Part 1

Question 1.Auditors frequently refer to the terms audit assurance, overall assurance, and level of assurance to refer to ________.

Question 2.If an auditor believes the chance of financial failure is high and there is a corresponding increase in business risk for the auditor, acceptable audit risk would likely:

Question 3.If it is probable that the judgment of a reasonable person will be changed or influenced by the omission or misstatement of information, then that information is, by definition of FASB Statement No. 2:

Question 4.When auditors allocate the preliminary judgment about materiality to account balances, the materiality allocated to any given account balance is referred to as:

Question 5.When the auditor is attempting to determine the extent to which external users rely on a client's financial statements, they may consider several factors except

for:

Question 6.Internal controls can never be regarded as completely effective. Even if company personnel could design an ideal system, its effectiveness depends on the:

Question 7.In performing the audit of internal control over financial reporting the auditor emphasizes internal control over class of transactions because:

Question 8.When considering internal controls, an important point to consider is that:

Question 9.Narratives, flowcharts, and internal control questionnaires are three common methods of:

Question 10.The employee in charge of authorizing credit to the company's customers does not fully understand the concept of credit risk. This lack of knowledge would constitute:

Question 11.Analytical procedures can be very effective in detecting inventory fraud. Which of the following analytical procedures would not be useful in detecting fraud?

Question 12.Financial statement manipulation risk is arguably present for all companies' financial statements. However, the risk is elevated for companies that:

Question 13.Which party has the primary responsibility to oversee an organization's financial reporting and internal control process?

Question 14.Who is most likely to perpetrate fraudulent financial reporting?

Question 15.Which of the following would the auditor be most concerned about regarding a heightened risk of intentional misstatement?

Question 16.An example of a physical control is:

Question 17.The audit approach in which the auditor runs his or her own program on a controlled basis to verify the client's data recorded in a machine language is:

Question 18.Which of the following describes the process of implementing a new system in one part of the organization, while other locations continue to use the current system?

Question 19.A ________ total represents the summary total of codes from all records in a batch that do not represent a meaningful total.

Question 20.The continued integration of IT in accounting systems can impact a company by:

Question 21.Which of the following audit tests is usually the least costly to perform?

Question 22.The purpose of tests of controls is to provide reasonable assurance that the:

Question 23.Many auditors perform extensive analytical procedures on audits because:

Question 24.A system walkthrough is primarily used to help the auditor:

Question 25.Analytical procedures:

Part 2

Question 1.Before goods are shipped on account, a properly authorized person must:

Question 2.What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected?

Question 3.The document that requires adjustments to the customers subsidiary ledger account is the:

Question 4.A document prepared to initiate shipment of the goods sold by an independent shipper is the:

Question 5.What event initiates a transaction in the sales and collection cycle?

Question 6.Auditors often use the ________ to determine the estimated population exception rate.

Question 7.When the auditor decides to select less than 100 percent of the population for testing, the auditor is said to use:

Question 8.Rodgers CPA believes that the rate of client billing errors is 4% and has established a tolerable deviation rate of 6%. In auditing client invoices Rodgers should use:

Question 9.Which of the following would have the least impact in determining sample size?

Question 10.Which of the following occurrences would be least likely to warrant further audit attention for the auditor?

Question 11.The most effective audit evidence gathered for accounts receivable is the:

Question 12.Which of the following most likely would be detected by a review of a client's sales cutoff?

Question 13.Analytical procedures:

Question 14.When do most companies record sales returns and allowances?

Question 15.Tests of which balance-related audit objective are normally performed first in an audit of the sales and collection?

Question 16.The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance under audit is greater than the tolerable misstatement is:

Question 17.The client's trial balance has a balance of $410,000 for merchandise inventory. As the auditor you are willing to accept a balance that is within $20,000 of either side of the recorded balance. You compute a 95% confidence interval of $395,000 to $425,000. You could therefore:

Question 18.One of the steps involved in planning the sample for the tests of details of balances is to:

Question 19.When the sample selection is done using probability proportional to size sample selection (PPS):

Question 20.When defining the population and the sampling unit for tests of details of balances:

Question 21.From which of the following evidence-gathering audit procedures would an auditor obtain most assurance concerning the existence of inventories?

Question 22.Comparing the physical counts with the perpetual inventory master files satisfies the balance-related audit objective of:

Question 23.Auditor tests of the physical controls over raw materials, work in process, and finished goods are generally limited to:

Question 24.Boxes or other containers holding inventory should also be opened during test counts to determine the ________ of the inventory.

Question 25.The audit tests to verify that the client is using an inventory method which is generally accepted and to verify that physical counts were correctly summarized are performed during the audit of the:

Question 26.The auditor's primary concern relative to presentation and disclosure-related objectives is:

Question 27.Which of the following subsequent events is most likely to result in an adjustment to a company's financial statements?

Question 28.When communicating with the audit committee and management:

Question 29.At the completion of the audit, management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities. This statement would appear in the:

Question 30.While there is no professional requirement to do so on audit engagements, CPAs frequently issue a formal "management" letter to clients. The primary purpose of this letter is to provide: