audit ch.7
Which of the following is a step associated with accessing and preparing data for audit data analytics (ADA)? A. Checking the completeness of the data set to be used for ADA B. Ensuring the match of ADA data with the balance sheet C. Presenting a data set or key information as a chart or other image D. Matching ADA with the general ledger
A. Checking the completeness of the data set to be used for ADA
Clustering can also be performed _______. A. by graphing data in a way that allows for visual identification of groups B. by graphing data in a way that allows for a simple regression analysis C. by the internal audit function before the data is transferred to the external auditors D. by the client's legal counsel, if necessary
A. By graphing data in a way that allows for visual identification of groups
What is the first step in using regression analysis as part of audit data analytics? A. Estimate the prediction equation using data that is not currently being audited B. Validate the prediction equation from a statistics point of view C. Compare the predicted values (auditor's expectation) with the actual values D. Use the regression equation to make predictions for the data being currently audited
A. Estimate the prediction equation using data that is not currently being audited
The auditor first obtains an understanding of the entity and its environment in order to identify misstatements and anomalies when performing audit data analytics (ADA) as which of the following procedures? A. Risk assessment B. Auditing risk C. Material misstatement D. Control risk
A. Risk assessment
Which of the following is a risk associated with visualizations? A. They do not provide precise figures or tests of statistical significance that are often needed in ADAs. B. They fail to communicate information efficiently. C. They use a lot of jargon. D. They are unlikely to be remembered.
A. They do not provide precise figures or tests of statistical significance that are often needed in ADAs
An issue addressed in the AICPA Guide to Audit Data Analytics is _______. A. what to do when initial investigation identifies a large number of notable items B. what to do when initial investigation identifies a small number of notable items C. how to reconcile data analytics and revenue recognition D. how to ensure adherence to matching of revenues and expenses using audit data analytics
A. What to do when initial investigation identifies a large number of notable items
Regression analysis is best defined as _______. A. a statistical process which involves estimating a prediction equation that expresses an item of interest (commonly known as the y or dependent variable) in terms of other data fields B. a non-statistical process which involves estimating a prediction equation that expresses an item of interest (commonly known as the y or dependent variable) in terms of other data fields C. a statistical process which involves estimating a prediction parameter that expresses an item of interest (commonly known as the y or dependent variable) in terms of other data fields D. a non-statistical process which involves estimating a prediction parameter that expresses an item of interest (commonly known as the y or dependent variable) in terms of other data fields
A. a statistical process which involves estimating a prediction equation that expresses an item of interest (commonly known as the y or dependent variable) in terms of other data fields
Once the auditor has planned the application of audit data analytics, the auditor should _______. A. access the data, make a copy of the client's data, and prepare the data for analysis B. seek the approval of management with respect to the tests C. determine how much these procedures will increase the cost of the audit and advise management accordingly D. access the data and prepare the data for the internal auditors to review
A. access the data, make a copy of the client's data, and prepare the data for analysis
Advances in the technological landscape _______. A. are providing opportunities to rethink how an audit is performed B. have rarely affected the profession auditing and how an audit is conducted C. are providing opportunities to increase the cost of an audit D. have had no bearing on inherent risk whatsoever
A. are providing opportunities to rethink how an audit is conducted
The regression model should be estimated _______. A. based only on historical data to ensure it can be used to make predictions for the current period B. based only on predicted future data to ensure it can be used to make predictions for the current period C. based only on historical data to ensure it can be used to make predictions for prior periods D. based only on forecasted data to ensure it can be used to make predictions for prior periods
A. based only on historical data to ensure it can be used to make predictions for the current period
Audit data analytics should _______. A. be customized to the individual client and industry B. be tailored to the individual client but consistent across an industry C. should be the same for each client, but differ among industries D. should be the same for both client and the industry in which they operate
A. be customized to the individual client and industry
One of the steps in preparing data for analysis is _______. A. checking the numerical continuity of the data B. making sure there are fields with missing data C. ensuring the data is inconsistently formatted D. retrieving the data from the internal audit function
A. checking the numerical continuity of the data
Regression analysis _______. A. comes in many forms, including simple linear regression analysis B. is rarely used in auditing, as it is too complex C. is best performed by the internal audit function D. should only be conducted with a data-set vetted and approved by management
A. comes in many forms, including simple linear regression analysis
One of the steps in the five step AICPA process to follow when planning, performing, and evaluating results from audit data analytics (ADA) is _______. A. consider the relevance and reliability of the data used B. prepare a suitable population and representative sample C. pass the results to management for analysis and evaluation D. consideration of internal control
A. consider the relevance and reliability of the data used
The item of interest in a regression analysis is referred to as the _______. A. dependent variable B. independent variable C. any x variable D. hypotenuse
A. dependent variable
Which of these steps is not used in a regression analysis? A. Determining which assertions apply to which dependent variables B. Validate the prediction equation from a business logic point of view C. Validate the prediction equation from a statistics point of view D. Use the regression equation to make predictions for the data being currently audited
A. determining which assertions apply to which dependent variables
Much of today's evidence is now typically in _______. A. electronic form B. documentary form C. neither electronic or documentary form D. the custody of the client's legal counsel
A. electronic form
When the auditor is performing audit data analytics (ADA) as a substantive test of details of a population of transactions or balances, the auditor will have _______. A. evaluated inherent risk B. evaluated audit risk C. confirmed the tests with management prior to conducting them D. already audited every account in the population
A. evaluated inherent risk
Effective visualizations _______. A. facilitate people making visual comparisons between data elements B. are generally understood by a smaller audience C. communicate a small amount of information efficiently D. are less likely to be remembered
A. facilitate people making visual comparisons between data elements
If the auditor is auditing an accounts receivable file, the auditor will want to make sure the receivable file matched the___________. A. general ledger as of the date of the test. B. trial balance as of the date of the test. C. investing section of the statement of cash flows as of the date of the test. D. general ledger as of any date before the test.
A. general ledger as of the date of the test
Audit data analytics (ADA) is effective for _______. A. identifying general types of misstatements, as well as identifying specific transactions or accounts that are likely to be misstated B. identifying general types of misstatements only C. identifying specific transactions or accounts that are likely to be misstated only D. none of the above
A. identifying general types of misstatements, as well as identifying specific transactions or accounts that are likely tp be misstated.
When the auditor is performing audit data analytics (ADA) as a substantive test of details of a population of transactions or balances, the auditor will have evaluated _______. A. inherent risk B. substantive risk C. fraud risk D. variance risk
A. inherent risk
Matching information in key data fields _______. A. is a process where the auditor uses audit data analytics to search for key characteristics that may exist in several different databases B. is a process where the auditor uses audit data analytics to search for key characteristics that may exist in the same database C. is typically a task assigned to the internal audit function D. is a process where the auditor uses his or her understanding of inherent risk to search for key characteristics that may exist in several different databases
A. is a process by where the auditor uses audit data analytics to search for key characteristics that may exist in several different databases
Audit data analytics (ADA)_______. A. is effective not only for identifying general types of misstatements, but is also capable of identifying specific transactions or accounts that are likely to be misstated B. is effective only for identifying general types of misstatements C. is only capable of identifying specific transactions or accounts that are likely to be misstated D. is effective neither at identifying general types of misstatements or capable of identifying specific transactions or accounts that are likely to be misstated
A. is effective not only for identifying general types of misstatements, but is also capable of identifying specific transactions or accounts that are likely to be misstated
The simplest regression _______. A. is where the prediction equation is the average of the data B. is where the prediction equation is the median of the data C. involves the use of logistic regression D. involves the use of time-series regression
A. is where the prediction equation is the average of the data
False positives refer to _______. A. items incorrectly identified as notable items B. items correctly identified as notable items C. negative confirmations incorrectly received from client vendors D. positive confirmations incorrectly received from client vendors
A. items incorrectly identified as notable items
One of the questions an auditor should consider related to the audit data analytics (ADA) application is___________. A. its purpose B. its potential use by the internal audit function C. its potential use by senior management D. ensuring all employees in the client organization has access to it
A. its purpose
If a confirmation of an accounts receivable balance is not returned by the customer, the auditor might validate the receivable by _______. A. looking at evidence of subsequent cash receipt in the amount of the billing to the customer B. asking the client to obtain the evidence and forward it to the auditor C. requesting the internal audit function contact the customer D. confirming prior receivables by the same client
A. looking at evidence of subsequent cash receipt in the amount of the billing to the customer
The first step in audit data analytics is _______. A. making sure the data is complete B. checking the numerical continuity of the data C. checking both of these simultaneously D. checking neither of these
A. making sure the data is complete
A number of substantive tests of details involve _______. A. matching information in the accounting records with information on underlying documents B. matching information in the accounting records with information evidence provided by the internal auditors C. matching information in the accounting records with evidence provided by the client's management D. making a determination on the effectiveness of the client's system of internal control
A. matching information in the accounting records with information on underlying documents
Substantive tests of details may involve _______. A. matching information in the accounting records with information on underlying documents B. testing of internal controls C. the clients legal counsel D. the approval of senior management
A. matching information in the accounting records with information on underlying documents
Some important aspects of any audit, including audit data analytics, pertain to the _______. A. nature, extent, and timing of the audit procedures B. prior auditor's assistance with audit procedures C. ultimate issuance of an audit opinion by senior management D. stock price, and ensuring it is not negatively affected by the audit
A. nature, extent, and timing of the audit procedures
The auditor is most likely going to perform audit data analytics (ADA) as a substantive test when the auditor has _______. A. performed tests of controls and concluded that the entity has strong controls B. performed tests of controls and concluded that the entity has weak controls C. completed the audit and is ready to issue the audit report D. confirmed the procedures to be conducted with the internal audit function
A. performed tests of controls and concluded that the entity has STRONG internal controls
AU-C 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, A61-.A64 _______. A. provides a discussion about how the use of information technology results in benefits and risks that may affect the reliability of data B. provides a discussion about how the use of information technology only C. provides a discussion about risks that may affect the reliability of data only D. relates to neither the use of information technology and the reliability of data
A. provides a discussion about how the use of information technology results in benefits and risks that may affect the reliability of data
AU - C 500 Audit Evidence, A 27-A.34 _______. A. provides a general discussion about the relevance and reliability of evidence. B. provides a general discussion about the using the internal audit function C. provides a general discussion about the sufficiency of audit evidence D. dictates that an audit opinion must always be issued by the balance sheet date
A. provides a general discussion about the relevance and reliability of evidence
If the evidence about internal controls does not support a previous conclusion regarding internal controls, the auditor should _______. A. reassess internal controls at a higher level, and reevaluate the implications of a high control risk assessment on detection risk and the auditor's audit strategy B. reassess internal controls at a lower level, and reevaluate the implications of a high control risk assessment on detection risk and the auditor's audit strategy C. consider the use of specialists to test the client's system of internal control D. wait until the end of the audit to perform further testing
A. reassess internal controls at a higher level , and reevaluate the implications of a high control risk assessment on detection risk and the auditor's audit strategy
A common problem with multinational organizations is _______. A. recording dates in different formats B. use of the same currency in different sales territories C. a lack of diversity due to a multinational workforce D. low cash reserves and retained earnings balances
A. recording dates in different formats
If revenue is strongly seasonal, the auditor might decide to _______. A. run a time-series regression that is based on the trend and seasonality in historical revenue figures B. run a non-statistical regression that is based on the seasonality in historical revenue figures C. run a time-series regression that is based on seasonality only D. run a time-series regression that is based on the trend only
A. run a time-series regression that is based on the trend and seasonality in historical revenue figures
A risk associated with visualizations is _______. A. that the pretty picture of the visualization will be remembered and not the message it was intended to convey B. that the pretty picture of the visualization will not be remembered and instead the message it was intended to convey is remembered instead C. everyone will interpret them in the same way D. no one will understand the picture, just the words
A. that the pretty picture of the visualization will be remembered and not the message it was intended to convey
Defining notable items depends on _______. A. the assertion being audited, and the auditor's understanding of the business and industry. B. the assertion being audited only C. the auditor's understanding of the business and industry only D. neither the assertion being audited, nor the auditor's understanding of the business and industry.
A. the assertion being audited and the auditor's understanding of the business and industry
When the auditor uses audit data analytics, _______. A. the auditor is looking for anomalies, or balances or transactions that do not meet the auditor's expectations B. the auditor is looking for anomalies only C. the auditor is only looking for balances or transactions that do not meet the auditor's expectations D. the auditor is neither looking for anomalies, nor balances nor transactions that do not meet the auditor's expectations
A. the auditor is looking for anomalies, or balances or transactions that do not meet the auditor's expectations
Once the auditor has determined that the data is complete and data is available for all desired fields, _______. A. the auditor must also make sure that the data is clean and ready for analysis B. the auditor must also make sure that the data is clean and ready for submittal to the internal auditors for analysis C. the auditor should seek management's permission to proceed D. the data set should be turned over to the client's legal counsel for further processing
A. the auditor must also make sure that the data is clean and ready for analysis
An example of a vouching procedure might be _______. A. the auditor vouching the quantities on a sales invoice to the quantities on underlying shipping documents, the existence of a bill of lading, and prices to the sales order. B. the auditor vouching the quantities on a sales invoice to the quantities on underlying shipping documents, the occurrence of a bill of lading, and prices to the sales order. C. requesting the internal audit function vouch the accuracy of all sales transactions. D. confirming with the client's legal counsel that there is no litigation outstanding
A. the auditor vouching the quantities on a sale invoice to the quantities on underlying shipping documents, the existence of a bill of lading, and prices to the sales order
When the auditor is performing audit data analytics (ADA) as a substantive test of details of a population of transactions or balances, _______. A. the auditor will have evaluated inherent risk and will likely have performed tests of controls to assess control risk B. the auditor is yet to evaluate inherent risk but has likely performed tests of controls to assess control risk C. the auditor will have evaluated inherent risk, but not yet performed tests of controls to assess control risk D. the auditor has not yet assessed either control or inherent risk Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Risk Assessment,
A. the auditor will have evaluated inherent risk and will likely have performed tests of controls to assess control risk
When the auditor is performing audit data analytics (ADA) as a substantive test of details of a population of transactions or balances, _______. A. the auditor will have evaluated inherent risk, and will likely have performed tests of controls to assess control risk B. the auditor will not have evaluated inherent risk, and will likely have performed tests of controls to assess control risk C. the auditor will have evaluated neither inherent risk, nor tests of controls to assess control risk D. the results should be immediately sent to management for vetting
A. the auditor will have evaluated inherent risk, and will likely have performed tests of controls to assess control risk
When performing audit data analytics (ADA) as a risk assessment procedure, _______. A. the auditor will have first obtained an understanding of the entity and its environment B. the auditor is yet to obtain an understanding of the entity and its environment C. the auditor will work closely with client management to confirm which risk assessment procedures they would prefer the auditor conduct D. the auditor should contact the prior auditor for assistance with this procedure
A. the auditor will have first obtained an understanding of the entity and its environment
The auditor determines the relevance of data by _______. A. the nature of the audit question or assertion being tested B. confirming its relevancy with senior management C. ensuring the data is unrelated to any audit assertion the auditor wishes to test D. inquiring of the internal auditors
A. the nature of the audit question or assertion being tested
Cluster analysis is defined as _______. A. the process of discovering groups (termed clusters in data science) of similar items in a set of data; items in the same group are similar, while items in different groups are not as similar. B. the process of discovering individual pieces of similar items in a set of data; items in the same group are similar, while items in different groups are not as similar. C. analyzing management techniques and administrative policies simultaneously D. determining which package of audit services can be sold to a client at the best possible price
A. the process of discovering groups (termed clusters in data science) of similar items in a set of data; items in the same group are similar, while items in different groups are not similar.
If an existing customer number is taken from a former customer that no longer does business with the company and is assigned to a new customer, _______. A. this may cause problems with the underlying data analysis B. then no problems should occur and the testing should be straightforward C. this should not complicate or cause issues with the data analysis D. the auditors should generate a new customer number and assign it to the old customer
A. this may cause problems with the underlying data analysis
It is appropriate for the auditor _______. A. to compare electronically what was previously compared manually. B. to compare manually what was previously compared electronically. C. to do neither of these things D. to do both these things
A. to compare electronically what was previously compared manually
Visualizations are typically produced _______. A. to reveal information to people B. to assist with inputting complex information into computer systems C. by the client's legal counsel when a lawsuit has been threatened D. by management for the external auditors
A. to reveal information to people
One of the benefits of a regression analysis is _______. A. understanding to what extent independent variables affect the dependent variable B. understanding to what extent dependent variables affect the independent variable C. understanding to what extent independent variables affect other independent variables D. understanding to what extent dependent variables affect other dependent variables
A. understanding to what extent independent variables affect the dependent variable
The auditor should make the same judgments about the relevance and reliability of information _______. A. when making an electronic comparison, as the auditor would consider when making a manual comparison B. for different audit clients within the same industry C. after confirming its relevance with senior management D. for all customers and vendors of a client
A. when making an electronic comparison, as the auditor would consider when making a manual comparison
The auditor should always evaluate evidence _______. A. with a questioning mind and attitude of professional skepticism B. under the assumption that all information is correct C. under the assumption that all information is incorrect D. after senior management has had a chance to review and approve it
A. with questioning mind and attitude of professional skepticism
Today, much of the evidence that used to exist in paper form _______. A. is kept solely by the internal auditor B. now exists electronically C. no longer exists at all D. is retained by the client's legal counsel, in case of litigation
B. now exists electronically
An issue that may affect a regression analysis used by an auditor as part of audit data analytics is _______. A. materiality B. seasonality C. faithful representation D. uniformity
B. Seasonality
Another name commonly given to a regression equation is _______. A. slope line intercept B. a prediction equation C. a statistical variance equation D. a population distribution equation
B. a prediction equation
Regression analysis is _______. A. a non-statistical process which involves estimating a prediction equation that expresses an item of interest (commonly known as the y or dependent variable) in terms of other data fields (the x or independent variables). B. a statistical process which involves estimating a prediction equation that expresses an item of interest (commonly known as the y or dependent variable) in terms of other data fields (the x or independent variables). C. a non-statistical process which involves estimating a prediction equation that expresses an item of interest (commonly known as the x or dependent variable) in terms of other data fields (the y or independent variables). D. a statistical process which involves estimating a prediction equation that expresses an item of interest (commonly known as the x or dependent variable) in terms of other data fields (the y or independent variables).
B. a statistical process which involves estimating a prediction equation that expresses an item of interest (commonly known as the y or dependent variable) in terms of other data fields (commonly known a x or independent variables)
It is common for data problems to arise when a company_______. A. has no subsidiaries and has not acquired any other companies B. acquires another company C. changes accounting method D. changes an accounting estimate
B. acquires another company
Audit data analytics can be used___________. A. only at the beginning of the audit B. at virtually any phase of the audit C. only at the end of the audit D. by the internal audit function only
B. at virtually any phase of the audit
AU-C 315, Understanding the Entity and Its Environment, and Assessing the Risks of Material Misstatement, defines risk assessment procedures as _______. A. audit procedures performed to obtain an understanding of the auditor and its environment, including the entity's internal control, to identify and assess the risk of material misstatement at the financial statement level and relevant assertion levels, whether due to error or fraud B. audit procedures performed to obtain an understanding of the entity and its environment, including the entity's internal control, to identify and assess the risk of material misstatement, at the financial statement level and relevant assertion levels - whether due to error or fraud C. any procedure that involves international currency transactions D. any procedure that was performed by the prior auditor, which is repeated by the current auditor
B. audit procedures performed to obtain an understanding of the entity and it's environment, including the entity's internal control, to identify and assess the risk of material misstatement, at the financial statement level and relevant assertion levels - whether due to error or fraud
Data analytics can often be used _______. A. by the internal audit function as a test of controls B. by the external auditors as a substantive test C. by the firms' actuarial staff when testing controls D. by specialists only
B. by the external auditors as a substantive test
If a confirmation of an accounts receivable balance is not returned by the customer, the auditor might validate the receivable by _______. A. confirming a different receivable with a different customer instead B. looking at evidence of subsequent cash receipt in the amount of the billing to the customer C. looking at evidence of subsequent cash receipt in the amount of the billing for a different customer D. confirming the receivable with senior management
B. looking at evidence of subsequent cash receipt in the amount of the billing to the customer
The initial planning of where to use audit data analytics _______. A. is typically left to the internal audit function B. may involve significant audit partner and manager time, or it may be combined with a brainstorming session that involves all members of the audit team C. is a legal question, and should be referred to the client's legal counsel D. is determined solely by the audit partner in charge of the audit
B. may involve significant audit partner and manager time, or it may be combined with a brainstorming session that involves all members of the audit team
As with all audit procedures, auditors must _______. A. pay little attention to the work of the prior auditor on a first-year engagement B. must carefully plan the nature, timing, and extent of audit data analytics (ADA) to be used for each client C. must let the client's management choose the nature, timing, and extent of ADA to be used for each client D. always outsource at least some of the audit work to the internal audit function
B. must carefully plan the nature, timing, and extent of audit data analytics (ADA) to be used for each client
When using cluster analysis, the characteristics of the group _______. A. must be known beforehand, and are determined by the data B. need not be known beforehand, but are determined by the data C. must be known beforehand, but are typically not determined by the data D. need not be known beforehand, and are typically not determined by the data
B. need not be known beforehand, but are determined by the data
When tests internal controls do not support a previous conclusion about internal controls, the auditor should _______. A. obtain assurances about internal control from senior management B. reassess internal controls at a higher level C. consider withdrawing from the engagement D. lower inherent risk related to internal control
B. reassess internal controls at a higher level
The most appropriate visualization to use, and the best parameters to use for the chosen visualization, _______. A. should be decided by the internal auditors B. should be decided on a case by case basis C. should always be the same in similar circumstances D. should be determined by senior management
B. should be decided on a case by case basis
The concept of testing at an interim date relates to _______. A. testing at year-end B. testing at a point before year-end C. testing after year-end D. None of these answer choices is correct.
B. testing at a point before year end
If the auditor is auditing revenues and identifies gaps in the sequence of pre-numbered sales invoices, ____________. A. the auditor is unlikely facing a completeness problem, even if the file reconciles with the general ledger B. the auditor may be facing a completeness problem, even if the file reconciles with the general ledger C. the auditor may be facing a valuation problem, even if the file reconciles with the general ledger D. the auditor is unlikely facing a valuation problem, even if the file reconciles with the general ledger
B. the auditor may be facing a completeness problem, even if the file reconciles with the general ledger
If the auditor is performing substantive tests at an interim date, _______. A. the auditor does not need to perform year-end testing procedures B. the auditor must perform steps to update their conclusion to the date of the financial statements C. the auditor must perform steps to update their conclusion for the next fiscal year of the firm D. this procedure should first be approved by management due to the extra cost involved
B. the auditor must perform steps to update their conclusion to the date of the financial statements
If the auditor is performing substantive tests at an interim date, _______. A. the auditor need not perform any more tests through the financial statement date B. the auditor must perform steps to update their conclusion to the date of the financial statements C. the internal audit function should be advised to complete any further testing deemed necessary D. the client should not be billed for this work in case it needs to be repeated at the financial statement date
B. the auditor must perform steps to update their conclusion to the date of the financial statements
If the auditor finds a misstatement when performing substantive tests, _______. A. the auditor should immediately withdraw from the engagement B. the auditor needs to evaluate the materiality of the misstatement C. the auditor should immediately increase inherent risk related to the engagement D. the auditor should immediately decrease inherent risk related to the engagement
B. the auditor needs to evaluate the materiality of the misstatement
Professional skepticism relates to _______. A. the concept that the auditors should look to make sure all statements and assertions are of substance B. the notion that the auditors should not believe any management assertions until they are proven C. the notion that the auditors should always believe any management assertions D. the notion that the auditor should view the work of the prior auditor with doubt
B. the notion that the auditors should not believe any management assertions until they are proven
The simplest regression is where _______. A. the prediction equation is the lowest value of the data B. the prediction equation is the average of the data C. the prediction equation is the highest value of the data D. the prediction equation has removed any outlying data points
B. the prediction equation is the average of the data
Visualization is defined as _______. A. a synonym for forecasting B. the representation of a data set or key information, such as a chart or another image C. transparency in financial reporting D. the calculation of material variances from predicted amounts
B. the representation of a data set or key information, such as a chart or another image
Some of the risks associated with visualization pertain to _______. A. the extreme accuracy of their results B. the risk that they are created in isolation C. visualizations always being useful and applicable D. no users misinterpreting them
B. the risk that they are created in isolation
When a new company is acquired, _______. A. there is rarely any disruption to accounting and information technology (IT) systems B. there is frequently a period of transition and integration of accounting and IT systems when different formats are introduced C. there is infrequently a period of transition and integration of accounting and IT systems when different formats are introduced. D. the acquiring company's systems are immediately discontinued and replaced with the acquiring company's systems
B. there is frequently a period of transition and integration of accounting and IT systems when different formats are introduced
For audits of very large organizations, the number of notable items _______. A. could number in the hundreds B. could number in the thousands C. could number in the hundreds or thousands D. could number in the millions
C. could number in the hundreds or thousands
The next step after visually observing a linear relationship _______. A. is to observe more data sets to look for different patterns B. is to confirm the relationship with management C. is to confirm by estimating a linear regression D. is to confirm by estimating a slope line intercept value
C. is to confirm by estimating a linear regression
Substantive tests could involve _______. A. testing the client's system of internal control B. withdrawing from the engagement C. matching information in the accounting records with information on underlying documents D. delegation to the internal audit function
C. matching information in the accounting records with information on underlying documents
If the auditor is performing substantive tests at an interim date, _______. A. then this testing will suffice and no further testing needs to be done B. the auditor should perform no further steps to update their conclusion through the date of the financial statements C. the auditor must perform steps to update their conclusion to the date of the financial statements D. the auditor should plan to conduct more tests once the audit report has been issued
C. the auditor must perform steps to update their conclusion to the date of the financial statements
When electronic data is obtained from an outside entity, _______. A. the auditor should assume that it is valid and free from error B. the auditor should assume the data is inaccurate and unreliable C. the auditor should consider the reliability of the data. D. it should be referred to management for vetting, before being submitted to the auditor for analysis
C. the auditor should consider the reliability of the data
The concept of a roll-forward process relates to _______. A. audit risk B. inherent risk C. the timing of audit procedures D. invoicing the client for work yet to be performed
C. the timing of audit procedures
When the auditor uses the 'matching information in key data fields' process, the expectation is that________. A. there should be minimal variances B. there should always be variances C. there should be no matches D. there should only be variances when two different databases are used
C. there should be no matches
To validate sales revenue and accounts receivable, the auditor could _______. A. send confirmations to accounts payable holders B. attempt to reconcile the differences between gross and net sales C. use the allowance for doubtful accounts account as a substantive test D. request that the internal audit function sign off on its accuracy
C. use the allowance for doubtful accounts account as a substantive test
Types of regression models include _______. A. simple linear regression B. local regression C. time-series regression D. All these answer choices are correct.
D. All of the Above
Some key issues to consider when planning an audit data analytics application are: A. What financial statement items, accounts or disclosures and related assertions are being audited? B. What is the overall purpose of the audit data analytics application and how will it contribute to the balance of the audit? For example, is audit data analytics being used as a risk assessment procedure or as a substantive test? C. What audit data analytics tool is best suited for the audit purpose? For example, which techniques, tools, graphics, tables or other analytical techniques should be used. D. All these answer choices are correct.
D. All of these answer choices are correct
A notable item is an item identified, from the population being analyzed, that has one or more characteristics that, for relevant assertions, may: A. Be indicative of a risk of material misstatement B. Provide information useful in designing procedures to address risks of material misstatement. C. Provide information useful in tailoring procedures to address risks of material misstatement. D. All these answer choices are correct.
D. All these answer choices are correct
Audit data analytics can be used _______. A. as a risk assessment tool B. as a test of controls C. as a test of details D. All these answer choices are correct.
D. All these answer choices are correct
Some key questions that the AICPA Guide for Audit Data Analytics suggests that the auditor should address when evaluating the reliability of data used in an audit data analytics (ADA) application are: A. What is the nature of the data? B. What is the source of the data? C. What is the process used to produce the data? D. All these answer choices are correct.
D. All these answer choices are correct
An important visualization is typically _______. A. clear and well-labelled B. concise and informative C. accurate and not misleading. D. All these answer choices are correct.
D. All these answer choices are correct.
Popular ways that an auditor might search an audit population for notable items include: A. Clustering transactions or balances based on a particular characteristic or multiple characteristics. B. Matching the characteristics of two populations to see if there are any overlaps. C. Statistical analysis, such as regression analysis, where the notable items are identified using statistics D. All these answer choices are correct.
D. All these answer choices are correct.
As part of an audit data analytics (ADA) procedure, some steps that might be used for regression analysis are: A. Estimate the prediction equation using data that is not currently being audited (usually historical data) B. Validate the prediction equation from a statistics point of view C. Use the regression equation to make predictions for the data being currently audited D. All these answer choices are correct.
D. all of the above
Before using client data for audit data analytics the auditor needs to consider which of the following? A. If the data obtained from the client is complete. B. If the data is in a consistent format and whether it needs to be cleaned before it can be used. C. Whether the data is relevant and reliable. D. All these answer choices are correct.
D. all of these answer choices are correct
The auditor is most likely going to perform audit data analytics (ADA) as a substantive test when the auditor has performed tests of controls and concluded that the entity has _______. A. strong information technology (IT) general controls, including strong access controls B. strong IT application controls related to the assertion being tested C. strong controls over electronic data interchange and the exchange of electronic information about a transaction between the client and its customers or suppliers. D. All these answer choices are correct.
D. all of these answer choices are correct
Some key issues to consider when preparing data for audit data analytics are _______. A. Is the data complete? B. Does the data need to be cleaned? C. Does the data agree with the general ledger and the financial statements? D. All these answer choices are correct.
D. all these answer choices are correct
The term notable item refers to something that _______. A. is indicative of a risk of material misstatement B. has not been previously identified (a new risk) C. represents a higher risk of material misstatement than anticipated by the auditor D. All these answer choices are correct.
D. all these answer choices are correct
Which of the following is not a type of regression analysis? A. Simple linear regression B. Time series regression C. Logistic regression D. Slope line intercept regression
D. slope line intercept regression
If the auditor uncovers a misstatement while conducting substantive testing: A. The auditor should refer the misstatement to the internal auditors for further investigation B. The auditor should report the misstatement to the SEC C. The misstatement should immediately be reported to senior management D. The auditor needs to determine if the misstatement provides evidence of a weakness in internal controls.
D. the auditor needs to determine if the misstatement provides evidence of a weakness in internal controls
