acct 241 ch 4

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acct 241 ch 4
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2010-08-04 22:50:04
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acct 241 ch 4
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  1. Which of the following is not done during the client selection and retention pahse of planning?
    A. obtain an undertanding of internal controls
    B. consider the need for special skills
    C. ensure that the firm has sufficient resources to complete the engagement in a timely manner
    D. obtain and review financial information
    A. obtain an undertanding of internal controls
    (this multiple choice question has been scrambled)
  2. Which of the following is not included in the engagement letter?
    A. objectives of the engagment
    B. representations that the financial statements were prepared in accordance with generally accepted accounting practices
    C. management's responsibilities
    D. a clear explanation of the services to be preformed on the engagement
    B. representations that the financial statements were prepared in accordance with generally accepted accounting practices
    (this multiple choice question has been scrambled)
  3. In deciding whether to use the work of internal auditors, external auditors must evaluate the internal auditors'
    A. age and gender
    B. education and certification
    C. objectivity and competence
    D. indepedence and professionalism
    C. objectivity and competence
    (this multiple choice question has been scrambled)
  4. Analytical procedures are performed in the following order
    a. calculate predictions and compare them to the recorded amount; define a significant difference; develop an expectation; investgate significant differences
    b. calculate predictions and compare them to the recorded amount; investigate significant differences; define a significant difference; develop an expectation
    c. develop an expectation; define a significant difference; calculate predictions and compare them to the recorded amount; investigate significant differences
    d. develop an expectation; calculate predictions and compare them to the recorded amount; define a significant difference; investigate significant differences
    • c. develop an expectation; define a significant difference; calculate
    • predictions and compare them to the recorded amount; investigate
    • significant differences
  5. Which of the following is not true regarding planning in an electronic environment?
    A. the procedures used are not changed
    B. the definition of auditing is not changed
    C. the purposes of auditing is not changed
    D. auditing standards are not changed
    A. the procedures used are not changed
    (this multiple choice question has been scrambled)
  6. For which of the following judgments may an indpendent auditor share responsibility with an entity's internal auditor who is assessed to be both competent and objective?
    assessment of inherent risk assessment of control risk
    A. yes no
    B. no no
    C. yes yes
    D. no yes
    B. no no
    (this multiple choice question has been scrambled)
  7. In testing the existence assertion for an asset, an auditor ordinarily works from the
    A. accounting records to the supporting evidence
    B. financial statements to the potentially unrecorded items
    C. potentially unrecorded items to the financial statements
    D. supporting evidence to the accounting records
    A. accounting records to the supporting evidence
    (this multiple choice question has been scrambled)
  8. In the preparation of an audit program, which of the following items is not essential?
    A. assessment of inherent risk
    B. an understanding of controls established by management
    C. a review of material from prior audits
    D. the preparation of a budget identifying the costs of resources needed
    D. the preparation of a budget identifying the costs of resources needed
    (this multiple choice question has been scrambled)
  9. Auditors try to identify predictable relationships when using analytical procedures. Relationships involving transactions from which of the following accounts most likely would yield the highest level of evidence?
    A. accounts receivable
    B. accounts payable
    C. advertising expense
    D. payroll expense
    D. payroll expense
    (this multiple choice question has been scrambled)
  10. The benefits of using CAATs include all of the following except:
    A. improved audit quality
    B. increased productivity
    C. reduced need for professional judgment
    D. reduced sampling risk because of 100% of the population can be tested.
    C. reduced need for professional judgment
    (this multiple choice question has been scrambled)
  11. Analytical procedures are generally used to produce evidence from:
    A. detailed examination of external, external-internal, and internal documents
    B. physical observation of inventories
    C. confirmation mailed directly to the auditors by client customers
    D. relationships among current financial balances and prior balanced, forecasts, and nonfinancial data
    D. relationships among current financial balances and prior balanced, forecasts, and nonfinancial data
    (this multiple choice question has been scrambled)
  12. Auditors perform analytical procedures in the planning stage of an audit for the purpose of:
    A. identifying unusual conditions that deserve more auditing effort
    B. deciding the matters to cover in an engagement letter
    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
    A. identifying unusual conditions that deserve more auditing effort
    (this multiple choice question has been scrambled)
  13. Which of the following match-up types of analytical procedures and sources of information makes the most sense?
    type of analytical procedure -- source of information
    A. comparison of current account balances with prior periods -- physical production statistics
    B. evaluation of current account balances with relation to predictable historical patterns -- published industry ratios
    C. comparison of current account balances with expected balances -- company's budgets and forecasts
    D. evaluation of current account balances in relation to non-financial information --company's own comparative financial statements
    C. comparison of current account balances with expected balances -- company's budgets and forecasts
    (this multiple choice question has been scrambled)
  14. Anyalytical 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
  15. Anyalytical procedures used when planning an audit should concentrate on:
    A. five major management assertations in financial statements
    B. predictability of account balances based on individual transactions
    C. weakness in the company's internal control procedures
    D. accounts and relationships that may represent specific potential problems and risks in the financial statements
    D. accounts and relationships that may represent specific potential problems and risks in the financial statements
    (this multiple choice question has been scrambled)
  16. When a successor auditor initiates communications with a predecessor auditor, the successor should expect:
    a. to take responsibility for obtaining the client's consent for the predecessor to give information about prior audits
    b. to conduct interviews with the partner and manager in charge of the predecessor audit 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
  17. Generally accepted auditing standards require that auditors always prepare and use:
    A. written client consent to discuss audit matters with successor auditors
    B. a written planning memo explaining the auditors' understanding of the client's business
    C. a written audit program
    D. written time budgets and schedules for performing each audit
    C. a written audit program
    (this multiple choice question has been scrambled)
  18. 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 existence of new sales contracts important for the clients business
    B. the auditors' need to document compliance with generally accepted auditing standards
    C. the auditors' judgment about materiality
    D. the auditors' judgment about their independence with regard to the client
    D. the auditors' judgment about their independence with regard to the client
    (this multiple choice question has been scrambled)
  19. An audit working paper that shows the detailed evidence and procedures regarding the balance in the acumulated depreciation account for the year under audit will be found in the:
    A. planning memorandum in the current file
    B. permant file audit documentation
    C. administrative audit documentation in the current file
    D. current file evidence audit documentation
    D. current file evidence audit documentation
    (this multiple choice question has been scrambled)
  20. An auditor's permanent file audit documentation most likely will contact:
    A. internal control analysis for the current year
    B. the latest engagement letter
    C. excerpts of the corporate charter and bylaws
    D. memoranda of conference with management
    C. excerpts of the corporate charter and bylaws
    (this multiple choice question has been scrambled)
  21. Which of the following is not a benefit claimed for the practice of determining materiality in the initial planning stage of starting an audit?
    A. being able to decide early what kind of audit opinion to give
    B. being able to fine-tune the audit work for effectiveness and efficiency
    C. avoiding the problem of doing too little work (under auditing)
    D. avoiding the problem of doing more work than necessary (over auditing)
    A. being able to decide early what kind of audit opinion to give
    (this multiple choice question has been scrambled)
  22. Spreadsheet software would be most useful for which of the following audit activities?
    A. testing internal controls over computerized accounting applications
    B. preparing an audit program
    C. preparing a comparison of current year expenses with those from the previous year
    D. drafting a planning memo
    C. preparing a comparison of current year expenses with those from the previous year
    (this multiple choice question has been scrambled)
  23. Which of the following is an advatage of computer assisted audit tools and techniques (CAATTs)?
    A. the software can be used for audits of clients that use differing computer equipment and file formats
    B. the CAATTs programs are all written in one identical computer language
    C. the use of CAATTs can be substituted for a relatively large part of the required testing
    D. CAATTs has reduced the need for the auditor to study input controls for computer related procedures
    A. the software can be used for audits of clients that use differing computer equipment and file formats
    (this multiple choice question has been scrambled)
  24. A primary advatnage of using computer assisted audit tools and techniques in the audit of the advanced computer system is that it enables the auditor to:
    A. substantiate the accuracy of data through self-checking digits and hash totals
    B. verify the performance of machine operationgs which leave visible evidence of occurrence
    C. gather and store large quantities of supportive audit evidence in machine readable form
    D. utilize the speed and accuracy of the computer
    D. utilize the speed and accuracy of the computer
    (this multiple choice question has been scrambled)
  25. When a company that sells its products for a (gross) profit increases its sales by 15% and its cost of goods by 7%, the cost of goods sold ratio will:
    a. increase
    b. decrease
    c remain unchanged
    b. decrease
  26. An audit engagement letter should normally include the following mater of agreement betweeen the auditor and the client:
    A. methods of statistical sampling the auditor will use
    B. client representations about availability of all minutes of meeting of the board of directors
    C. schedules and analyses to be prepared by the client's employees
    D. specifications of litigation in progress against the client
    C. schedules and analyses to be prepared by the client's employees
    (this multiple choice question has been scrambled)
  27. An auditor most likely would analyze inventory turnover rates to obtain evidence concerning management's assertions about:
    A. existence or occurrence
    B. rights and obligations
    C. valuation or allocation
    D. presentation and disclosure
    C. valuation or allocation
    (this multiple choice question has been scrambled)
  28. Which of the following factors most likely would cause an auditor not to accept a new audit engagement?
    A. the close proximity to the end of the entity's fiscal year
    B. an inadequate understanding of the entity's internal control structure
    C. concluding that the entity's management probably lacks integrity
    D. an inability to perform preliminary analytical procedures before assessing control risks
    C. concluding that the entity's management probably lacks integrity
    (this multiple choice question has been scrambled)
  29. To obtain an understanding of a continuing client's business in planning an audit, an auditor most likely would
    A. read specialized industry journals
    B. reevaluate the client's internal control environment
    C. review prior year working papers and the permant file for the client
    D. perform tests of details of transactions and balances
    C. review prior year working papers and the permant file for the client
    (this multiple choice question has been scrambled)
  30. Generally accepted auditing standards states that analytical procedures:
    A. should be applied in the planning and final review stages of the audit and can be used as a substantive test during the audit
    B. should be applied in the final review stage, and can be applied as a substantive test and in the planning stage
    C. should be applied in the planning stage and can be applied as a substantive test and in the final review stage
    D. should be applied in the planning and final review stages of the audit and as a substantive test during the audit
    A. should be applied in the planning and final review stages of the audit and can be used as a substantive test during the audit
    (this multiple choice question has been scrambled)

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