Chapter 8 CPA Multiple Choice Questions

1
Which of the following is an effective audit planning procedure that helps prevent misunderstandings and inefficient use of audit personnel?
(1) Arrange to make copies, for inclusion in the audit files, of those client supporting documents examined by the auditor.
(2) Arrange to provide the client with copies of the audit programs to be used during the audit.
(3) Arrange a preliminary conference with the client to discuss audit objectives, fees, timing, and other information.
(4) Arrange to have the auditor prepare and post any necessary adjusting or reclassification entries prior to the final closing.

2
When auditing related party transactions, an auditor places primary emphasis on
(1) Confirming the existence of the related parties.
(2) Verifying the valuation of related party transactions.
(3) Evaluating the disclosure of the related party transactions.
(4) Ascertaining the rights and obligations of the related parties.

3
Which of the following will most likely indicate the existence of related parties?
(1) Writing down obsolete inventory prior to year end.
(2) Failing to correct weaknesses in the client's internal control.
(3) An unexplained increase in gross margin.
(4) Borrowing money at a rate significantly below the market rate.

4
When using the work of a specialist, the auditor may identify and refer to the specialist in the auditor's report if the
(1) Auditor expresses a qualified opinion as a result of the specialist's findings.
(2) Specialist is not independent of the client.
(3) Auditor wishes to indicate a division of responsibility.
(4) Specialist's work provides the auditor greater assurance of reliability
Chapter 8 CPA Multiple Choice Questions

5
Which of the following is an effective audit planning procedure that helps prevent misunderstandings and inefficient use of audit personnel?
(1) Arrange to make copies, for inclusion in the audit files, of those client supporting documents examined by the auditor.
(2) Arrange to provide the client with copies of the audit programs to be used during the audit.
(3) Arrange a preliminary conference with the client to discuss audit objectives, fees, timing, and other information.
(4) Arrange to have the auditor prepare and post any necessary adjusting or reclassification entries prior to the final closing.

6
When auditing related party transactions, an auditor places primary emphasis on
(1) Confirming the existence of the related parties.
(2) Verifying the valuation of related party transactions.
(3) Evaluating the disclosure of the related party transactions.
(4) Ascertaining the rights and obligations of the related parties.

7
Which of the following will most likely indicate the existence of related parties?
(1) Writing down obsolete inventory prior to year end.
(2) Failing to correct weaknesses in the client's internal control.
(3) An unexplained increase in gross margin.
(4) Borrowing money at a rate significantly below the market rate.

8
When using the work of a specialist, the auditor may identify and refer to the specialist in the auditor's report if the
(1) Auditor expresses a qualified opinion as a result of the specialist's findings.
(2) Specialist is not independent of the client.
(3) Auditor wishes to indicate a division of responsibility.
(4) Specialist's work provides the auditor greater assurance of reliability