Audit Gleim 8.2

If an auditor wishes to decrease the acceptable level of audit risk, which of the following changes in the substantive procedures performed will not effectively provide greater assurance?

A change in the timing of substantive procedures from year-end to interim dates

Which of the following is least likely to indicate the need to increase the assurance provided by substantive testing?

A decrease in the assessed inherent risk.

Which of the following types of evidence would an auditor most likely consider to determine whether internal controls are operating effectively?

A questionnaire completed by an employee in the receiving department concerning her duties and responsibilities.

Tests of controls in a financial statement audit are least likely to be omitted with regard to

Accounts representing many transactions.

A nonissuer audit client failed to maintain copies of its procedures manuals and organizational flowcharts. What should the auditor do in an audit of financial statements?

Adopt a substantive audit approach.

Providing more supervision during an audit of a nonissuer in response to assessed risks of material misstatement at the financial statement level is an example of

An overall response

Which of the following explanations best describes why an auditor may decide to reduce tests of details for a particular audit objective?

Analytical procedures have revealed no unusual or unexpected results.

How would an auditor of a nonissuer most appropriately respond to a heightened assessed risk of material misstatement?

By assigning more experienced staff or those with specialized skills to high-risk areas.

An auditor is least likely to test controls that provide for

Classification of revenue and expense transactions by product line.

Which of the following procedures is not used in tests of controls over purchases?

Confirm inventory held in public warehouses

An auditor may decide to perform only substantive procedures for certain assertions because the auditor believes

Controls are not relevant to the assertions.

An auditor uses the assessed risks of material misstatement to

Determine the acceptable level of detection risk for financial statement assertions.

The objective of tests of details of transactions performed as tests of controls is to

Evaluate whether internal controls operated effectively.

Which of the following tests of controls most likely will help assure an auditor that goods shipped are properly billed?

Examine shipping documents for matching sales invoices.

When an auditor increases the assessment of the risks of material misstatement because certain controls were determined to be ineffective, the auditor will most likely increase the

Extent of test of details

Which of the following levels would most likely address the risk of material misstatement by the auditor's consideration of an entity's control environment?

Financial statements

Which of the following is a step in an auditor's decision to rely on internal controls?

Identify specific controls that are likely to prevent, or detect and correct, material misstatements and perform tests of controls.

Determining that controls are operating effectively most likely involves

Identifying specific controls relevant to specific assertions.

An auditor may compensate for a high assessed risk of material misstatement by

Increasing the extent of substantive analytical procedures.

To obtain evidence about the operating effectiveness of controls, an auditor selects tests from a variety of methods, including

Inquiries

If the auditor intends to rely on the operating effectiveness of relevant controls, which test of controls is necessary to obtain sufficient appropriate evidence?

Inquiry

Which of the following audit procedures, if used, should be combined with other audit procedures when testing the operating effectiveness of controls?

Inquiry

Which of the following combinations of audit procedures provides the least assurance?

Inquiry and observation

When the operating effectiveness of a control is not evidenced by written documentation, an auditor should obtain evidence about the control's effectiveness by

Inquiry and other procedures such as observation.

Which of the following most likely should be included as part of an auditor's tests of controls?

Inspection

After obtaining an understanding of internal control and assessing the risks of material misstatement in a financial statement audit, an auditor decided to perform tests of controls. The auditor most likely decided that

It would be efficient to perform tests of controls that would result in a reduction in substantive procedures.

Which of the following actions should the auditor take in response to discovering a deviation from the prescribed control?

Make inquiries to understand the potential consequence of the deviation.

Which of the following may imply that internal controls are ineffective?

Misstatements detected by analytical procedures.

Which of the following is true related to the auditor's consideration of controls?

Misstatements detected by the auditor's substantive procedures should be considered when testing the effectiveness of related controls.

After obtaining an understanding of internal control in a financial statement audit, an auditor has concluded that it is well designed and is operating effectively. Under these circumstances, the auditor would most likely

Not increase the extent of substantive procedures.

For certain controls, such as assignment of authority and responsibility, documentary evidence may not exist. An auditor would most likely test the controls by

Observation and inquiry

An auditor wishes to evaluate the design and perform tests of controls over a client's cash disbursements procedures. If the controls leave no audit trail of documentary evidence, the auditor most likely will test the procedures by

Observation and inquiry.

Which of the following procedures concerning accounts receivable is an auditor most likely to perform to obtain evidence in support of the effectiveness of controls?

Observing an entity's employee prepare the schedule of past due accounts receivable.

Audit evidence concerning undocumented monitoring controls ordinarily is best obtained by

Observing the employees as they apply controls.

The auditor should perform tests of controls when the auditor's risk assessment includes an expectation

Of the operating effectiveness of internal control.

What is the most likely course of action that an auditor would take after determining that performing substantive procedures on inventory will take less time than performing tests of controls?

Perform only substantive procedures on inventory.

In an environment that is highly automated, an auditor determines that it is not possible to obtain sufficient appropriate audit evidence solely by performing substantive procedures on transactions. Under these circumstances, the auditor most likely would

Perform tests of controls

After obtaining an understanding of internal control for the audit of a nonissuer's financial statements, an auditor decided not to perform tests of controls. The auditor most likely decided that

Performing only substantive procedures would effectively reduce audit risk to an acceptably low level.

An auditor generally tests the segregation of duties related to inventory by

Personal inquiry and observation.

An overall response to address a high assessed risk of material misstatement at the financial statement level of a nonissuer may include

Providing more supervision of the audit team.

To obtain evidence about the effectiveness of controls, an auditor ordinarily selects tests from a variety of methods, including

Reperformance

To test the effectiveness of controls, an auditor ordinarily selects from a variety of techniques, including

Reperformance and observation

A client maintains perpetual inventory records in both quantities and dollars. If the assessment of the risks of material misstatement is high, an auditor will probably

Request the client to schedule the physical inventory count at the end of the year

Which of the following statements about the auditor's response to assessed risks of material misstatement in a financial statement audit is true?

Risk assessment procedures performed to obtain an understanding of an entity's internal control also may serve as tests of controls

Which of the following courses of action is the most appropriate if an auditor concludes that there is a high risk of material misstatement?

Select more effective substantive procedures.

During an audit of a nonissuer's financial statements, an auditor should perform tests of controls to obtain sufficient appropriate audit evidence about the operating effectiveness of relevant controls if

Substantive procedures alone cannot provide sufficient appropriate audit evidence

An auditor decides to perform substantive tests on a client's property and equipment balance as of an interim date. The auditor has not obtained evidence about the operating effectiveness of relevant controls. What additional work must be performed to extend the audit conclusions from the interim date to the balance sheet date?

Substantive procedures for the period between the interim date and the balance sheet date.

Regardless of the assessed risks of material misstatement, an auditor should perform some

Substantive procedures to restrict detection risk for significant transaction classes

An auditor examines a sample of copies of December and January sales invoices for the initials of the person who verified the quantitative data. The purpose is to determine the operating effectiveness of the verification. This audit procedure is an example of a

Test of controls

When an auditor plans to rely on controls that have changed since they were last tested, which of the following courses of action would be most appropriate?

Test the operating effectiveness of such controls in the current audit.

Which of the following statements best describes why an auditor would use only substantive procedures to evaluate specific relevant assertions and risks?

Testing the operating effectiveness of the relevant controls would not be efficient.

When numerous property and equipment transactions occur during the year, an auditor who assesses the risks of material misstatement at a low level usually performs

Tests of controls and limited tests of current-year property and equipment transactions

A senior auditor conducted a dual-purpose test on a client's invoice to determine whether the invoice was approved and to ascertain the amount and other terms of the invoice. Which of the following lists two tests that the auditor performed?

Tests of controls and tests of details.

If interim substantive procedures for an account identified no exceptions, which of the following would the auditor not perform on that account at year end?

Tests of details for the entire year under audit.

After gaining an understanding of a client's computer processing internal control, a financial statement auditor may decide not to test the effectiveness of the computer processing control procedures. Which of the following is not a valid reason for choosing to omit tests of controls?

The assessment of the risks of material misstatement permits the auditor to rely on the controls.

An auditor of a nonissuer should design tests of details to ensure that sufficient audit evidence supports which of the following?

The planned level of assurance at the relevant assertion level.

In performing tests of controls, the auditor will normally find that

The rate of deviations in the sample exceeds the rate of error in the accounting records.

As the acceptable level of detection risk increases for a given audit risk, an auditor may change the

Timing of substantive procedures from year end to an interim date.

While performing interim audit procedures on accounts receivable, numerous unexpected errors are found resulting in a change of risk assessment. Which of the following audit responses would be most appropriate?

Use more experienced audit team members to perform year-end testing.

Tests of controls are concerned primarily with each of the following questions except

Were the controls approved by the board of directors?