARDS: United States – BUSPROG: Communications
United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Purposes of Audit Documentation
DATE CREATED: 1/19/2018 2:42 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 53Chapter 05
103. What are the three broad types of audit procedures? What is the purpose of each test?
ANSWER: Risk assessment procedures. Procedures performed by the auditor to obtain
information for identifying and assessing the risks of material misstatement in the
financial statements whether due to error or fraud. Risk assessment procedures by
themselves do not provide sufficient appropriate evidence on which to base an audit
opinion, but are used for purposes of planning the audit.
Tests of controls. Audit procedures designed to evaluate the operating effectiveness
of controls in preventing, or detecting and correcting, material misstatements, typically
at the assertion level.
Substantive procedures. Audit procedures designed to detect material misstatements
in accounts which include tests of details and substantive analytical procedures.
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.01
NATIONAL STANDARDS: United States – BUSPROG: Communications
United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Procedures
DATE CREATED: 1/19/2018 2:43 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 54Chapter 05
104. Identify at least five specific procedures an auditor can apply to collect audit evidence and provide an
example of each.
ANSWER: Audit Procedure (examples in italics)
Inspection of documentation
Examining a client document for evidence of authorization
Inspection of assets
Physically examining a client’s equipment
Observation
Looking at a process or procedure, such as observing the client use of a
restricted access area
External confirmation
Obtaining a direct written response to the auditor from a third party, such the
client’s customers, confirming the amount owed to the client
Recalculation
Checking the mathematical accuracy of a document or record, such as an
inventory count sheet
Reperformance
Independently performing procedures or controls that were originally performed
by the client, such as reperforming a bank reconciliation
Analytical procedures
Analyzing plausible relationships among both financial and non-financial data
Scanning
Performing a type of analytical procedure which involves reviewing accounting
data to identify significant or unusual items, such as examining a credit balance
in an account that typically has a debit balance
Inquiry
Seeking information of persons within or outside of the client organization, such
as communicating with the CFO or general counsel about changes in accounting
policy
POINTS: 1
QUESTION TYPE: Essay
HAS VARIABLES: False
LEARNING OBJECTIVES: AUDI.JOHN.18.05.06
NATIONAL STANDARDS: United States – BUSPROG: Communications
United States – BUSPROG: Comprehension
STATE STANDARDS: United States – AK – AICPA BB – Critical thinking
TOPICS: Audit Procedures
DATE CREATED: 1/19/2018 2:45 AM
DATE MODIFIED: 1/20/2018 6:53 AMCopyright Cengage Learning. Powered by Cognero. Page 55Chapter 05

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