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Quiz 1
Quiz 1
Quiz 1
Quiz 1
Points: 44/60
1. Surname, Name, MI *
2. Student Number *
1150038
3. Section *
3BSA-1
3BSA-2
3BSA-3
4. Attribute sampling in statistical sampling is
(0/1 Point)
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A. A method of sampling that divides the population into strata and then selects random
samples from the strata.
C. A method of sampling in which individual items are drawn at random from a population
so that each sample of a given size has an equal chance of being selected.
A. The larger of the samples that would otherwise have been designed for the two
separate purposes.
B. The smaller of the samples that would otherwise have been designed for the two
separate purposes,
C. The combined total of the samples that would otherwise have been designed for the
two separate purposes.
D. More than the larger of the samples that would otherwise have been designed for the
two separate purposes, but less than the combined hotel of the samples that would
otherwise have been designed for the two separate purposes.
6. Control activities constitute one of the five components of internal control. Which
following is not included in this internal control component?
(1/1 Point)
A. Segregation of duties
B. performance reviews
D. Authorization
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7. Which of the following statements concerning audit planning is incorrect?
(0/1 Point)
C. In a recurring audit, planning often begins shortly after (or in connection with) the
completion of the previous audit and continues until the completion of the current actual
engagement
D. In planning an audit, the auditor considers the timing of certain manning activities and
audit procedures that are to be completed prior to the performance of further audit
procedures.
A. Not more than 30 days after the date of the auditor's report.
B. Not more than 60 days after the date of the auditor's report.
C. Not more than 90 days after the end of the entity's reporting period.
D. Not more than 60 days after the date the entity's financial statements are authorized
issue.
9. Which of the following is least likely considered by the auditor in determining the
significance of service organization activities to the client and the relevance to the
audit?
(0/1 Point)
A. Terms of contract and relationship between the client and the service organization.
B. The material financial statement assertions that are affected by the use or me service
organization.
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C. Clients internal controls that are applied to the transactions processed by the service
organization.
D. The control policies and procedure of the client of requiring that all payments for
goods and services be supported be receiving reports.ion 1
10. A service organization's internal control may interact: with that of me client. The
user auditor
(1/1 Point)
B. Should obtain absolute assurance that the service organization's internal control will
prevent or detect errors or fraud.
D. Need not be concerned with the service organization's internal control if the client
has effective controls related to service organization processing.
11. In performing audit tests, the auditor may use either nonstatistical or statistical
sampling. The critical difference between the two types of sampling is that
(1/1 Point)
A. The sampling plan for nonstatistical sampling eliminates procedures required for
statistical sampling
12. Which of the following constitutes the most significant risk within the purchasing
cycle?
(1/1 Point)
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B. Large quantities of relatively inexpensive parts are stored in open areas near work
stations to reduce production slow-downs.
13. When the auditor performs substantive tests of balances, the primary concern is
(1/1 Point)
A. A fee that is dependent upon the approval of the assurance client's loan application
B. An audit fee that is based on 5% of the client’s adjusted net income for the current year
A. Informing assistants of their responsibilities and the objectives of the procedures they
are to perform.
B. Informing assistants of matters, such as the nature of the entity's business and possible
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accounting or auditing problems that may affect the nature, timing, and extent of audit
procedures with which they are involved.
C. Both A and B.
D. Neither A nor B.
16. On January 2, 2021, the Yusuke co. received a notice from its primary suppliers
that effective immediately all wholesale prices would be increased 10%. On the
basis of the notice, Yusuke revalued its December 31, 2020 inventory to reflect the
higher costs. As a result, the statement of financial position reflects inventory
stated at an amount higher than its net realizable value. The inventory constituted
a material proportion of total assets; however, the effect of the revaluation was
material to current assets but not to total assets or net income. In reporting on the
Company’s financial statements for the year ended December 31, 2020, in which
inventory is valued at the adjusted amount, the auditor would most likely
(0/1 Point)
A. Express an unmodified opinion provided the nature of the adjustment and the amounts
involved are disclosed in notes to the financial statements.
C. Disclaim an opinion.
17. The auditor is required to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to fraud or error. In all
cases when reasonable assurance cannot be obtained, the auditor's report should
contain a/an
(1/1 Point)
A. Unmodified opinion
D. Disclaimer of opinion
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18. During an audit engagement, pertinent data are compiled and included in the
audit working papers. The working papers primarily are considered in be
(1/1 Point)
19. Which of the following statements concerning the auditor's responsibility
regarding subsequent events Is incorrect?
(0/1 Point)
A. The auditor should perform audit procedures designed to obtain sufficient appropriate
audit evidence that all events up to the date of the auditor's report that may require
adjustment of, or disclosure in, the financial statements have been identified.
B. The audit procedures to identify events that may require adjustment of, or disclosure
in, the financial statements should be performed as near as practicable to the date of
issuance of the audited financial statements.
C. When the auditor becomes aware of events which materially affect the financial
statements, the auditor should consider whether such events are properly accounted for
and adequately disclosed in the financial statements.
D. The auditor does not have any responsibility to perform audit procedures or make
inquiry regarding the financial statements after the date of the auditor's report
20. Which of the following questions would not appear in an internal control
questionnaire relating to cash disbursements?
(1/1 Point)
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B. Are imprinted and renumbered check; used and is a check protection device used in
printing the check amount?
21. PSA 620 (Using the World of an Auditor's Expert) considers the following
individuals as "experts", except
(1/1 Point)
C. An individual with expertise in complex modeling for the purpose of valuing financial
instruments.
D. An individual with expertise in the valuation of assets acquired and liabilities assumed in
business combinations.
23. Which of the following procedures should an auditor ordinarily perform regarding
subsequent events?
(-/1 Point)
A. Review the cutoff bank statements for several months after the year-end.
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B. Send second requests to the client's customers who failed to respond to initial accounts
receivable confirmation requests.
D. Compare the latest available interim financial statements with the financial statements
being audited.
24. Which of the following statements best describes a positive request for
confirmation of an accounts receivable balance?
(0/1 Point)
A. The customer will be asked to indicate to the auditor the current balance in the account.
B. The customer will be asked to respond in the confirmation request only if the balance
indicated in the request is incorrect.
c. The customer will be asked to inform the auditor whether the balance indicated in
the request is correct and to respond regardless of whether such stated balance is
correct.
D. The customer will be asked to indicate to the auditor the balance in his/her account only
if it is positive (i.e., greater than zero).
A. Sampling risk arises from the possibility that the auditor’s conclusion based on a sample
may be different from the conclusion reached if the entire population were subjected to
the same audit procedure.
B. The risk of assessing control risk too low and the risk of incorrect acceptance affect
audit effectiveness as it would usually lead to additional work to establish that initial
conclusions were incorrect.
D. The risk of assessing control risk too high is the risk the auditor will conclude, in the case
of test of controls, that control risk is higher that it actually is.
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B. Detection risk arises partly from uncertainties that exist when the auditor does not
examine 100 percent of the population.
C. Detection risk arises partly because of other uncertainties that exist even if the auditor
were to examine 100 percent of the population.
27. When an auditor does not receive replies to positive requests for year-end
accounts receivable confirmations, the auditor most likely would
(1/1 Point)
A. Inspect the allowance account to verify whether the accounts were subsequently written
off.
B. Increase the assessed level of detection risk for the valuation and completeness
assertions.
C. Ask the client to contact the customers to request that the confirmations be
returned.
D. Increase the assessed level of inherent risk for the revenue cycle.
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28. The preliminary assessment of control risk is the princess of evaluating the
efficiency of an entity’s accounting and internal control systems In preventing or
detecting and correcting material misstatements.
The auditor should document in the audit working papers the understanding
obtained of the entity's accounting and internal control systems and the
assessment of control risk.
There will always be some control risk because of the inherent limitations of any
accounting and internal control systems.
(0/1 Point)
29. PSA 500 requires the auditor to use assertions for classes of transactions, account
balances, and presentation and disclosure. in sufficient detail to form it basis for
the assessment of risks of material misstatement and the design and performance
of further audit procedures. Assertors about classes of transactions include
occurrence, completeness, accuracy, cutoff, and
(0/1 Point)
C. Existence
D. Classification
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31. A continuing accountant is one who has been engaged to audit, review, or
compile and report on the financial statements of the current period and one or
more consecutive periods immediately prior to the current period. A continuing
accountant who performs the same or a higher level of service with respect to the
financial statements of the current period should
(1/1 Point)
D. Express an adverse opinion with respect to the prior period's financial statements.
32. A CPA is auditing the financial statements of a small telephone company and
wishes to test whether customers are being billed. One procedure that he or she
might use is to
(0/1 Point)
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B. Trace a sample of postings from the billing control to the subsidiary accounts receivable
records.
C. Balance the accounts receivable master files to the general ledger control account.
33. The negative form of accounts receivable confirmation request is useful except
when
(1/1 Point)
C. The auditor has reason to believe the persons receiving the requests are likely to give
them consideration.
D. Agreement by management to engage the auditor for the next annual audit.
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D. Opinion of any subsequent events occurring since the previous auditor’s report was
issued.
37. An entity's accounting records generally include the records of initial entries; and
supporting records including
(0/1 Point)
B. Information obtained by the auditor from such audit procedures as inquiry, observation,
and inspection.
D. Other information developed by, or available to, the auditor to permit him/her to reach
conclusions through valid reasoning.
38. Which of the following statements best expresses me auditor's responsibility with
respect to events occurring in the subsequent events period?
(1/1 Point)
A. The auditor has no responsibility for events occurring in the subsequent period unless
these events affect transactions recorded on or before the end of the reporting period.
B. The auditor is responsible for determining that a proper cutoff has been made and
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C. The auditor is fully responsible for events occurring in the subsequent period and
should extend all detailed procedures through the date of the auditor’s report
39. The effect of a satisfactory Internal audit function upon the work of the
Independent auditor will most likely be
(1/1 Point)
A. A substitution of the work of the Internal auditor for the work of the independent
auditor.
B. A substitution of the internal auditor's opinion of the financial statements in place of the
independent auditors opinion.
40. If the quoted for a professional service is so low, it may be difficult for the CPA to
perform the engagement in accordance with the applicable technical and
professional standards for that price. The situation may create a self-interest threat
to
(1/1 Point)
B. Objectivity
C. Integrity
D. Professional behavior
41. Auditors are often requested to report on interim financial statements. A review of
interim financial information consists primarily of
(1/1 Point)
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42. An entity's management is responsible for the preparation and fair presentation of
the financial statements. Its responsibility includes the following, accept
(1/1 Point)
B. The audit procedures directed toward identifying related party transactions should
include considering whether transactions are occurring but are not being given proper
accounting recognition.
c. An auditor should determine whether a particular transaction would have occurred if the
parties had not been related.
C. Assure that the quantity ordered is omitted from the receiving department
D. Agree the vendor's invoice with the receiving report and purchase order.
45. Which one of the following statements concerning sampling risk and nonsampling
risk is correct?
(0/1 Point)
A. Neither sampling risk nor nonsampling risk can be reduced by the auditor.
B. Sampling risk, but not nonsampling risk, can be reduced by the auditor.
C. Nonsampling risk, but not sampling risk, can be reduced by the auditor.
D. Both sampling risk and nonsampling risk can be reduced by the auditor.
46. Which of the following circumstances may create self-interest threats for a
professional accountant in public practice?
(1/1 Point)
A. Performing a service for a client that directly affects the subject matter of the assurance
engagement
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47. While observing a client’s annual physical inventory, an auditor recorded test
counts for several items and noticed that certain test counts were higher than the
recorded quantities in the client’s perpetual records. This situation could be the
result of the client’s failure to record
(1/1 Point)
A. Purchase discounts
B. Purchase returns.
C. Sales.
D. Sales returns.
48. The standard states that the auditor may decide to select specific items from a
population based on such factors as the auditor’s understanding of the entity, the
assessed risk of material misstatement, and the characteristics of the population
being tested. Specific items that may be selected for testing usually include the
following, except.
(1/1 Point)
C. All items whose values do not emceed a certain amount so as to verify only a small
proportion of the total amount of class of transactions or account balance.
D. Items that provide information about matters such as the nature of the entity, the
nature of transactions, and internal control.
Selection of tests to meet audit objectives should depend upon the understanding of
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internal control.
The auditor should resolve any substantial doubt about any of management’s material
financial statement assertions.
50. The auditor’s risk assessment procedures should always include the following,
except
(1/1 Point)
B. Analytical procedures.
A. Monitoring of controls.
B. Control activities.
C. Control environment.
A. External confirmation is the process of obtaining and evaluating audit evidence through
a direct communication from a third party in response to a request for information about a
particular item affecting assertions made by management in the financial statements.
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C. The auditor should tailor external confirmation requests to the specific audit objective.
C. Events occurring between the date of the financial statements and the date of the
auditor's report.
D. Both events occurring between the date of the financial statements and the date of
the auditor's report, and facts discovered after the date of the auditor's report.
54. Professional judgment
(0/1 Point)
B. Can be used as the justification for the decisions made by the auditor that are not
supported by the fads and circumstances of the engagement.
55. The date of the end of the latest period covered by the financial statements, which
is normally the date of the most recent balance sheet in the financial statements
subject to audit is the
(1/1 Point)
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57. In evaluating the assumptions on which the estimate is based, the auditor would
need pay particular attention to assumptions which are
(1/1 Point)
58. Comparative financial statements include the prior year's statements that were
audited by a predecessor auditor whose report is not presented. If the
predecessor’s report was unmodified, the successor auditor should
(1/1 Point)
A. Express an opinion on the current year's statements alone and make no reference to the
prior year’s statements.
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C. Obtain a letter of representations from the predecessor concerning any matters that
might affect the successor’s opinion
B. Sufficiency is the measure of the quality of audit evidence, that is, its relevance and
reliability.
C. The quantity of audit evidence needed is affected by its quality and the risk of
misstatement.
60. Analytical procedures viable the auditor to predict the balance or quantity of an
item under audit. Information to develop this estimate can be obtained from all of
the following, except
(1/1 Point)
A. Comparison of financial data with data for comparable prior periods, anticipated results
(e.g., budgets and forecasts), and similar data for the industry in which the entity operates.
D. Tracing transactions through the system to determine whether procedures are being
applied as prescribed.tion 1
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D. The maximum rate of exception that the auditor would be willing to accept in the
population without altering the planned reliance on the attribute.
A. The expected population deviation rate has little or no effect on sample size.
B. For a given tolerable rate, a larger sample size should be selected as the expected
population deviation rate decreases.
C. The population size has little or no effect on sample size except for very small
populations.
D. As the population size doubles, the sample size should also double.
63. The most reliable forms of documentary evidence are those documents that are
(0/1 Point)
A. Prenumbered.
B. Internally generated.
C. Issued sequentially.
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