S-AUD Section 2 Good MCQs (3)

Which of the following factors would a CPA ordinarily consider in the planning stage of an audit engagement?

BOTH Financial statement accounts likely to contain a misstatement Conditions that require extension of audit tests

Field CPA, is auditing the financial statements of Miller Mailorder, Inc., (MMI) for the year ended January 31, 20X1. Field has compiled a list of possible errors and fraud that may result in the misstatement of MMI's financial statements, and a corresponding list of internal controls that, if properly designed and implemented, could assist MMI in preventing or detecting the errors and fraud. Select the internal control that most likely could assist MMI in preventing or detecting the sending of an invoice for shipped goods and its recording in the sales journal without being posted to any customer account.,

Control amounts posted to the accounts receivable ledger are compared with control totals of invoices.

If an auditor finds noncompliance under applicable law or regulations throughout the audit which of the following would be an appropriate reaction?

Issue an qualified opinion/Disclaim an opinion/Withdraw from the engagement

Is a CPA interested in risks which affect management's objectives or basically just those that would have a material mistatement of FS?

JUST those that would casue a material misstatement on FS

Are measurements and review of the entity's financial performance relevant to an entity's control environment?

NO

Which of the following computer-assisted auditing techniques processes client input data on a controlled program under the auditor's control to test controls in the computer system?

Parallel simulation

An audit client has substantial assets held in a trust that is managed by the trust department of a bank. Which of the following actions by the auditor is the most efficient way to obtain information about the trust department's internal controls?

Rely on the trust department's audit report on internal controls placed in operation and their operating effectiveness.

Which of the following control activities does not impact an auditor's consideration of the effect of IT on internal control?

Resolution of deficiencies, including management's response to known deficiencies and audit findings

Which of the following control activities most likely could prevent EDP personnel from modifying programs to bypass programmed controls?

Segregation of duties within EDP for computer programming and computer operations

T or F: The work of a specialist who is related to the client may be acceptable under certain circumstances.

T

When an auditor tests a computerized accounting system which of the following is true of the test data approach?

Test data is processed by the client's computer programs under the auditor's control.

Under which of the following circumstances would an auditor be considered to be using the work of a specialist?

The auditor engages a lawyer to interpret the provisions of a complex contract.

Which of the following statements is correct concerning an auditor's use of the work of an actuary in assessing a client's pension obligations?

The auditor is required to understand the objectives and scope of the actuary's work.

Based on the assessed risk of material misstatement at the relevant assertion level the auditor should consider which of the following matters in designing further audit procedures?

The characteristics of the class of transactions, account balance, or disclosure involved

The auditor should consider certain factors in assessing the efficiency and effectiveness of analytical procedures as compared to tests of details. In determining whether and to what extent analytical procedures should be used which of the following should the auditor consider?

The nature of the assertion tested

Which of the following statements is correct concerning an auditor's use of the work of a specialist?

The work of a specialist who is related to the client may be acceptable under certain circumstances.

An auditor is concerned about a policy of management override as a limitation of internal control. Which of the following tests would best assess the validity of the auditor's concern?

Verifying that approved spending limits are not exceeded

In the planning stage of an audit engagement would a CPA consider conditions that require extension of audit tests?

YES

Is an audit trail a deterrent to fraud?

YES

Processing data through the use of simulated files provides an auditor with information about the operating effectiveness of control policies and procedures. One of the techniques involved in this approach makes use of what?

an integrated test facility.

Which of the following is not a major reason for maintaining an audit trail for a computer system?

analytical purposes

Why would "The CEO can request a check with no purchase order." be an example of an inherent limitation on internal controls?

because management override of internal controls is usually an issue in inherent limitations and the exmaple given qualifies as management override

In auditing accounts payable an auditor's procedures most likely would focus primarily on management's assertion of what?

completeness

A principal auditor decides not to refer to the audit of another CPA who audited a subsidiary of the principal auditor's client. After making inquiries about the other CPA's professional reputation and independence the principal auditor most likely would do what?

contact the other CPA and review the audit programs and working papers pertaining to the subsidiary.

For effective internal control the accounts payable department generally should do what?

establish the agreement of the vendor's invoice with the receiving report and purchase order.

Able Co. uses an online sales order processing system to process its sales transactions. Able's sales data is electronically sorted and subjected to edit checks. A direct output of the edit checks most likely would be a what?

file of all rejected sales transactions.

Assessing control risk below the maximum level most likely would involve what?

identifying specific control activities relevant to specific assertions.

Audit evidence for the control environment is best obtained through which methods?

inquiry and observation

Test data is what?

introduced into the client's computer system using the same program to operate the application being tested. This type of control testing is not under the auditor's control, as it uses the client's actual program.

Edit checks test transactions prior to processing and are designed to ensure that what happens?

invalid inputs are rejected.

Audit evidence concerning segregation of duties ordinarily is best obtained by what?

observing the employees as they apply control procedures.

An inherent limitation is what?

one that would exist even if the controls were designed and operated perfectly.

Which of the following procedures would an auditor most likely use to identify unusual year-end transactions?

performing analytical procedures

Restrictions on stuff relates to which financial statement assertion?

presentation and disclosure

An auditor should design the written audit plan so that what happens?

the audit procedures selected will achieve specific audit objectives.

What is the record count?

the numnber of rows or basically the number of entires in a database

Preventative controls are what?

usually more cost beneficial than detective controls.