Auditing Chapter 6
Which of the following should not normally be included in the engagement letter for an audit?
A listing of the client's branch offices selected for testing
In planning and performing an audit, auditors are concerned about risk factors for two distinct types of fraud: fraudulent financial reporting and misappropriation of assets. Which of the following is a risk factor for misappropriation of assets?
An unreliable accounting system
Tracing from source documents to journals most directly tests:
Completeness (understatement)
The primary objective of tests of details of transactions performed as substantive procedures is to:
Detect material misstatements in the financial statements
The risk that the auditors will conclude, based on substantive procedures, that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is referred to as:
Detection risk
Vouching from journals(or legders) to source documents most directly test:
Existence (overstatemetn)
Which of the following best describes what is meant by the term "fraud risk factor"
Factors often observed in circumstances where frauds have occurred
Which of the following should the auditors obtain from the predecessor auditors before accepting an audit engagement?
Facts that might bear on the integrity of management
Which of the following elements underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting?
Materiality and audit risk
The audit committee of a company must be made up of:
Members of the board of directors who are not officers or employees
As one step in testing sales transactions, a CPA traces a random sample of sales journal entries to debits in accounts subsidiary ledger. This test provides evidence as to whether:
Recorded sales have been posted properly to customer accounts
Which portion of an audit is least likely to be completed before the balance sheet date?
Substantive procedures
Three conditions generally are present when fraud occurs. Select the one below that is not one of those conditions.
Supervisory position
The auditors are concerned about source documents that reflect valid transactions that have not been recorded in the journals. Which procedure would be most effective?
Trace from source documents to journals
The auditors are concerned about transactions that have been recorded for improper amounts. Which procedure would be most effective:
Trace from sources documents to journals or Vouch from journals to source documents
Which of the following is most likely to be an overall response to fraud risks identified in an audit?
Use less predictable audit procedures
The auditors are concerned about transactions that have been recorded in the journal (and subsequently in the ledgers) that are not valid - that is, a transaction is recorded, but it did not actually occur (e.g. a fraudulent overstatement of sales). Which procedures would be mos effective?
Vouch from journals to source documents