Audit Exam 2 MC

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stricklandt09
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74253
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Audit Exam 2 MC
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2011-03-21 21:11:33
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auditing payroll engagement planning cycle
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mc for exam 2
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  1. Which of the following is not done during the client selectino and retention phase of planning?

    A. obtain an understanding 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 understanding 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 engagement
    B. representations that the financial statements were prepared in accordance with GAAP
    C. management's responsibilities
    D. a clear explanation of the services to be performed on the engagement
    B. representations that the financial statements were prepared in accordance with GAAP
    (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. independence and professionalism
    C. objectivity and competence
    (this multiple choice question has been scrambled)
  4. Analytical procedures are performed in the following order

    A. develop an expectation, define a significant difference, calculate predictions and compare them to the recorded amount, investigate significant differences
    B. develop an expectation, calculate predictions and compare them to the recorded amount, define a significant difference, investigate significant differences
    C. calculate predictions and compare them to the recorded amount, define a significant difference, develop an expectation, investigate significant differences
    D. calculate predictions and compare them to the recorded amount, investigate significant differences, define a significant difference, develop an expectation
    A. develop an expectation, define a significant difference, calculate predictions and compare them to the recorded amount, investigate significant differences
    (this multiple choice question has been scrambled)
  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 judgements may an independent auditor share responsibility with an entity's internal auditor who is assessed to be both competent and objective?

    A. Assessment of inherent risk but not control risk
    B. Neither assessment of inherent risk or control risk
    C. Assessment of inherent risk and control risk
    D. Assessment of control risk but not inherent risk
    B. Neither assessment of inherent risk or control risk

    Judgements such as assessment of inherent and control risk should not be shared with the client's internal auditors
    (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 stmts to the potentially unrecorded items
    C. potentially unrecorded items to the financial stmts
    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 mgmt
    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

    the audit team would typically not rely on the budget in its determination of appropriate audit procedures
    (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. account payable
    C. advertising expense
    D. payroll expense
    D. payroll expense

    balance sheet accoiunts tend to be the more unpredictable because auditors are comparing one day with another 365 days earlier, compared to income stmt accounts that are an aggregation of 365 days
    (this multiple choice question has been scrambled)
  10. An advantage of an internal control questionnaire is

    A. flexibility in design and application
    B. that is provides sufficent data for the assessment of control risk
    C. its strict adherence to a yes/no format
    D. ease of completion
    D. ease of completion
    (this multiple choice question has been scrambled)
  11. In addition to gaining an understanding of the internal controls for a private company, an external auditor, at minimum, would be expected to

    A. Study organization charts to obtain an understanding of the informal lines of communication.
    B. Observe client employees to determine the extent of their compliance with quality control standards
    C. Evaluate the internal auditors' work as an important part of the accounting system element of the internal controls
    D. Trace a few transactions through the control process to obtain evidence that the controls have been placed in operation.
    D.

    Although auditors would examine organization charts as part of gaining an understanding of the entities control environment, their focus would be the formal lines of communication.
    (this multiple choice question has been scrambled)
  12. An auditor would most likely be concerned with internal control policies and procedures that provide reasonable assurance about

    A. appropriate prices the entity should charge for its products
    B. the efficency of management's decision making process
    C. methods of assigning production tasks to employees
    D. the entity's ability to process and summarize financial data
    D.

    Auditors are most concerned with policies and procedures affecting the entity's ability to process and summarize financial data.
    (this multiple choice question has been scrambled)
  13. Which of the following factors are included in an entity's control environment?


    A. A
    B. C
    C. B
    D. D
    D.

    all three factors are part of the entity's control environment
    (this multiple choice question has been scrambled)
  14. To be recognized, revenues must be

    a. realized
    b. realizable
    c. earned
    d. all of the above
    d.
  15. A form signed by the carrier to verify goods are shipped is called the

    A. carrier form
    B. receiving report
    C. shipping order
    D. bill of lading
    D.

    This is prepared by the recipients after goods are shipped and received.
    (this multiple choice question has been scrambled)
  16. Approval of credit sales by the credit department supports the assertion of

    A. rights and obligations
    B. existence or occurence
    C. completeness
    D. valuation or allocation
    D.

    This helps ensure the receivable will be collectible
    (this multiple choice question has been scrambled)
  17. Confirming accounts receivable primarily supports the assertion of

    A. completeness
    B. existence
    C. rights and obligations
    D. valuation or allocation
    B.

    the receivable may have been factored and sold and the customer would not know
    (this multiple choice question has been scrambled)
  18. The most reliable evidence comes from

    A. a positive confirmation
    B. a blank confirmation
    C. a negative confirmation
    D. examining a sales invoice
    B.

    a blank confirmation is the most reliable because the customer has to look up the amount to fill in the blank
    (this multiple choice question has been scrambled)
  19. Which of the following responses to a confirmation request at December 31 is most likely to indicate a misstatement?

    A. we received these goods on January 4
    B. the amount was paid on December 30
    C. we returned these items
    D. We are unable to confirm thiis account
    C.

    This would have been after the confirmation date
    (this multiple choice question has been scrambled)
  20. A "voucher" is a

    a. document received from the vendor to request payment
    b. an authorization to prepare a purchase order
    c. a check that has been prepared and forwarded for signing
    d. none of the above
    d.
  21. A "blind purchase order" is a

    A. a blanket purchase order for goods to be received throughout the year
    B. purchase order with the quantity deleted to be used as a receiving report
    C. an automatic purchase performed using electronic data interchange
    d. non of the above
    B.
    (this multiple choice question has been scrambled)
  22. Which of the following account is not included in the acquisition and expenditure cycle?

    A. sales returns and allowances
    B. inventory
    C. freight-in
    D. cash
    A.
    (this multiple choice question has been scrambled)
  23. Canceling invoices with a "paid" stamp after payment is a control that relates to which assertion?

    A. existence or occurrence
    B. valuation or allocations
    C. rights and obligations
    D. completeness
    A.
    (this multiple choice question has been scrambled)
  24. Which of the following is not a step in the search for unrecorded liabilities?

    A. examine disbursements for the period immediately before the end of the period
    B. examine the unmatched receiving reports
    C. examine the open purchasse order file
    d. all of the above are steps in the search
    A.
    (this multiple choice question has been scrambled)
  25. Which of the following fraud signs could be detected by a CAAT?

    a. look for vendor's invoices submitted in numerical order
    b. look for invoices always slightly lower than a review threshold
    c. look for vendors with only post office box addresses
    d. all of the above
    d.
  26. Auditors usually focus on which assertion when auditing current liabilities?

    A. completeness
    B. classification
    C. occurrence
    D. accuracy
    A.

    frauds are more likely to invovle unrecorded liabilities
    (this multiple choice question has been scrambled)
  27. If goods ordered under a binding purchase commitment permanently decline in value below the agreed on purchase prices, a company should

    A. disclose the terms of the commitment in the financial statements
    B. record a loss for items received
    C. record a loss for items not yet recorded
    d. none of the above
    C.
    (this multiple choice question has been scrambled)
  28. The purchasing department

    A. should obtain competitive bids from vendors
    B. should inspect incoming goods and forward them to the receiving department
    C. should inspect vendor invoices and forward them to the accounting department
    d. all of the above
    A.

    the purchasing department should not have access to the actual goods
    (this multiple choice question has been scrambled)
  29. 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. determining the nature, timing, and extent of audit procedures for auditing the inventory
    C. deciding the matters to cover in an engagement letter
    D. determing which of the financial statement assertions are the most important for the client's financial statements
    A.
    (this multiple choice question has been scrambled)
  30. When initiating communications with predecessor auditors, prospective auditors should expect

    a. to take responsibility for obtaining the client's consent for the predeccessor 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 auditors' audit documentation
    d. all of the above
    d.
  31. An auditor's permanent file audit documentation most likely will contain

    A. the most recent engagement letter
    B. excerpts of the corporate charter and bylaws
    C. memoranda of conference with management
    D. internal control analysis for the current year
    B.
    (this multiple choice question has been scrambled)
  32. An audit engagement letter should be normally include which of the following matters of agreement between the auditor and the client?

    A. methods of statistical sampling the auditor will use
    B. specification of litigation in progress against the client
    C. schedules and analyses to be prepared by the client's employees
    D. client representations about availability of all minutes of meetings of the board of directors
    C.
    (this multiple choice question has been scrambled)
  33. Which of the following engagement planning procedures would most likely assist the auditor in identifying related party transactions before the balance sheet date?

    A. inspecting communications with the client's legal counsel regarding recorded contingent liabilities
    B. scanning the minutes for significant transactions with members of the board of directors
    C. reviewing accounting records for recurring transactions occurring near year end
    D. interviewing internal auditors about their reporting responsibilities
    B.
    (this multiple choice question has been scrambled)
  34. Which of the following is an application control?

    A. change controls over new programs
    B. an output control department that ensures that reports go to authorized recipients
    C. backup controls
    D. locked doors to the central server
    B.
    (this multiple choice question has been scrambled)
  35. In most audits of large entities, control risk assessment contributes to audit efficiency, which means that

    A. the cost of substantive procedures will exceed the cost of control evaluations work
    B. auditors will be able to reduce the cost of substantive procedures by an amount less than the cost of test of controls
    C. auditors will be able to reduce the cost of substantive procedures by an amount more than the control evaluation costs
    D. the cost of control evaluation work will exceed the cost of substantive procedures
    C.
    (this multiple choice question has been scrambled)
  36. Revenues are normally considered to have been earned when

    A. the company has substantially accomplished what it must to be entitled to the benefits
    B. the cash is collected
    C. all possibility of return has expired
    D. goods have been shipped
    A.
    (this multiple choice question has been scrambled)
  37. Write-offs of doubtful accounts shouild be approved by

    A. the salesperson
    B. the cashier
    C. the credit manager
    D. the treasurer
    D.
    (this multiple choice question has been scrambled)

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