Audit Exam Review Module G

When performing an ADA, which of the following best describes an appropriate sequence used by an auditor for risk assessment purposes? a. An auditor develops an audit plan after evaluating the results of the risk assessment ADA. b. An auditor evaluates the results of a data analytic chosen based off of the audit plan. c. An auditor cleanses the client's data after modeling the ADA required by the audit plan. d. The auditor models an ADA based on the evaluation of the audit plan.

a. An auditor develops an audit plan after evaluating the results of the risk assessment ADA.

Analysis of accounts receivable collection periods by region is most likely a part of which of the following types of ADA? a. Risk assessment procedures b. Tests of controls c. Substantive analytical procedures d. Test of details

a. Risk assessment procedures

Which of the following would occur during the planning stage of Audit Data Analytics? a. Auditor must determine the nature, timing, and extent of the work that will be completed as part of the ADA. b. Auditor can conclude that no additional risk of material misstatement is present in population items. c. Auditors may need to subject client systems to reliability testing. d. Auditor must consider whether the data has a logical connection to the purpose of the audit procedure.

a.Auditor must determine the nature, timing, and extent of the work that will be completed as part of the ADA.

The automated approach to audit analytics can be delivered through: 1. Ad hoc procedures 2. Continuous execution 3. Repetitive analysis a. 1 only b. 2 and 3 c. 3 only d. 1, 2, and 3

b. 2 and 3

Which of the following is not a typical problem found by auditors when cleansing client data for the purposes of performing an ADA? a. Some fields may be empty and thus cause errors during analysis. b. Some fields may not be sorted in numerical order and require sorting for identification of outliers. c. Some date fields may contain letters or be in the wrong format. d. Some fields may have country-specific differences such as currency.

b. Some fields may not be sorted in numerical order and require sorting for identification of outliers.

In determining the reliability of the data to be used by the audit team, an auditor discovers the data is controlled internally by the accounting department. Which of the following is the most likely step the auditor would take after learning of this information? a. The auditor should rely on the data and continue to perform the ADA. b. The auditor should consider obtaining information from a more reliable source before continuing with the ADA. c. The auditor should ask management if the information can be relied upon. d. The auditor should not rely on the data and perform a different procedure to obtain sufficient, appropriate audit evidence.

b. The auditor should consider obtaining information from a more reliable source before continuing with the ADA.

When auditing a client in the merchandising business, an auditor became concerned that the client was recording fraudulent credit sales. Which of the following procedures would have most likely alerted them to this potential fraud? a. Observing the credit sales figure on the income statement b. Recalculating depreciation on fixed assets c. Analyzing cash receipts as a percentage of sales by month d. Analyzing gross profit percentage by class of revenue

c. Analyzing cash receipts as a percentage of sales by month

For documentation of an ADA to be considered sufficient, all the following should be recorded except? a. Who reviewed work performed within the output of the ADA. b. Who performed the work and created the output of the ADA. c. The process used to produce the data examined. d. Identifying characteristics of specific items or matters tested.

c. The process used to produce the data examined.

All of the following procedures are common uses of audit data analytics in risk assessment procedures except: a. analyzing trends in inventory costs. b. identifying sales which did not follow the typical three way match control in the revenue cycle. c. comparing cash collections to sales invoices and discounts in the revenue cycle. d. calculating accounts receivable collection periods by region.

c. comparing cash collections to sales invoices and discounts in the revenue cycle.

The first step of planning an ADA is: a. select techniques and tools used for performing the ADA. b. document the objective of the ADA. c. determine the overall purpose and specific objectives of the ADA. d. select the ADA that is best suited for the purpose.

c. determine the overall purpose and specific objectives of the ADA.

When documenting an Audit Data Analytic (ADA), an experienced auditor with no prior connection to the engagement should be able to understand all these elements of the ADA except: a. results of procedures performed and evidence obtained. b. nature, timing, and extent of procedures performed. c. the software used in performing the ADA. d. conclusions reached and significant judgments made.

c. the software used in performing the ADA.

Select the proper order in performing Audit Data Analytics: 1. Evaluate the results and conclude on whether the purpose and specific objectives of performing the ADA have been achieved 2. Consider the relevance and reliability of the data used 3. Plan the ADA 4. Perform the ADA 5. Access and prepare the data for purposes of the ADA a. 5, 3, 2, 4, 1 b. 2, 3, 5, 4, 1 c. 2, 5, 3, 4, 1 d. 3, 5, 2, 4, 1

d. 3, 5, 2, 4, 1

Certain characteristics of data may affect the relevance and reliability of the data used in the ADA. The level of aggregation is one of these characteristics. Which of the following does not illustrate differing levels of aggregation? a. Number of annual transactions compared to the number of weekly transactions b. A consolidated statement compared to a single segment of a statement c. A total account balance compared to a single transaction within that balance d. All of the above illustrate differing levels of aggregation

d. All of the above illustrate differing levels of aggregation

When identifying and assessing inherent risk through the use of audit data analytics, what type of analytic would an auditor most likely perform first? a. Detail analysis of specific sales transactions. b. Dimension analysis of sales transactions by region. c. Trend analysis of sales by month. d. Comparison of sales revenue to prior period and expectations.

d. Comparison of sales revenue to prior period and expectations.

An auditor imports a client's purchasing cycle transactions for the purposes of testing authorization controls. Which of the following is true regarding the implementation of this audit data analytic? a. The use of statistical sampling in the performance of the ADA increases the auditor's confidence. b. The use of ADA for purchasing transactions often significantly increases audit risk relative to traditional auditing procedures. c. A disadvantage of implementation is the increased costs associated with ADA. d. Testing can be more efficiently conducted across 100% of transactions.

d. Testing can be more efficiently conducted across 100% of transactions.

An auditor is considering choosing an ADA tool for performing a risk assessment procedure. Which of the following best describes the requirements in the auditing standards? a. The AICPA Guide to Audit Data Analytics lists the technology tools which are allowed for audits of nonissuers. b. The auditing standards prohibit the use of artificial intelligence in risk assessment. c. The ASB and PCAOB standards provide a uniformly agreed upon and updated listing of allowable tools for audits of issuers. d. The auditing standards do not specifically address the tools auditors may use in performing the audit.

d. The auditing standards do not specifically address the tools auditors may use in performing the audit.

An auditor is considering the appropriate software to perform an ADA for a substantive analytical procedure. Which of the following types of software is the auditor most likely to use? a. Data visualization software b. Data cleansing software c. Robotic process automation software d. The auditor may use any of the above depending on the purposes of the ADA.

d. The auditor may use any of the above depending on the purposes of the ADA.

Which of the following is a common use of ADA in performing tests of controls? a. The auditor performs an aging of accounts receivable. b. The auditor conducts a trend analysis on inventory costs. c. The auditor runs a predictive model of interest expense. d. The auditor performs journal entry exception testing for employee entry amount limits.

d. The auditor performs journal entry exception testing for employee entry amount limits.

Which of the following is correct regarding including client data in audit documentation for an issuer? a. Auditors are required to retain their client's data in documentation for seven years. b. Auditors should always include client data in their documentation to enable an experienced auditor with no prior connection to the engagement to replicate testing. c. Client data should never be included in documentation. d. There is no specific requirement to include client data in auditing documentation.

d. There is no specific requirement to include client data in auditing documentation.

To determine the reliability of data, the auditor may consider all but which of the following? a. The process used to produce the data b. The nature and source of the data c. The extent of other audit procedures d. Whether the auditor's system has been subject to reliability testing

d. Whether the auditor's system has been subject to reliability testing