Auditing quiz 3

WOTF is an auditor most likely to add to the negative form of confirmation of accounts receivable to encourage timely consideration by the recipient

"if you do not report any differences within 15 days, it will be assumed that this statement is correct"

WOTF documentation is not required for an audit in accordance with auditing standards?

A client letter that details the auditors planned field of work

WOTF statements about evidence is true?

A client's accounting records cannot be considered sufficient appropriate audit evidence on which to base the auditor's opinion.

In confirming accounts receivable, an auditor decided to confirm customers' account balances rather than individual invoices. Which of the following most likely will be included with the client's confirmation letter?

A client-prepared statement of account showing the details of the customer's account balance

Early appointment of the auditor enables preliminary work to be performed by the auditor. This benefits the client because it permits the audit to be performed in

A more efficient manner

The components of internal control include

A process of managing risks relevant to preparing financial statements.

A CPA wishes to determine how various issuers have complied with the disclosure requirements of a new...

AICPA Accounting trends and techniques.

A CPA is conducting the first audit of a nonissuer's financial statements. The CPA hopes to reduce the audit work by consulting...

Acceptable if the client and the predecessor auditor agree to it

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

Accounts representing many transactions

Analytical procedures used as risk assessment procedures should

Address the risk of material misstatement of revenue due to fraudulent financial reporting

would least likely appear in an auditor's engagement letter?

After performing our preliminary analytical procedures, we will discuss with you the other procedures we consider necessary to complete the engagement.

Financial statement audit plans usually should be developed

After the auditor has established the overall audit strategy

Is required documentation in an audit with accordance with auditing standards.

An audit plan documenting the procedures to be used to reduce audit risk.

WOTF presumptions is least likely to relate to the reliability of audit evidence?

An auditor's opinion is formed within a reasonable time to achieve a balance between benefit and cost.

Although the quantity and content of audit documentation vary with each engagement, an auditor's permanent files most likely include

Analyses of capital stock and other owners' equity accounts.

WOTF concepts distinguishes the retention of computerized audit documentation from the tradition hard copy form

Analyses, conclusions, and recommendations are filed on electronic media and are therefore subject to computer system controls and security procedures.

WOTF in a predecessor's audit documentation is the auditor least likely to be interested in reviewing?

Analysis of income statement accounts

Is true concerning analytical procedures used as risk assessment procedures?

Analytical procedures used as risk assessment procedures ordinarily use data aggregated at a high level

Is an effective audit planning and control procedure that helps prevent misunderstandings and inefficient use of audit personnel?

Arrange a preliminary conference with the client to discuss audit objectives, fee's, timing, and other information.

A primary advantage of using generalized audit software packages to audit financial statements of a client that uses a computer system is that the auditor may

Asses information stored on computer files while having a limited understanding of the client's hardware and software features.

An auditor would least likely use computer software to

Asses risk

Using personal computers in auditing may affect the methods used to review the work of staff assistants because

Audit documentation may not contain readily observable details of calculations

WOTF elements ultimately determines the specific auditing procedures that are necessary...

Auditor judgement

The most reliable forms of documentary evidence are those documents that are

Authorized by a responsible official

When an auditor obtains an understanding of the entity and its environment, including its internal control...

BAC

The PCAOB's AS 1215, audit documentation, requires that a complete and final set of audit documentation be assembled for retention as of date...

Be added, but no audit documentation may be deleted or discarded

Factors does a cpa ordinarily consider in the planning stage of an audit engagement

Both I and II

An auditor's audit documentation will least likely show how the

Clients schedule's were prepared

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

Comparison and confirmation

Would most likely cause and auditor to not to accept a new audit engagement?

Concluding that the entity's management probably lacks integrity

Procedures is not used in tests of controls over purchases?

Confirm inventory held in public warehouses.

Before performing substantive analytical procedures at an interim date prior to the balance sheet date, an auditor should

Consider whether the amounts of the year-end balance selected for interim testing are reasonably predictable

Audit documentation that records the procedures used by the auditor to gather evidence should be

Designed to meet the circumstances of the particular engagement

Smith Corporation has numerous customers. A customer file is maintained and includes a customer record with a name, an address, a credit limit, and an account balance. The auditor wishes to test this file to determine whether credit limits are being exceeded. The best procedure for the auditor to follow would be to

Develop a program to compare credit limits with account balances and print out the details of any account with a balance exceeding its credit limit

The auditor with final responsibility for an engagement and one of the assistants have a difference of opinion about the results of an auditing procedure. If the assistant believes it is necessary to be disassociated from the matter's resolution, the CPA firm's procedures should enable the assistant to

Document the details of the disagreement with the conclusion reached.

An auditor using audit software probably would be least interested in which of the following fields in a computerized perpetual inventory file?

Economic order quantity

Standardized working papers are often used, chiefly because they allow audit documentation to be prepared more

Efficiently

The scope and nature of an auditors contractual obligation to a client is ordinarily set forth in the

Engagement letter

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

Evaluate whether internal controls operated effectively.

A difference of opinion concerning accounting and auditing natters relative to a particular phrase of the audit arises between...

Expanded to detail the assistant auditor's position and how the difference of opinion was resolved

In developing written audit plans, an auditor should design specific audit procedures that relate primarily to the

Financial statement assertions

The in-charge auditor for an audit of an issuer most likely has a supervisory responsibility to explain to the staff assistants

How the results of various auditing procedures performed by the assistants should be evaluated.

An auditor most likely obtains an understanding of a new client to

Identify areas of audit emphasis

In the course of the audit of financial statements for the purpose of expressing an opinion, the auditor will normally...

Identify the potential financial statements effects of misstatements that were not considered clearly trivial when discovered.

Is an aspect of scheduling and controlling the audit engagement?

Include in the audit plan a column for estimated and actual time

Some account balances, such as those for pensions and leases, are the result of complex calculations. The susceptibility to material misstatements in these types of accounts is defined as

Inherent risk

WOTF procedures would provide the most reliable audit evidence?

Inspection of bank statements obtained directly from the clients financial institution

Computer technology makes it possible to perform paperless audits. For example, in an audit of computer-processed customer accounts receivable balances...

It allows immediate processing of audit data on a spreadsheet working paper

WOTF represents a limitation of the use of generalized audit software (GAS)?

It can only be used on hardware with compatible operating systems

With respect to the auditor's planning of a year-end audit, which of the following statements is always true?

It is an acceptable practice to carry out part of the audit at interim dates.

Observation is considered a reliable audit procedure but one that is limited in usefulness. However...

It is most persuasive about the performance of a process but is limited to the moment in time at which the observation takes place.

The audit working paper that reflects the major components of an amount reported in the financial statements is the

Lead schedule

The negative request form of accounts receivable confirmation be used when the

Low, Many, Likely

Before accepting an engagement to audit a new client, an auditor is required to

Make inquiries of the predecessor after obtaining the consent of the prospective client

An auditor's engagement letter most likely will include

Managements acknowledgements of its responsibility for maintaining effective internal control

The audit risk against which the auditor and those who rely on his or her opinion require reasonable...

Material misstatements that occur will not be detected by the audit

Specialized audit software

May be written in a procedure-oriented language.

If an auditor conducts an audit of financial statements in accordance with applicable auditing standards, WOTF will the auditor most likely detect?

Misposting of recorded transactions

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

Nature of substantive procedures from a less effective to a more effective procedure

You have been assigned to audit the maintenance department of an organization. WOTF is likely to produce...

Notes on discussions with mechanics in the maintenance operation

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

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.

Most of the auditor's work in forming an opinion on financial statements consists of

Obtaining and evaluating audit evidence

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

Of the operating effectiveness of internal controls

An auditor confirms a representative number of open accounts receivable as of December 31 and investigates respondents' exceptions and comments. By this procedure, the auditor would be most likely to learn of which of the following?

One of the cashiers has been covering a personal embezzlement by lapping.

In developing an audit plan, an auditor should

Perform risk assessment procedures.

Is an engagement attribute for an audit of an entity that processes most of its financial data in electric form without any paper documentation?

Performance of audit tests is on a continuous basis.

Audit planning for an initial audit most likely includes

Performing procedures involving operating balances

Audit working papers are indexed by means of reference numbers. The primary purpose of indexing is to

Permit cross-referencing and simplify supervisory review

To obtain an understanding of a continuing client in planning an audit, an auditor most likely would

Read internal audit reports

An auditor ordinarily uses a working trial balance resembling the financial statements without notes, but containing columns for

Reclassifications and adjustments

Circumstances would permit an independent auditor to accept an engagement after the close of the fiscal year?

Remedy of limitations resulting from accepting the engagement after the close of the end of the year, such as those relating to the existence of physical inventory.

In the confirmation of accounts receivable, the auditor would most likely

Request information of a sample of the inactive accounts

The audit work performed by each assistant should be reviewed to determine whether it was adequately performed and to evaluate whether the

Results are consistent with the conclusions to be presented in the auditors report.

An auditor is planning an audit engagement for a new client in a business that is unfamiliar to the auditor...

Results of performing substantive procedures.

Two assertions for which confirmation of accounts receivable balances provides primary evidence are

Right and obligations and existence

About the auditors 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.

The appropriateness of evidence available to an auditor is least likely to be affected by the

Sampling method employed by the auditor to obtain a sample of such evidence.

Assuming a low assessed risk of material misstatement, which of the following audit procedures would be least likely to be performed?

Search for unrecorded cash receipts

Is an auditor least likely to perform in planning a financial statement audit?

Selecting a sample of vendors' invoices for comparison with receiving reports.

One of the primary roles of an engagement work program is to

Serve as a tool for planning and conducting engagement work.

The auditor should perform tests of controls when the auditors assessment of the risks of material misstatement...

Substantive procedures alone cannot provide sufficient evidence appropriate audit evidence at the relevant assertion level.

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

Substantive procedures to restrict detection risk for significant transaction classes.

WOTF statements is most accurate regarding sufficient and appropriate documentation

Sufficient and appropriate documentation should include evidence that has been reviewed.

Upon discovering material misstatements in a clients financial statements that the client would not revise...

Suggest that the auditor obtain the clients permission to discuss the reasons.

A client uses a suspense account for unresolved questions whose final account has not been...

Suspense debits that management believes will benefit future operations.

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?

Test of controls and test of details.

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.

The two requirements crucial to achieving audit efficiency and effectiveness with a personal computer are selecting

The appropriate audit tasks for personal computer applications and the appropriate software to perform the selected audit tasks.

Negative confirmation of accounts receivable is less effective than positive confirmation of accounts receivable because

The auditor cannot infer that all nonrespondents have verified their accounts information

The auditor should establish an overall audit strategy. Which one of the following statements is most consistent with the requirement?

The auditor should plan the audit so that it will be performed effectively.

Ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion?

The auditors judgement.

An auditor is required to establish an understanding with a client regarding the responsibilities for each engagement. This understanding generally includes

The auditors responsibility for ensuring that management and those charged with governance are aware of any significant deficiencies or material weaknesses in control that come to the auditor's attention.

Confirmation of accounts receivable is a generally accepted audit procedure. The presumption that an auditor will request conformation of accounts receivable...

The combined assessed level of inherent and control risk is high

In planning the audit engagement, the auditor should consider each of the following except

The kind of an opinion that is likely to be expressed.

Auditors may use positive or negative forms of confirmation requests. an auditor most likely will use

The negative form for small balances

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.

Is a false statement about the relationship of financial statement assertions and audit procedures?

The relationship between financial statement assertions and audit procedures should be one-to-one

Based on an understanding of internal control completed at an interim date, the auditor assessed the risks of material misstatement at the...

The remaining period is long

AU-C 500 describes five generalizations about the reliability of evidence. The situations given below indicate the relative degrees of assurance provided by two types of evidence obtained in different situations. Which describes an exception to one of the generalizations?

The report of an auditor's specialist regarding the valuation of a collection of paintings held as an investment provides greater assurance than the auditors physical observation of the paintings.

WOTF About audit evidence is true

The sufficiency and appropriateness of audit evidence is a matter of professional judgement.

Most likely would pose the greatest risk in accepting a new audit engagement

There will be a client-imposed scope limitation.

The element of the audit-planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of

Timing of inventory observation procedures to be performed.

Is the auditor most likely to perform after accepting the initial audit engagement?

Tour the clients facilities

The primary difference between audit of the balance sheet and an audit of the income statement is that the audit of the income statement deals with the verification of

Transactions

The objective of performing analytical procedures in planning an audit is to identify the existence of

Unusual transactions and events

Auditors can often make use of computer programs that perform routine processing functions, such as sorting and merging...

Utility programs

During the process of confirming receivables as of December 31, year 1, a positive confirmation was returned indicating the "balance owed as of December 31 was paid on January 9, year 2" the auditor

Verify that the amount was received

To reduce the risks associated with accepting fax responses to requests for confirmations of accounts receivable, an auditor most likely would

Verify the sources and contents of the faxes in telephone calls to the senators

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

Were the controls approved by the board of directors?

After audit procedures are completed, a partner of the CPA firm who has not been involved in the audit performs a second or wrap-up audit documentation review. This second review usually focuses on

Whether the financial statements are consistent with the auditor's understanding of the entity

In assessing whether to accept a client for an audit engagement, a cpa should consider the

YES, YES

Ordinarily, the predecessor auditor permits the auditor to review the predecessor's audit documentation relating to

YES, YES

WOTF is usually included or shown in the audit documentation

a summary of how significant findings were addressed.

WOTF tasks can be achieved using generalized audit software

filtering data based on accounts receivable data recording.

Prior to beginning the field work on new audit engagement in which a cpa does not posses expertise in the industry in which the client operates, the cpa should

perform risk assessment procedures

In gathering evidence in the performance of substantive procedures, the auditor most likely

relies on persuasive rather conclusive evidence in the majority of cases.