Auditing Theory - QUIZZER QUIZZER
1. A control which relates to all parts of the the ED syste! is called a"n# a. $yste!s control c. Applications control %. &eneral control d. Uni'ersal control (. )hich )hich of the the followi following ng is not not an outpu outputt control control* * a. roper roper autho authori+a ri+ation tion of trans transacti action on %. ,ont ,ontro roll tota totals ls c. ,hec ec di digit gits d. Ade Adeua uate te docu! docu!en ents ts /. $hould the the auditor auditor feel0 after after o%taining o%taining an understanding understanding of of the ED ED internal internal control structure0 that control ris cannot %e reduced0 he or she will a. Issu Issue e a dis discl clai ai!e !er r %. Issue Issue an ad' ad'ers erse e opini opinion on c. Increase Increase the sa!p sa!ple le si+e si+e for tests tests of cont controls rols d. Epand Epand the the su%stanti su%stanti'e 'e testing testing portio portion n of the audit audit 2. The real-ti!e real-ti!e feature feature nor!ally nor!ally would would %e least least useful useful when applied applied to accounting accounting for a fir!3s a. 4an 4an-ac -acco count unt %alan %alances ces %. rope roperty rty and and depre depreci ciati ation on c. ,usto ,usto!er !er acco accoun unts ts recei' recei'a% a%le le d. 5ercha 5erchandi ndise se in'ent in'entory ory 6. A sa!ple in in which the characterist characteristics ics in the sa!ple sa!ple are the sa!e sa!e as those those of of the population is a a. Rando! sa!ple c. Attri%utes sa!ple %. 7aria%les sa!ple d. Representati'e sa!ple 8. Esta%lis Esta%lishing hing a route route through through the rando rando! ! nu!%er nu!%er ta%le a. Is an an ar%it ar%itrar rary y deci decisi sion on %. 9eeds 9eeds to %e done done in ad'an ad'ance ce of choos choosing ing the the nu!%ers nu!%ers c. Is essenti essential al and the the route route !ust %e follo followed wed consi consiste stently ntly d. Reuire Reuires s that all three three of the a%o'e a%o'e is is true :. )hen an auditor goes goes through through a population population and selects selects ite!s for the sa!ple sa!ple without regard to their si+e0 source0 or other distinguishing characteristics0 it is called a. 4loc 4loc sele select ctio ion n %. ;apha ;apha+ar +ard d selec selectio tion n c. $yst $yste! e!at atic ic selec selecti tion on d. $tati $tatisti stica call selec selectio tion n <. )hich of the the following following !ay %e used to reduce the the ris of of non sa!pling sa!pling errors* errors* a. Increasi Increasing ng the the si+e si+e of of audit audit sa!pl sa!ples es
%. $tratifying audit sa!ples c. Adeuately planning audit sa!ples d. Using statistical sa!pling techniues =. A nu!%er of factors influences the sa!ple si+e for a su%stanti'e test of details of an account %alance. All other factors %eing eual0 which of the following would lead to larger sa!ple si+e* a. &reater reliance on internal control %. c. $!aller reliance o analytical procedures d. $!aller !easures of tolera%le !isstate!ent 1>.?raudulent financial reporting is often called a. 5anage!ent fraud c. Defalcation %. Theft of assets d. E!ployee fraud 11. The !ost i!portant general ledger account included in and affecting se'eral cycles is the a. &eneral cash account c. Inco!e ta epense ad lia%ility accounts %. In'entory accounts d. Retained earnings account 1(.In testing for cut-off 0 the o%@ecti'e is to deter!ine a. )hether all of the current period3s transactions are recorded %. That no transactions fro! the prior period are included in the current period3s %alances c. That no transactions of the curret period ha'e %een delayed and recorded in the future period. d. )hether transactions are recorded in the proper period. 1/.The pri!ary difference %etween an audit of the %alance sheet and an audit of the inco!e state!ent lies in the fact that the audit of the inco!e state!ent deals with the 'erification of a. Transactions c. ,osts %. Authori+ation d. ,utoffs 12.Docu!entation is a for! of e'idence a. Used in e'ery financial state!ent audit %. Used in !ost financial state!ent audit c. Used o the rate occasions when it is %oth readily a'aila%le ad less costly than other procedures d. Used when nothing is a'aila%le that is !ore co!petent 16.The current file of the auditor3s woring papers generally should include a. a flowchart of internal controls %. organi+ation charts c. a copy of the financial state!ents d. copies of %ond and note indentures
18.An audit woring paper that reflects the !a@or co!ponents of an a!ount reported in the financial state!ents is referred to as"an# a. ead schedule c. Audit control schedule %. $upporting schedule d. )oring trial %alance 1:. The !a@or reason an independent auditor gathers audit e'idence is to a. ?or! an opinion on the financial state!ents %. Detect fraud c. E'aluate !anage!ent d. E'aluate internal control 1<.An auditor !ost liely would analy+e in'entory turno'er rates to o%tain e'idence concerning !anage!ents assertions a%out a. Eistence or occurrence %. Rights and o%ligations c. resentation and disclosure d. 7aluation and allocation 1=.To which type of the following !atters would !ateriality li!its not apply when o%taining client representations* a. osses fro! sales co!!it!ents. %. Unasserted clai!s and assess!ents c. Irregularities in'ol'ing !anage!ent d. 9onco!pliance with contractual agree!ents (>.)hich of the following procedures is !ore liely to %e perfor!ed i a re'iew engage!ent of a non-pu%lic entity that i n a co!pilation engage!ent* a. &aining an understading of the entity3s %usiness transactions %. 5aing a preli!inary assess!ent of control ris c. B%taining a representation letter fro! the chief eecuti'e officer d. Assisting the entity i ad@usting the accounting records
(1.In auditing accounts paya%le0 an auditor3s procedures !ost liely would focus pri!arily o !anage!ent3s assertion of a. Eistence or occurrence %. resentation and disclosure c. ,o!pleteness d. 7aluation or allocation ((.4efore goods are shipped on account0 a properly authori+ed person !ust a. repare the sales in'oice %. Appro'e the @ournal entry c. Appro'e credit d. 7erify that the unit price is accurate (/.)hich of the following is not a auditor3s concern a%out a ey authori+ation point in the salesCcollection cycle
a. The recei'ing roo! !ust ha'e authori+ation %efore releasing ite!s to in'entory control %. ,redit !ust %e authori+ed %efore sale c. &oods !ust %e shipped after the authori+ation d. rices !ust %e authori+ed (2.)hene'er footing ad co!parisons are restricted to @ournals0 !aster file records0 and ledgers0 the process is a. 7aluation c. ,utoff %. $u!!ari+ation d. ,o!pleteness (6.The !ost significant effect of the results of the tests of controls su%stanti'e tests of transactions in tha sales and collection cycle is on a. Allowance for uncollecti%le accounts %. 4ad de%ts epense account c. ,onfir!ation of accounts recei'a%le d. Inco!e ta paya%le (8.There is a difference %etween internal control o%@ecti'es and audit o%@ecti'es. )hich of the following is not an audit o%@ecti'e* a. 7alidity c. 7aluation %. ,o!pleteness d. Authori+ation (:.?or effecti'e internal control0 e!ployees !aintaining the accounts recei'a%le su%sidiary ledger should not also appro'e a. E!ployee o'erti!e wages %. ,redit granted to custo!ers c. )rite-offs of custo!er accounts d. ,ash dis%urse!ent (<.The general cash account is considered significant in al!ost all audits a. )here the ending %alance3 is !aterial %. )here either the %eginning %alance is !aterial c. E'en when the ending %alance is i!!aterial d. Ecept those of not-for-profit organi+ations (=.$ales order for! and in'oice %lans should %e controlled in the a. $ales order section of the sales depart!ent %. 4illing cler in the accounting depart!ent c. ,redit !anager in the credit depart!ent d. $ales !anager in the sales depart!ent />.)hich of the following is a su%stanti'e test of transactions a. Re'iew personnel policies %. Account for a seuence of payroll checs c. Reconcile the dis%urse!ents i the payroll @ournal with the dis%urse!ents on the payroll %an state!ent
d. Ea!ine printouts of transactions re@ected %y the co!puter as ha'ing in'alid e!ployee nu!%ers /1.The infor!ation typically needed to prepare a production order would not include a a. $ales forecast c. In'entory plan %. roduction plan d. 4ill of !aterials /(.The su%stanti'e test which reuires the auditor to trace fro! a file of recei'ing reports to the acuisitions @ournal satisfies the o%@ecti'e of a. 7alidity c. ,o!pleteness %. Authori+ation d. 7aluation //.An a. %. c. d.
auditor usually ea!ines recei'ing reports to support entries in the 7oucher register and sales return @ournal $ales @ournal and sales return @ournal 7oucher register and sales @ournal ,hec register and sales @ournal
/2.The in'entory and warehousing cycle can %e thought of as co!prising two separate %ut closely related syste!s0 one in'ol'ing the actual physical flow of goods0 and the other the a. internal control o'er those goods %. related costs c. storing of the goods d. pre'ention of wastes0 o%solenscence0 and theft /6.In planning an audit engage!ent0 which of the following is a factor that affects the independent auditor3s @udge!ent as to the uantity0 type0 and content of woring papers* a. The esti!ated occurrence rate of attri%utes %. The preli!inary e'aluation %ased upon initial su%stanti'e testing c. The content of the client3s representation letter d. The anticipated nature of the auditor3s report /8.A listing of all the things which the auditor will use to gather sufficient0 co!petent e'idence is the a. audit procedure %. audit plan c. audit progra! d. audit ris !odel /:.The pri!ary e!phasis in !ost tests of details of %alances is on the a. %alance sheet accounts %. inco!e state!ent accounts c. cash flow state!ent accounts d. three state!ents a%o'e
/<. Tracing recorded sales transactions in the sales @ournal to the shipping docu!ents "%ills of lading# pro'ides e'idence a%out the a. ,o!pleteness of recording of sales transactions %. Bccurrence of sales transactions c. %illing of all sales transactions d. presentation of paya%les /=.)hich of the following is the %est audit procedure for the detection of lapping* a. ,o!parison of postings of cash receipts to accounts with the details of cash deposits %. ,onfir!ation of the cash %alance c. Reconciliation of the cash account %alances d. reparing a proof of cash 2>. To gather e'idence regarding the %alance per %an in the %an reconciliation0 an auditor could ea!ine all of the following ecept a. ,ut-off %an state!ent %. year-end %an state!ent c. %an confir!ation d. general ledger 21.The confir!ation of accounts recei'a%le is !ost closely associated with a. %usiness ris %. detection ris c. inherent ris d. relati'e ris 2(.The client3s physical count of in'entories is lower than the in'entory uantities in the perpetual records. This could %e the result of a failure to record a. purchases %. purchases discounts c. sales d. sales discounts 2/.The !ost liely techniue for the current year audit of goodwill which was not acuired three years ago %y a continuing audit client. a. ,onfir!ation %. B%ser'ation c. Reco!putation d. Inuiry 22.The auditor will !ost liely perfor! etensi'e tests for possi%le understate!ent of a. re'enues %. assets c. lia%ilities d. capital
26.If the auditor is deter!ined to lac independence0 a disclai!er of opinion !ust %e issued a. in all cases %. only if it is highly !aterial c. only if it is !aterial d. if the client reuests it 28.The use of negati'e assurances in audit reports of historical financial state!ents is a. a 'iolation of the standards of reporting %. encouraged %y the hilippine Institute of ,As c. a help in clarifying the degree of responsi%ility %y %eing assu!ed %y the auditor d. properly located in the opinion paragraph of the unualified report 2:.Unualified financial state!ents for the prior year presented in co!parati'e for! with audited financial state!ents for the current year should %e clearly !ared to indicate their status and I. The report on the prior period should %e reissued to acco!pany the current period report II. The report on the current period should include as a separate paragraph description of the responsi%ility assu!ed for the prior period3s financial state!ents a. %. c. d.
I only II only 4oth I and II Either I or II
2<.,o!pilation ser'ices are intended to ena%le a ,A fir! to co!pete with a. 5anage!ent ad'isory ser'ice fir!s %. Ta preparation %usinesses c. ,o!puter ser'ice %usiness d. 4ooeeping fir!s 2=.A !odification of the ,A3s report on a re'iew of the interi! financial state!ents of a pu%licly-held co!pany would %e necessitated %y which of the following* a. An uncertainty %. ac of consistency c. Reference to another accountant d. Inadeuate disclosure 6>.,o!fort letters ordinarily are signed %y the client3s a. independent auditor %. underwriter of securities c. audit co!!ittee d. senior !anage!ent
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