7 MULTIPLE CHOICE QUESTIONS Quizz

Every industry is different for example bad debts

1. When gaining an understanding of the specific business operations of an audit client which of the
following matters would an auditor need to consider?
A. Accounting principles and industry specific practices relevant to the client’s business
B. Acquisitions or disposals of the client’s business activities
C. Leasing of property, plant or equipment for use in the client’s business
D. Products of services and markets of the client’s business
substance

2. Which of the following statements most accurately describes substantive audit procedures?
A. Substantive audit procedures consist of analytical procedures and tests of control
B. Substantive audit procedures are tests to obtain audit evidence about the design and operation
of an entity’s internal control system
C. Substantive audit procedures are tests to obtain audit evidence to detect material misstatements
in the financial statements
D. Substantive audit procedures are only carried out when the internal control system is assessed
as being strong
3. Which of the following is not a financial statement assertion relating to presentation and disclosure,
in accordance with ISA 315 Identifying and assessing the risks of material misstatements through
understanding the entity and its environment? IS there already
A. Completeness complete
B. Existence
C. Accuracy and valuation
D. Classification and understandability
4. The audit procedure of observation is particularly limited in its use based on registration card of vehicle
Is this statement true or false?
A. True
B. False
5. Which audit procedure describes an audit test to perform a proof in total of the depreciation charge
for the year?
A. Reperformance
B. Recalculation
C. Analytical procedures
D. Confirmation
6. Which of the following statements about materiality are correct?
hide from audit
(1) Information is material if its omission or misstatement could influence economic decisions of
users of the financial statements
(2) Materiality is based on the auditor’s experience and judgement
(3) Materiality is always based on turnover
(4) Materiality should only be calculated at the planning stage of the audit
A. 1, 2 and 3
B. 1, 3 and 4
C. 1 and 2
D. 2 and 4
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 7. Which of the following guidelines is generally accepted when calculating materiality as a % of
total assets?
A. 0.5 – 1%
B. 5 – 10%
C. 2 – 5%
D. 1 – 2%
8. Why do auditors need to obtain an understanding of the client and its environment?
A. To assist them in designing and performing further audit procedures
B. To help them estimate how much the audit will cost
C. To ascertain whether the audit report will be modified or not
D. To assist them writing their report to management
9. Which of the following procedures must the auditor use to obtain an understanding of the entity and
its environment in accordance with ISA 315 Identifying and assessing the risks of material
misstatements through understanding the entity and its environment?
(1) Analytical procedures
(2) Inquiry ask
(3) Confirmation
(4) Reperformance
A. 1, 2 and 3
B. 1 and 2
C. 2, 3 and 4
D. 1 and 4
10. What are the two elements of the risk of material misstatement at the assertion level? audit risk=inherrent x detection x
sampling chapter control
A. Inherent risk and detection risk
=inherent x control x sampling x
B. Audit risk and detection risk not really in the sylibus non-sampling
C. Inherent risk and control risk and detection risk
D. Detection risk and control risk
11. Which of the following is an example of an inherent risk factor?
A. The company is rapidly expanding
B. There is no log in or password required to access the accounting system
C. The company does not maintain a non-current asset register to record its assets
D. No backups are taken of the computer system at the end of each day
12. Which of the following sets the scope, timing and direction of the audit?
A. Audit plan
B. Internal control questionnaire
C. Audit strategy
D. Audit engagement letter
13. What are the purposes of planning an audit?
(1) To ensure appropriate attention is devoted to different areas of the audit
(2) To identify potential problem areas
(3) To facilitate delegation of work to audit team members
(4) To ensure the audit is completed within budget and time restraints
A. 1, 2, 3 and 4
B. 1, 3 and 4
C. 1, 2 and 3
D. 2 and 3
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 14. Which of the following descriptions accurately defines audit documentation?
A. The record of procedures performed by an auditor, and all evidential matters including
discussions with management and third parties
B. The record of audit evidence obtained by the auditor and conclusions with regard to the
financial statements subject to audit
C. The record of a current nature of procedures performed by the auditor and all evidence,
matters and conclusions relevant to the audit
D. The record of audit procedures performed, relevant audit evidence obtained, and conclusions
the auditor reached some of the things are not accurate

15. Which of the following factors influences the auditor’s judgement as to what constitutes
sufficient, appropriate audit evidence?
(1) Risk
(2) Cost
(3) Materiality
(4) Experience from prior audits
A. 1, 2 and 3
B. 1, 3 and 4
C. 3 and 4
D. 2, 3 and 4
16. During which of the following stages of the audit must analytical procedures be used, in
accordance with International Standards on Auditing?
(1) Audit planning
(2) Audit fieldwork
(3) Audit completion
A. 1 and 3
B. 1, 2 and 3
C. 1 only
D. 1 and 2
17 15. For which of the following could the external auditor employ the services of an expert in
accordance with ISA 620 Using the work of an auditor’s expert?
(1) Analytical procedures on inventory
(2) Valuation of land and buildings
(3) Legal opinion on the outcome of a court case
(4) Verifying directors’ transactions
A. 1, 2 and 3
B. 2, 3 and 4
C. 2 and 3
D. 1, 3 and 4 **

18. Which of the following is not a method used when selecting a sample for audit testing?
A. Random selection
B. Systematic selection
C. Haphazard selection
D. Statistical selection

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19. In which of the situations would it be most appropriate to test 100% of the population?
A. The population consists of a small number of high value items
B. Control risks has been assessed as low
C. The population consists of a high number of low value items
D. Audit evidence can be obtained from various sources
20. The auditor can reduce sampling risk by increasing the sample size.
Is this statement true or false?

A. True
B. False
21. Which of the following is not an example of an audit working paper?
A. Audit strategy
B. Memorandum of the company
C. Audit file
D. Analytical procedures
22 Which of the following factors influences the form and content of audit working papers?
(1) Risks of material misstatements
(2) Exceptions identified
(3) Nature of the package used for documentation
(4) Cost to the audit
A. 1, 2 and 4
B. 1, 3 and 4
C. 1 and 2
D. 2 and 4
23. The disclosure checklist is prepared as part of the planning stage of the audit.
Is this statement true or false?

A. True
B. False
24. Which of the following papers would normally be retained on the permanent file maintained for a
company audit client?
A. Completed checklist of statutory disclosure provisions
B. Extracts of minutes of meeting of the directors
C. Letter of representation
D. Copy of the company’s legal constitute
25. Which of the following would normally be retained on the current file maintained for a
company audit client?
A. Narrative notes describing the company’s accounting systems
B. A copy of the company’s constitution
C. A representation letter
D. A description of the company’s business and its operations
26. Performance materiality levels are higher than the materiality for the financial statements as a
whole
Is this statement true or false?
A. True
B. False 16