Audit Exam 2

Representations in the representation letter include ________. -all items requiring any disclosure are sufficiently disclosed -acknowledgment that all necessary adjusting entries were made -acknowledgment that it is management's responsibility to train employees in the effective use of internal controls -financial statements are complete and were prepared with the use of generally accepted accounting principles

-all items requiring any disclosure are sufficiently disclosed -financial statements are complete and were prepared with the use of generally accepted accounting principles

Common methods for auditors to determine related parties include ________. -contacting client customers and vendors -inquiries of management -reviewing SEC filings -conflict-of-interest statements

-inquiries of management -reviewing SEC filings -conflict-of-interest statements

Data analytics _______. -may assist in the assessment of risk material misstatement -results in a more detailed understanding of the client -generally has no effect on the auditors' substantive procedures -may involve testing entire populations instead of samples

-may assist in the assessment of risk material misstatement -results in a more detailed understanding of the client -may involve testing entire populations instead of samples

Factors that can influence the level of audit documentation detail include _______. -nature of auditing procedures -size of the audit client -risk of misstatement -extent of judgment involved

-nature of auditing procedures -risk of misstatement -extent of judgment involved

Significant audit findings or issues that need to be documented include ______. -selection of appropriate auditing standards -selection of appropriate accounting principles -issues related to accounting estimates -accounting for complex and unusual transactions

-selection of appropriate accounting principles -issues related to accounting estimates -accounting for complex and unusual transactions

During the planning stages of the audit, the auditors develop a(n) _______. -strategy -opinion -audit plan -schedule

-strategy -audit plan -schedule

A spreadsheet that combines Petty Cash with all the company's bank accounts is an example of a _______. -working trial balance -summary schedule -lead schedule -corroborating document

-summary schedule -lead schedule

Auditing standards require that audit documentation provide evidence ________. -that the audit was planned and performed in accordance with GAAP -that the audit was planned and performed in accordance with GAAS -of the auditor's basis for concluding on the achievement of the audit's overall objectives

-that the audit was planned and performed in accordance with GAAS -of the auditor's basis for concluding on the achievement of the audit's overall objectives

Management makes assertions for financial statements regarding all of the following except _____. A) fairness of the audit opinion B) properly recorded transactions C) properly presented disclosures D) proper amounts in various accounts

A) fairness of the audit opinion

In evaluating the appropriateness of audit evidence, auditors consider its _______. A) sufficiency and volume B) relevance and reliability

B) relevance and reliability

These transactions involve recurring financial statement activities recorded in the accounting records in the normal course of business restricting inherent risk. A) estimation B) routine C) nonroutine

B) routine

The working papers for a particular engagement are included in the _____ ______.

audit file

The risk that a material misstatement could occur in a relevant assertion and not be detected on a timely basis by the client's internal control is called _____ risk.

control

The examination of big data to uncover hidden patterns, unknown correlations, market trends and other useful business applications is called _____ _____.

data analytics

Much of the information contained in the ______ file is gathered during the course of the first audit of a client's records.

permanent

Analytical procedures and tests of detail of account balances, transactions, and disclosures are _______ procedures.

substantive

In regards to audit evidence, _______ is a measure of the quantity of audit evidence that should be obtained.

sufficient

The record of the audit procedures performed, relevant audit evidence obtained, and the conclusions the auditors reach is called audit documentation or ___________ _________.

working papers

The backbone of the working papers (which is ordinarily an electronic spreadsheet) is the _____ _____ _____.

working trial balance

Categories of traditional ratios include _______ ratios. -performance -activity -leverage -longevity

-activity -leverage

Factors that affect inherent risk include the nature of the ______. -client's environment -internal control system -account -client

-client's environment -account -client

Auditors are required to ______. -ensure accounting estimates are properly accounted for and disclosed -develop any necessary estimates that management fails to make -evaluate the reasonableness of accounting estimates

-ensure accounting estimates are properly accounted for and disclosed -evaluate the reasonableness of accounting estimates

External confirmations are normally used to gather evidence for all of the following accounts except _______. A) buildings B) notes payable C) accounts receivable D) cash

A) buildings

Throughout the audit, auditors accumulate non-trivial misstatements identified and propose appropriate ______ journal entries. A) replacement B) adjusting C) reclassification D) restatement

B) adjusting

For the audit risk model, auditors must restrict this risk through the performance of substantive procedures. A) control B) detection C) inherent

B) detection

Which of the following relates to the assertion being addressed? A) both reliability and relevance B) reliability C) relevance

C) relevance

In performing audit procedures, auditors must make sure the procedures cover _______. A) all assertions B) only material assertions C) only relevant assertions D) all material and relevant assertions

D) all material and relevant assertions

Evaluations of financial statement information by a study of relationships among financial and nonfinancial data is the basis of ______ procedures.

analytical

Working papers are assigned this, which allows the information to be tied together through a system of cross-referencing. A) index number B) schedule number C) reconciliation date D) signature and date

A) index number

Making accounting estimates is the responsibility of ______. A) external auditors B) management C) internal auditors

B) management

These components of audit risk exist for a client even if an audit is not performed. A) inherent risk and control risk B) control risk only C) detection risk only D) inherent risk, control risk, and detection risk E) inherent risk only

A) inherent risk and control risk