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C
MULTIPLE CHOICE
2. A useful starting point for becoming familiar with the
client’s inventory is for the auditor to:
a) Read the PICPA’s Industry Audit Guide
b) Review accounting theory covering special problems
such as oil and gas accounting, or accounting for
lease-purchase agreements
c) Read the client’s accounting manual
d) Tour the client’s facilities
D
MULTIPLE CHOICE
3. To obtain an understanding of a continuing client’s
business in planning an audit, an auditor most likely
would
a) Perform tests of details of transactions and balances
b) Review prior-year working papers and the permanent
file for the client
c) Read specialized industry journals
d) Reevaluate client’s internal control environment
B
MULTIPLE CHOICE
4. A purpose of reviewing first quarter financial results
during audit planning is to
a) Identify unexpected fluctuations occurring in account
balances since the prior year’s financial statements
b) Become familiar with accounts likely to appear in the
financial statements
c) Plan evidence to be gathered in auditing accounts that
are new to the first quarter financial statements
d) Assess first quarter financial position, results of
operations and cash flows
A
MULTIPLE CHOICE
5. Which of the following will most likely help the auditor
to identify and understand the events, transactions and
practices of his audit client?
a) Obtaining a sufficient knowledge of the business of his
client.
b) Understanding of accounting and internal control.
c) Testing control policies and procedures.
d) Obtaining a representation letter from the client
management.
A
MULTIPLE CHOICE
6. Analytical procedures used in planning an audit should
focus on:
a) Enhancing the auditor’s understanding of the client’s
business
b) Evaluating the adequacy of evidence gathered
concerning unusual balances
c) Testing individual account balances that depend on
accounting estimates
d) Identifying material weaknesses in the internal control
structure
A
TRUE OR FALSE
7. Comparisons of recorded amounts of major
disbursements with appropriate invoices is an
example of analytical procedure
FALSE
TRUE OR FALSE
8. The auditor may discuss elements of planning
with those charged with governance and the
entity’s management.
FALSE
TRUE OR FALSE
9. Planning is a repetitive and iterative process
TRUE
TRUE OR FALSE
10.Analytical procedures cannot replace tests of
details of transactions and balances
FALSE
FALSE
analytical procedures, such as ratio analysis, enable
an auditor to identify significant differences that
should be evaluated and investigated
TRUE OR FALSE
12.Statistical tests of financial information will lead to
the detection of material misstatements in the FS
FALSE
FALSE
For many assertions, test of details are still more
effective or efficient in providing the level of
assurance desired by the auditor
TRUE OR FALSE
14.Analytical procedures can replace test of controls
in gathering audit evidence to support the
assessed level of control risk
FALSE
FALSE
analytical procedures involve comparisons of
recorded amounts or ratios developed from recorded
amount with expectations developed by the auditor,
not with assertions developed by management