Which of the following is the best explanation of the difference, if any, between audit objectivesand

audit procedures? Audit objectives define specific

Other information that the auditor may use as audit evidence least likely includes adjustments to
the financial

Which of the following is not generally included in the working papers file? Copy of the internal
audits

When an independent auditor expresses an unqualified opinion he asserts that: (1) He performed
the audit in accordance with generally accepted auditing standards. (2) The company is a profitable
and viable entity. (3) The financial statements examined are in conformity with GAAP. (4) The
financial statements are accurate and free of errors. Only statements 1 and 3 are true

Which of the following modifications of the standard auditor’s report does not require an explanatory
paragraph. Reference to other auditors

Each time an auditor draws a conclusion based on evidence from a sample, an additional risk,
sampling risk, is introduced. An example of sampling risk is Drawing an erroneous conclusion

The predecessor auditor, after properly communicating with the successor auditor, has reissued a
report because the audit client desires comparative financial statements. The predecessor auditor’s
report should make no reference to the report or the work of the successor auditor. True

Tests of controls are necessary when substantive procedures….

In the course of the audit of financial statements for the purpose of expressing an opinion thereon,
the auditor will normally prepare a schedule of unadjusted differences for which he did not propose
adjustment when they were uncovered. The primary purpose served by this schedule is to Identify
the potential….

Ordinarily, the audit may use schedules, analyses and other documentation prepared by entity
personnel in order to: Improve audit efficiency

The auditor is required to issue a disclaimer of opinion in the event of a going concern problem.false

Which statement is incorrect about sampling risk? Risk of assessing control risk too low and risk
of incorrect…

Assuming the tolerable deviation rate is 5 percent, the expected population rate is 3 percent, and the
allowance for sampling risk is 2 percent, what should an auditor conclude if tests of 100 randomly
selected documents reveals 4 deviations? Assess control risk at the maximum because the
sample deviation rate

Which of the following statements is correct? The population size has little

Which of the following statements is incorrect regarding relevance of audit evidence? Obtaining
audit evidence

Which of the following audit procedures is used extensively throughout the audit and often is
complementary to performing other audit procedures? Inquiry

This consists of checking the mathematical accuracy of documents or records.recalculation

Accuracy and valuation assertions about presentation and disclosure means financial and other
info
When an auditor expresses an adverse opinion, the opinion paragraph should include a direct
reference to a separate paragraph disclosing the basis of information. True

Tests of controls provide reasonable assurance that controls are applied as prescribed. A sampling
method that is useful when testing controls is: attribute estimation sampling

The audit report are normally addressed to the company’s chief executive officer or chief financial
officer. False

While performing a substantive test of details during an audit, the auditor determined that the sample
results supported the conclusion that the recorded account balance was materially misstated. It was,
in fact, not materially misstated. This situation illustrates the risk of incorrect rejection

At times a sample may indicate that the auditor’s assessed level of control risk for a given control is
reasonable when, in fact, the true compliance rate does not justify the assessed level. This situation
illustrates the risk of assessing control risk too low

In an internal audit, the audit supervisor determines that working papers are complete when
satisfied that the audit objectives

The following situations will likely lead the auditor to use 100% testing, except a.when testing
controls that leave audit trail

The description of an audit in the scope paragraph of the standard audit report includes all of the
following except: assessing control risk

The most reliable form of documentary evidence are those documents that are authorized by a
responsible official

An auditor decides to express a qualified opinion on an entity’s financial statements because a major
inadequacy in its computerized accounting records prevents the auditor from applying necessary
procedures. The opinion paragraph of the auditor’s report should state that the qualification pertains
to the possible effects on the financial statements

Several risks are inherent in the evaluation of audit evidence that has been obtained through the use
of statistical sampling. An example of a beta or Type II error related to sampling risk is the failure to
rejects the statistical hypothesis that a boojk value….

An auditor who concludes that an uncertainty is not adequately disclosed in the financial statements
should issue a: qualified report

The auditor uses assertions in assessing risks by considering the different types of potential
misstatements that may occur, and thereby designing audit procedures that are responsive to the
assessed risks. Assertions used by the auditor fall into the following categories: I. Assertions about
classes of transactions and events for the period under audit. II. Assertions about account balances
at the period end. III. Assertions about presentation and disclosure. I,ii, and iii

Audit working papers are indexed by means of reference numbers. The primary purpose of indexing
is to permit cross referencing….

The competence of evidence available to an auditor is least likely to be affected by the sampling
method employed by the auditor….

If comparative financial statements are presented and the present auditor has audited both years,
the auditor should: update the report
An auditor would issue an adverse opinion if the statement taken as a whole do not fairly present the
financial position and financial performance of the company. True

Which of the following is the least required of the audit working papers? Substitute for entity

When would difference estimation or ratio estimation sampling methods be inappropriate? If

difference between the book vales and audit values of a population are rare

The audit report date on an unmodified report indicates the last day of the auditor’s responsibility for
the review of significant events that occurred subsequent to the date of the financial statements.
True

A statement that the auditor’s responsibility is to express an opinion on the financial statements is
contained in the: Opening Paragraph

The process which requires the calculation of an interval and then selects the items based on the
size of the interval is systematic selection

Which of the following best illustrates the concept of sampling risk? A randomly chosen sample …

Audit sampling is not involved in the following, except selecting the sample w/o

In addition to evaluating the frequency of deviations in tests of controls, an auditor also considers
certain qualitative aspects of the deviations. The auditor most likely will give broader consideration to
the implications of a deviation if it is initially concealed by a forged docu

In performing substantive tests, the auditor is concerned with two risks or errors of sampling: 1. The
risk of incorrect rejection (an alpha or Type I error) 2. The risk of incorrect acceptance (a beta or
Type II error) Which of the following is true about alpha and beta errors? The beta error of greater
concern…

Audit report issued for financial statements of a company should refer to PFRS in the auditor’s
responsibility paragraph. False

Which of the following is true about sampling and non-sampling risks? Sampling risk can be
reduced …

The adverse effects of events causing an auditor to believe there is substantial doubt about an
entity’s ability to continue as a going concern would likely be mitigated by evidence relating to
feasibility to plans to purchased leased equipment at less than market value. False

Which statement is incorrect regarding audit evidence? Auditors are expected to address…

Materiality is an essential consideration in determining the appropriate type of report under a given
set of circumstances. True

When management prepares financial statements on the basis of a going concern and the auditor
believes the company may not continue as a going concern, the auditor should issue a(n)
unqualified opinion with an explanatory

Since auditors are interested in the occurrence of exceptions in population, they refer to the
occurrence as deviation rate

If a company’s external auditor expresses an unqualified opinion as a result of the audit of the
company’s financial statements, readers of the audit report can assume that all materials
disagreements
An auditor’s report contains the following sentences: "We did not audit the financial statements of B
Company, a consolidated subsidiary, whose statements reflect total assets and revenues
constituting 20 percent and 22 percent, respectively, of the related consolidated totals. These
statements were audited by other auditors, whose report has been furnished to us, and our opinion,
insofar as it relates to the amounts included for B Company, is based solely upon the report of the
other auditors." These sentences divide responsibility

Which of the following generalizations in assessing the reliability of audit evidence is incorrect?
Audit evidence that is generated internally

If an auditor conducts an audit of financial statements in accordance with generally accepted

auditing standards, which of the following will the auditor most likely detect? Misposting of
recorded

The audit working paper that reflects the major components of an amount reported in the financial
statements is the lead schedule

Before applying substantive tests to the details of asset accounts at an interim date, an auditor
should assess the difficulty in controlling

An auditor’s working papers will ordinarily be least likely to include documentation showing how the
clients schedules were prepared

If management fails to provide adequate justification for a change from one generally accepted
accounting principle to another, the auditor should add an explanatory paragrapg

Before applying principal substantive tests to the details of accounts at an interim date prior to the
balance sheet date, an auditor should consider whether the amountsd of the year

An auditor’s opinion reads as follows: “In our opinion, except for the above-mentioned limitation on
the scope of our audit…” This is an example of a(n) unacceptable reporting pracrice

The entire set of data about which the auditor wishes to draw conclusions is called population

A dual dated report contains the dates of a subsequent event and the date the: auditor completed
work in the clients office

Assertion about account balances at period end which means assets, liabilities, and equity interests
are included in the financial statements at appropriate amounts is rights and obli

Baranda, CPA, was engaged to audit the financial statements of One Co. after its fiscal year had
ended. The timing of Pamela’s appointment as auditor and the start of field work made confirmation
of accounts receivable by direct communication with the debtors ineffective. However, Pamela
applied other procedures and was satisfied as to the reasonableness of the account balances.
Pamela’s auditor’s report most likely contained a(n) unqualified opinon

“Whenever a sample is taken, there is a risk that the quantitative conclusions about the population
will be incorrect.” 100 percent

Fantastic, Inc. has significant information that is transmitted, processed, maintained, and accessed
electronically. The auditor has concluded that it is not possible to reduce detection risk to an
acceptable level by performing only substantive tests for a number of financial statement assertions.
The auditor’s alternative strategy is to perform tests of controls to gather
The objective of the consistency standard is to provide assurance that the comparability of
financial

The financial statements most commonly audited by external auditors are the statement of financial
position, the statement of comprehensive income and the statement of changes in retained earnings.
True

An auditor plans to test a sample of 20 checks for counter signatures as prescribed by the client’s
control procedures. One of the checks in the chosen sample of 20 cannot be found. The auditor
should consider the reasons for this limitation and treat the missing check