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  1. 26. Analytical procedures are generally used to produce evidence from:

    a) Confirmations mailed directly to the auditors by client customers

    b)Physical observation

    c)Relationships amont current financial balances and prior balances, forecasts, and nonfinancial data

    d) Detailed examination of external, external-internal, and internal documents
    C. Analytical procedures incorporate information from a variety of sources
  2. 27. Auditors perform analytical procedures in the planning stage of an audit for the purpose of

    a) Deciding the matters to cover in an engagement letter

    b) Indentifying unusual conditions that deserve more auditing effort

    c) Determining which of the financial statement assertions are the most important for the client's financial statements

    d) Determining the nature, timing, and extent of audit procedures for auditing the inventory
    B) This is the "attention-directing" purpose
  3. 29. Analytical procedures can be used in which of the following ways?

    a) As a means of overall review at the end of an audit

    b) As "attention-directing" methods when planning an audit at the beginning

    c) As substantive audit procedures to obtain evidence during an audit

    d) All of the above
    D) all of the above - Analytical procedures can be used when planning the audit, when performing substantive procedures during the audit, and as a method of overall review at the end of an audit
  4. 30. Analytical procedures used wehn planning an audit should concentrate on:

    a) Weaknesses in the company's internal control activities

    b) Predictability of account balances based on individual transactions

    c) Management assertions in financial statements

    d) Accounts and relationships that can represent specific potential problems and risks to the financial statements
    D) with preliminary analytical procedures, the auditors are looking for signs of accounts and relationships that may represent specific potential problems and risks in the financial statements
  5. 31. When initiating communications with predecessor auditors, prospective auditors should expect:

    a) To take responsibility for obtaining the client's consent for the predecssor to give information about prior audits

    b) To conduct interviews with the partner and manager in charge of the predecessor public accounting firm's engagement

    c) To obtain copies of some or all of the predecessor auditor's audit documentation

    d) all of the above
    D) all of the above are expected
  6. 32. Generally accepting auditing standards require that auditors always prepare and use

    a) a writting planning memorandum explaining the auditor's understanding of the client's business

    b) Written client consent to discuss audit matters with prospective auditors

    c) a written audit plan

    d) Written time budgets and schedulres for performing each audit
    c) A written audit plan is required (SAS 22, AU 311)
  7. 33. When planning an audit, which of the following is not a factor that affects auditors' decisions about the quantity, type, and content of audit documentation?

    a) The auditors' need to document compliance with generally accepted auditing standards

    b) The existence of new sales contracts important for the client's business

    c) The auditors' judgement about their independence with regard to the client

    d) the auditors' judgement about materiality
    C) Independence is not really a working paper matter
  8. 34. Audit documentation that shows the detailed evidence and procedures regarding the balance in the accumulated depreciation account for the year under audit will be found in the:

    a) Current file evidence audit documentation

    b) Permanent file audit documentation

    c) Administrative audit documentation in the current file

    d) Planning memorandum in the current file
    a) Evidence bears on the year under audit
  9. 35. An auditor's permanent file audit documentation most likely will contain

    a) Internal control analysis for the current year

    b) the most recent engagement letter

    c) Memoranda of conferecne with management

    d) Excerpts of the corporate charter and bylaws
    D) excerpts of the corporate charter and by-laws would not change often and would be in the permanent file
  10. 36. Which of the following is not a benefit claimed for the practice of determining materiality in the initial planning stage of an audit:

    a) Being abble to fine-tune the audit work for effectiveness and efficiency

    b) Avoiding the problem of doing more work than necessary (overauditing)

    c) Being able to decide early what type of audit opinion to issue

    d) Avoiding the problem of doing too little work (understanding)
    C) The kind of opinion cannot be determined until all the evidence is obtained and evaluated
  11. 37. Spreadsheet software would be most useful for which of the following audit activities?

    a) Testing internal control over computerized accounting applications

    b) Preparing an audit plan

    c) Preparing a comparison of current-year expenses with those from the previoius year

    d) Drafting a planning memorandum
    c) spreadsheet software is ideal for preparing a comparison of current year expenses with those from the previous year
  12. 38. Which of the following is an advantage of computer-assisted audit techniques (CAAT)

    a) The CAATs programs are all written in one computer language

    b) The software can be used for audits of clients that use differing computer equipment and file formats

    c) CAATs have reduced the need for the audito to study input controls for computer-related procedures

    d) the use of CAATs can be substited for a relatively large part of the required testing
    b) CAATs can be transported to various clients having various systems
  13. 39. A primary advantage of using CAATs in the audit of an advanced computerized system is that it enables the auditor to

    a) Substantiate the accuracy of data through self-checking digits and has totals

    b) Utilize the speed and accuracy of the computer

    c) Verify the performance of machine operations that leave visible evidence of occurrence

    d) Gather and store large quantities of supportive audit evidence in machine-readable form
    b) Auditors can use the computer with ease
  14. 40. When a company that sells its products for a (gross) profit increases its sales by 15 percent and its cost of goods sold by 7 percent, the cost of goods sold ratio will

    a) increase

    b) decrease

    c) Remain unchanged

    d) Not be able to be determined with the information provided
    b) the numeratot (cost of goods sold) increases relatively less than the denominator (sales) increases
  15. 41. An audit engagement letter should normally include which of the following matter of agreement between the auditor and the client?

    a) Schedules and analyses to be prepared by th eclient's employees

    b) Methods of statistical sampling the auditor will use

    c) specification of litigation in progress against the client

    d) client represenations about availability of all minutes of meetings of the board of directors
    a) Client cooperation should be specified
  16. When auditing Vandalay Jewelry, Constanza, CPA was not familiar with the quality and cut of the company's precious jewel inventory. To address this shortcoming, Constanza hired Benes, an expert in jewel valuation, to assist in the inventory valuation. Should Constanza refer to Bene's work in the audit report

    a) yes, the auditors' report should mention the fact that a specialist was used

    b) the auditors' report should mention the use of the specialist only when the specialist's findings affect the auditors' conclusions

    c) the use of a specialist need not be mentioned if the auditors decide not to take responsibility for the specialists' findings

    d) the auditors' report shhould mention the specialist only if Vandalay agrees with the specialist's findingss
    b) Tha auditors' report should only mention the use of the specialist when teh specialist's findings affect the auditor's conclusions
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2012-03-11 23:04:57
Auditing Louwers

Chapter 4 MC questions
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