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1) From which one of the following evidence-gathering audit procedures will auditor get most assurance concerning existence of inventories?

Choose one:

a. Confirmation of inventories in a public warehouse
b. Auditor’s re-computation of inventory extensions.
c. Observation of physical inventory counts.
d. Written inventory representations from management.

2) When designing audit procedures, direction of tests is the vital step in satisfying:

Choose one:

a. Cutoff objective.
b. Completeness objective.
c. Classification objective.
d. Valuation objective.

3) Which of the following procedures will auditor most probably carry out in searching for unrecorded payables?

Choose one:

a. Vouch sample of creditor balances to supporting invoices, receiving reports, and purchase orders.
b. Compare ratio of accounts payable to purchases with prior year’s ratio.
c. Compare cash payments occurring after balance sheet date with list of creditors at year-end.
d. Reconcile receiving reports with related cash payments made just prior to year-end.

4) A common test is to account for the sequence of different types of documents, like duplicate sales invoices selected from sales journal, watching for omitted and duplicate numbers or invoices outside the normal sequence. This test provides evidence of:

Choose one:

a. Existence.
b. Completeness.
c. Neither completeness or existence.
d. Both completeness and existence.

5) The statement which best expresses auditor's responsibility with respect to events occurring between balance sheet date and the end of the audit examination is that:

Choose one:

a. the auditor is responsible for determining that proper cutoff has been made and performing general review of events occurring in subsequent period.
b. the auditor's responsibility is to find out that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred.
c. the auditor has no responsibility for events occurring in subsequent period unless these events affect transactions recorded on or before balance sheet date.
d. auditor is fully responsible for events occurring in subsequent period and must extend all detailed procedures through last day of fieldwork.

6) The audit of the financial report includes initial approach of addressing fraud. How should an auditor address fraud in the planning stage?

Choose one:

a. The auditor must not be aggressive in its initial approach to fraud as trust may be lost by the client.
b. The auditor must realise that most people are honest and not automatically assume that fraud exists when planning the audit.
c. The auditor must consider the likelihood of fraud existing in the company in the planning stage.
d. The auditor must test for fraud in the planning stage by sampling accounts.

7) In many audits of sales transactions, no substantive tests of transactions are performed for completeness objective because:

Choose one:

a. understatements of assets and income are greater concern than overstatements.
b. overstatements of assets and income are a greater concern than understatements.
c. the unrecorded sales cause a reduction of accounts receivable; therefore, the ratios of the two financial statements will not be misleading.
d. it doesn't matter if income is understated because savings on income tax offsets the reduced revenue and net income is correct.

8) Before releasing the audit report, the auditor must

Choose one:

a. carry out analytical procedures.
b. estimate subsequent client fee for services.
c. give subsequent contingency disclosure.
d. issue a management letter.

9) If auditor of a financial report understands internal control and assesses control risk as low, it is supposed that internal control:

Choose one:

a. is considered relatively weak and will not be tested
b. has been assessed erroneously by auditor
c. is not required to be tested as it is considered strong
d. might be tested in the attempt to support assessment

10) Auditor considers internal control by 4 steps. What is the order for these steps:

i. Get understanding of internal control.
ii. Assess control risk.
iii. Perform tests of controls.
iv. Decide on planned detection risk and substantive testing

Choose one:

a. 4, 1, 2, 3
b. 2, 1, 3, 4
c. 1, 3, 2, 4
d. 1, 2, 3, 4

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M92673

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