audit mcqs ricchiute test bank

8/18/2019 Audit Mcqs Ricchiute Test Bank

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MCQs - RICCHIUTE TEST BANK

Chapter 1 - Auditing: Integral to the Economy

1. To become a Certified Pb!ic Acco"ta"t #CPA$% a" i"di&ida! mst 'ass t(e U"iform CPA E)ami"atio" a"da. *emo"strate (is or (er i"de'e"de"ce. b. Com'!+ ,it( state edcatio" a"d e)'erie"ce reireme"ts.

c. btai" em'!o+me"t ,it( a 'b!ic acco"ti"/ firm.d. Become a member of t(e AICPA.

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. A" i"de'e"de"t adit is im'orta"t to readers of fi"a"cia! stateme"ts becase ita. Pro&ides a measre of ma"a/eme"t2s ste,ards(i' f"ctio". b. Measres a"d comm"icates t(e fi"a"cia! data i"c!ded i" fi"a"cia! stateme"ts.c. b3ecti&e!+ e)ami"es a"d re'orts o" ma"a/eme"t2s fi"a"cia! stateme"ts.d. Re'orts o" t(e accrac+ of i"formatio" i" t(e fi"a"cia! stateme"ts. #AICPA A*APTE*$

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4. Stateme"ts o" Aditi"/ Sta"dardsa. Re!ate to t(e fi!i"/ reireme"ts a"d e"forceme"t acti&ities of t(e SEC. b. *escribe 'rocedres to be a''!ied i" s'ecific areas of adit acti&it+ to e!imi"ate i"co"siste"cies i" adit

'ractice.c. Are i"te"ded to !imit t(e de/ree of aditor 3d/me"t "eeded to f!fi!! t(e attest f"ctio".d. I"ter'ret sta"dards t(at 'ro&ide /ide!i"es or measres of a!it+ for a" i"de'e"de"t adit.

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5. T(e 'rimar+ 'r'ose of a" i"de'e"de"t fi"a"cia! stateme"t adit is toa. Pro&ide a basis for assessi"/ ma"a/eme"t2s 'erforma"ce. b. Com'!+ ,it( state a"d federa! re/!ator+ reireme"ts.c. Assre ma"a/eme"t t(at t(e fi"a"cia! stateme"ts are "biased a"d free from materia! error.d. Pro&ide sers ,it( a" "biased o'i"io" abot t(e fair"ess of i"formatio" re'orted i" t(e fi"a"cia!

stateme"ts.

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6. I"de'e"de"t aditi"/ ca" best be described as aa. Bra"c( of acco"ti"/. b. *isci'!i"e t(at attests to t(e res!ts of acco"ti"/ a"d ot(er o'eratio"s a"d data.c. Professio"a! acti&it+ t(at measres a"d comm"icates fi"a"cia! a"d bsi"ess data.d. Re/!ator+ f"ctio" t(at 're&e"ts t(e issa"ce of im'ro'er fi"a"cia! i"formatio".

#AICPA A*APTE*$

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7. A" i"de'e"de"t adit aids i" t(e comm"icatio" of eco"omic data becase t(e adita. Co"firms t(e accrac+ of ma"a/eme"t2s fi"a"cia! re'rese"tatio"s. b. 8e"ds credibi!it+ to t(e fi"a"cia! stateme"ts.c. 9ara"tees t(at fi"a"cia! data are fair!+ 'rese"ted.d. Assres t(e readers of fi"a"cia! stateme"ts t(at a"+ frad!e"t acti&it+ (as bee" corrected.

#AICPA A*APTE*$

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:. ;(ic( of t(e fo!!o,i"/ t+'es of adits are most simi!ar<a. 'eratio"a! adits a"d com'!ia"ce adits. b. I"de'e"de"t fi"a"cia! stateme"t adits a"d o'eratio"a! adits.c. Com'!ia"ce adits a"d i"de'e"de"t fi"a"cia! stateme"t adits.d. I"ter"a! adits a"d i"de'e"de"t fi"a"cia! stateme"t adits.

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=. T(e Aditi"/ Sta"dards Boarda. Sets r!es a"d re/!atio"s t(at /o&er" 'b!ic acco"ti"/ firms. b. Is a" arm of t(e >i"a"cia! Acco"ti"/ Sta"dard Board.c. Is a se"ior tec("ica! bod+ of t(e AICPA desi/"ated to isse at(oritati&e aditi"/ 'ro"o"ceme"ts.d. Re'orts direct!+ to t(e Secrities a"d E)c(a"/e Commissio".

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?. T(e esse"ce of t(e attest f"ctio" is toa. *etect frad. b. E)ami"e i"di&ida! tra"sactio"s so t(at t(e aditor ca" certif+ as to t(eir &a!idit+.

c. *etermi"e ,(et(er t(e c!ie"t2s fi"a"cia! stateme"ts are fair!+ stated.d. E"sre t(e co"siste"t a''!icatio" of correct acco"ti"/ 'rocedres. #AICPA A*APTE*$

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1@. ;(ic( of t(e fo!!o,i"/ criteria is "ie to t(e i"de'e"de"t aditor2s attest f"ctio"<a. 9e"era! com'ete"ce. b. >ami!iarit+ ,it( t(e 'artic!ar i"dstr+ of eac( c!ie"t.c. *e 'rofessio"a! care.d. I"de'e"de"ce. #AICPA A*APTE*$

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11. T(e defi"itio" of aditi"/ co"tai"ed ,it(i" A Statement of Basic Auditing Concepts reco/"ies t(at aditi"/i"c!des bot( a#a"$a. *ocme"tatio" 'rocess a"d a" e&a!atio" 'rocess. b. E&a!atio" 'rocess a"d a re'orti"/ 'rocess.c. I"&esti/ati&e 'rocess a"d a re'orti"/ 'rocess.d. *ocme"tatio" 'rocess a"d a re'orti"/ 'rocess.

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1. A" o'eratio"a! adit is desi/"ed toa. Assess t(e efficie"c+ a"d effecti&e"ess of ma"a/eme"t2s o'erati"/ 'rocedres. b. Assess t(e 'rese"tatio" of ma"a/eme"t2s fi"a"cia! stateme"ts i" accorda"ce ,it( /e"era!!+ acce'ted

acco"ti"/ 'ri"ci'!es.c. *etermi"e ,(et(er ma"a/eme"t (as com'!ied ,it( a''!icab!e !a,s a"d re/!atio"s.d. *etermi"e ,(et(er t(e adit committee of t(e board of directors is effecti&e!+ disc(ar/i"/ its

res'o"sibi!it+ to o&ersee ma"a/eme"t2s o'eratio"s.

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14. T(e maret for aditi"/ ser&ices is dri&e" b+a. T(e re/!ator+ at(orit+ of t(e Secrities a"d E)c(a"/e Commissio". b. A dema"d b+ e)ter"a! sers of fi"a"cia! stateme"ts.c. Pro"o"ceme"ts issed b+ t(e Aditi"/ Sta"dards Board.d. Co"/ress at t(e federa! !e&e! a"d e!ected !e/is!ati&e bodies at t(e state !e&e!.

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15. T(e first co"tem'orar+ adit re!ated !e/is!atio" ,as t(ea. Secrities Act of 1?44. b. Secrities E)c(a"/e Act of 1?45.c. Britis( oi"t Stoc Com'a"ies Act of 1=55.d. Com'a"ies Act of 1?5:.

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16. T(e first at(oritati&e aditi"/ 'ro"o"ceme"t i" t(e U.S. ,asa. Stateme"t o" Aditi"/ Procedres No. 1% DE)te"sio"s of Aditi"/ Procedres.D b. Stateme"t o" Aditi"/ Sta"dards No. 1% DCodificatio" of SASs.D

c. DU"iform Acco"ti"/0 A Te"tati&e Pro'osa! Sbmitted b+ t(e >edera! Reser&e Board #1?1:$.Dd. DE)ami"atio" of >i"a"cia! Stateme"ts b+ I"de'e"de"t Pb!ic Acco"ta"ts #1?47$.D

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17. T(e first at(oritati&e adit sta"dards-setti"/ bod+ em'o,ered to isse aditi"/ 'ro"o"ceme"ts i" t(e U.S.,as t(ea. T(e Committee o" Aditi"/ Procedre. b. T(e Aditi"/ Sta"dards E)ecti&e Committee.c. T(e Aditi"/ Sta"dards Board.d. T(e Acco"ti"/ a"d Re&ie, Ser&ices Committee.

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1:. ;(ic( of t(e fo!!o,i"/ i"correct!+ matc(es t(e at(oritati&e bod+ ,it( its at(oritati&e 'ro"o"ceme"ts<a. Acco"ti"/ a"d Re&ie, Ser&ices Committee0 DStateme"ts o" Sta"dards for Acco"ti"/ a"d Re&ie,

Ser&icesD b. Aditi"/ Sta"dards Board0 DStateme"ts o" Aditi"/ Sta"dardsDc. Aditi"/ Sta"dards E)ecti&e Committee0 DStateme"ts o" Aditi"/ ProcedreDd. Secrities a"d E)c(a"/e Commissio"0 D>i"a"cia! Re'orti"/ Re!easesD

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1=. A !ice"se to 'ractice as a certified 'b!ic acco"ta"t is /ra"ted b+a. State boards of acco"ta"c+. b. T(e AICPA.c. State societies of CPAs.d. T(e SEC.

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1?. T(e 'r'ose of a com'!ia"ce adit for a /o&er"me"ta! e"tit+ is to determi"e ,(et(er a. >i"a"cia! stateme"ts com'!+ ,it( 9AAP a"d ,(et(er t(e e"tit+ is o'erati"/ efficie"t!+. b. >i"a"cia! stateme"ts com'!+ ,it( 9AAP a"d t(e e"tit+ (as com'!ied ,it( a''!icab!e !a,s a"d

re/!atio"s.c. T(e e"tit+ (as com'!ied ,it( a''!icab!e !a,s a"d re/!atio"s.d. >i"a"cia! stateme"ts com'!+ ,it( 9AAP.

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@. Prsa"t to t(e AICPA r!es of co"dct% t(e aditor2s res'o"sibi!it+ to t(e 'rofessio" is defi"ed b+a. T(e AICPA Code of Professio"a! Co"dct. b. >edera! !a,s /o&er"i"/ !ice"sed 'rofessio"a!s ,(o are i"&o!&ed i" i"terstate commerce.c. Stateme"ts o" Aditi"/ Sta"dards.d. T(e B+!a,s of t(e AICPA. #AICPA A*APTE*$

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Chapter 2 - The Risk of Fraud and echanisms to Address Fraud: Regulation! Corporate "o#ernance! andAudit $uality

1. I" a fi"a"cia! stateme"t adit% i"(ere"t ris re'rese"tsa. T(e ssce'tibi!it+ of a" acco"t ba!a"ce to error t(at co!d be materia!. b. T(e ris t(at error co!d occr a"d "ot be 're&e"ted or detected b+ t(e i"ter"a! co"tro! strctre.c. T(e ris t(at error co!d occr a"d "ot be detected b+ t(e aditor2s 'rocedres.d. T(e ris t(at t(e aditor fai!s to modif+ materia!!+ misstated fi"a"cia! stateme"ts.

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. To mi"imie t(e o''ort"ities for frad% "c!aimed cas( 'a+ro!! s(o!d be

a. *e'osited i" a safe de'osit bo). b. He!d b+ t(e 'a+ro!! cstodia".c. *e'osited i" a s'ecia! ba" acco"t.d. He!d b+ t(e co"tro!!er. #AICPA A*APTE*$

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4. T(e aditor is most !ie!+ to 'resme t(at a (i/( ris of irre/!arities e)ists if a. T(e c!ie"t is a m!ti"atio"a! com'a"+ t(at does bsi"ess i" "meros forei/" co"tries. b. T(e c!ie"t does bsi"ess ,it( se&era! re!ated 'arties.c. I"adeate se/re/atio" of dties '!aces a" em'!o+ee i" a 'ositio" to 'er'etrate a"d co"cea! t(efts.d. I"adeate em'!o+ee trai"i"/ res!ts i" !e"/t(+ E*P e)ce'tio" re'orts eac( mo"t(.

#AICPAA*APTE*$A"s,er0 C

5. *e 'rofessio"a! care reiresa. A critica! re&ie, of t(e ,or do"e at e&er+ !e&e! of s'er&isio". b. T(e e)ami"atio" of a!! corroborati"/ e&ide"ce a&ai!ab!e.c. T(e e)ercise of error-free 3d/me"t.d. A co"sideratio" of i"ter"a! co"tro! strctre t(at i"c!des tests of co"tro!s.

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6. If a" aditor be!ie&es a c!ie"t ma+ (a&e committed i!!e/a! acts% ,(ic( of t(e fo!!o,i"/ actio"s s(o!d t(eaditor tae<a. Co"s!t ,it( t(e c!ie"t2s co"se! a"d t(e aditor2s co"se! to determi"e (o, t(e ss'ected i!!e/a! acts ,i!!

be comm"icated to stoc(o!ders. b. E)te"d aditi"/ 'rocedres to determi"e ,(et(er t(e ss'ected i!!e/a! acts (a&e a materia! effect o" t(e

fi"a"cia! stateme"ts.c. Mae i"iries of t(e c!ie"t2s ma"a/eme"t a"d obtai" a" "dersta"di"/ of t(e circmsta"ces "der!+i"/

t(e acts a"d of ot(er e&ide"ce to determi"e t(e effects of t(e acts o" t(e fi"a"cia! stateme"ts.d. Notif+ eac( member of t(e adit committee of t(e board of directors abot "atre of t(e acts a"d reestt(at t(e+ ad&ise a" a''roac( to be tae" b+ t(e aditor. #AICPA A*APTE*$

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7. If a" i!!e/a! act is disco&ered dri"/ t(e adit of a 'b!ic!+ (e!d com'a"+% t(e aditor s(o!da. Notif+ t(e re/!ator+ at(orities. b. *etermi"e ,(o ,as res'o"sib!e for t(e act.c. Modif+ t(e e)te"t of aditi"/ 'rocedres.d. Re'ort t(e act to (i/(-!e&e! 'erso""e! ,it(i" t(e c!ie"t2s or/a"iatio". #AICPA A*APTE*$

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:. T(e >orei/" Corr't Practices Act reires t(ata. Aditors e"/a/ed to e)ami"e t(e fi"a"cia! stateme"ts of 'b!ic!+ (e!d com'a"ies re'ort a!! i!!e/a!

'a+me"ts to t(e SEC. b. Pri&ate!+ (e!d com'a"ies de&ise a"d mai"tai" a" adeate i"ter"a! co"tro! strctre.c. Pb!ic!+ (e!d com'a"ies de&ise a"d mai"tai" a" adeate i"ter"a! co"tro! strctre.d. U.S. firms doi"/ bsi"ess abroad re'ort siab!e 'a+me"ts to "o"-U.S. citie"s to t(e stice *e'artme"t.

#AICPAA*APTE*$

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=. T(e t(ird /e"era! sta"dard states t(at de care is to be e)ercised i" t(e 'erforma"ce of a" adit% a"d s(o!d bei"ter'reted to mea" t(at a" aditor ,(o "dertaes a" e"/a/eme"t assmes a dt+ to 'erforma. ;it( reaso"ab!e di!i/e"ce a"d ,it(ot fa!t or error. b. As a 'rofessio"a! ,(o ,i!! assme res'o"sibi!it+ for !osses co"see"t 'o" error of 3d/me"t.c. To t(e satisfactio" of t(e c!ie"t a"d t(ird 'arties.d. As a 'rofessio"a! 'ossessi"/ t(e de/ree of si!! commo"!+ 'ossessed b+ ot(ers i" t(e fie!d.

#AICPA A*APTE*$A"s,er0 *

?. T(e aditor2s 3d/me"t co"cer"i"/ t(e o&era!! fair"ess of t(e 'rese"tatio" of fi"a"cia! 'ositio"s% res!ts ofo'eratio"s% a"d cas( f!o,s is a''!ied ,it(i" t(e frame,or of a. Qa!it+ co"tro!. b. 9e"era!!+ acce'ted aditi"/ sta"dards t(at i"c!de t(e co"ce't of materia!it+.c. T(e aditor2s e&a!atio" of t(e adited com'a"+2s i"ter"a! co"tro!s.d. 9e"era!!+ acce'ted acco"ti"/ 'ri"ci'!es. #AICPA A*APTE*$

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1@. A" adit co"dcted i" accorda"ce ,it( /e"era!!+ acce'ted aditi"/ sta"dards /e"era!!+ s(o!da. Be e)'ected to 'ro&ide assra"ce t(at i!!e/a! acts ,i!! be detected ,(e" i"ter"a! co"tro! is effecti&e. b. Be re!ied o" to disc!ose &io!atio"s of trt( i" !e"di"/ !a,s.c. I"c!de a '!a" to acti&e!+ searc( for i!!e/a! acts.d. Not be re!ied o" to 'ro&ide assra"ce t(at i!!e/a! acts ,i!! be detected. #AICPA A*APTE*$


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17. ;it( res'ect to errors a"d frad% ,(ic( of t(e fo!!o,i"/ s(o!d be 'art of a" aditor2s '!a""i"/ of t(e adite"/a/eme"t<

a. P!a" to searc( for errors or frad t(at ,o!d (a&e a materia! or immateria! effect o" t(e fi"a"cia!stateme"ts.

b. P!a" to disco&er errors or frad t(at are eit(er materia! or immateria!.c. P!a" to disco&er errors or frad t(at are materia!.d. P!a" to co"sider factors affecti"/ t(e ris of materia! misstateme"t bot( at t(e fi"a"cia! stateme"t a"d t(e

acco"t ba!a"ce !e&e!. #AICPA A*APTE*$

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1:. I" assessi"/ sam'!i"/ ris% t(e ris of i"correct re3ectio" a"d t(e ris of assessi"/ co"tro! ris too (i/( re!ateto t(ea. Efficie"c+ of t(e adit. b. Effecti&e"ess of t(e adit.c. Se!ectio" of t(e sam'!e.d. Adit a!it+ co"tro!s. #AICPA A*APTE*$

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1=. I" 'rsi"/ its a!it+ co"tro! ob3ecti&es ,it( res'ect to acce'ta"ce of a c!ie"t% a CPA firm is "ot !ie!+ to

a Mae i"iries of t(e 'ro'osed c!ie"t2s !e/a! co"se!. b Re&ie, fi"a"cia! stateme"ts of t(e 'ro'osed c!ie"t.c Mae i"iries of 're&ios aditors.d Re&ie, t(e 'erso""e! 'ractices of t(e 'ro'osed c!ie"t. #AICPA A*APTE*$

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1?. ;(e" seei"/ to reco&er stoc maret !osses from a 'b!ic acco"ti"/ firm o" t(e basis of a" "a!ifiedo'i"io" t(at accom'a"ied a re/istratio" stateme"t% a" i"&estor mst estab!is( t(ata. T(e adited fi"a"cia! stateme"ts ,ere materia!!+ misstated.

b. He or s(e re!ied o" t(e fi"a"cia! stateme"ts.c. T(e firm did "ot act i" /ood fait(.d. If t(e firm (ad e)ercised de care% t(e materia! misstateme"t ,o!d (a&e bee" disco&ered.

#AICPA A*APTE*$A"s,er0 A

@. A !a,+er2s res'o"se to a !etter of adit i"ir+ ma+ be !imited to matters t(at are co"sidered i"di&ida!!+ orco!!ecti&e!+ materia! to t(e fi"a"cia! stateme"ts if a. T(e aditor (as i"strcted t(e !a,+er abot t(e !imits of materia!it+ i" fi"a"cia! stateme"ts. b. T(e c!ie"t a"d t(e aditor (a&e a/reed o" t(e !imits of materia!it+ a"d t(e !a,+er (as bee" "otified.c. T(e !a,+er a"d aditor (a&e reac(ed a" "dersta"di"/ abot t(e !imits of materia!it+.d. T(e !a,+er2s res'o"se to t(e i"ir+ e)'!ai"s t(e !e/a! mea"i"/ of materia!it+ !imits a"d estab!is(es

a"titati&e 'arameters. #AICPA A*APTE*$

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Chapter % - Internal Control o#er Financial Reporting: anagement&s Responsi'ilities and Importance to

the E(ternal Auditors

1. I"ter"a! co"tro! 'rocedres are "ot desi/"ed to 'ro&ide reaso"ab!e assra"ce t(ata. Tra"sactio"s are e)ected i" accorda"ce ,it( ma"a/eme"t2s at(oriatio". b. Irre/!arities ,i!! be e!imi"ated.c. Access to assets is 'ermitted o"!+ i" accorda"ce ,it( ma"a/eme"t2s at(oriatio".

d. T(e recorded acco"tabi!it+ for assets is com'ared ,it( t(e e)isti"/ assets at reaso"ab!e i"ter&a!s.

#AICPA A*APTE*$A"s,er0 B

. A seco"dar+ 'r'ose of t(e aditor2s co"sideratio" of i"ter"a! co"tro! is to 'ro&ide

a. A basis for co"strcti&e s//estio"s abot im'ro&eme"ts i" i"ter"a! co"tro! strctre. b. A basis for assessi"/ co"tro! ris.c. A" assra"ce t(at t(e records a"d docme"ts (a&e bee" mai"tai"ed i" accorda"ce ,it( e)isti"/ com'a"+

'o!icies a"d 'rocedres.d. A basis for t(e determi"atio" of t(e res!ta"t e)te"t of t(e tests to ,(ic( aditi"/ 'rocedres are to be

restricted. #AICPA A*APTE*$

A"s,er0 A

4. ;(e" co"sideri"/ i"ter"a! co"tro!% a" aditor mst be a,are of t(e co"ce't of reaso"ab!e assra"ce% ,(ic(reco/"ies t(ata. Em'!o+me"t of com'ete"t 'erso""e! 'ro&ides assra"ce t(at t(e ob3ecti&es of i"ter"a! co"tro! ,i!! be

ac(ie&ed. b. Estab!is(me"t a"d mai"te"a"ce of i"ter"a! co"tro! is a" im'orta"t res'o"sibi!it+ of t(e ma"a/eme"t a"d

"ot of t(e aditor.c. Cost of i"ter"a! co"tro! 'rocedres s(o!d "ot e)ceed t(e be"efits e)'ected to be deri&ed from t(e

co"tro!.d. Se/re/atio" of i"com'atib!e f"ctio"s is "ecessar+ to ascertai" t(at t(e co"tro! 'rocedres are effecti&e.

#AICPAA*APTE*$

A"s,er0 C

5. After co"sideri"/ a c!ie"t2s i"ter"a! co"tro!% a" aditor (as co"c!ded t(at t(e s+stem is ,e!! desi/"ed a"d isf"ctio"i"/ as a"tici'ated. U"der t(ese circmsta"ces% t(e aditor ,o!d most !ie!+a. Cease to 'erform frt(er sbsta"ti&e tests. b. Not i"crease t(e e)te"t of '!a""ed sbsta"ti&e tests.c. I"crease t(e e)te"t of a"tici'ated a"a!+tica! 'rocedres.d. Perform a!! tests of co"tro!s to t(e e)te"t ot!i"ed i" t(e 're'!a""ed adit 'ro/ram.


6. T(e 'rimar+ 'r'ose of t(e aditor2s co"sideratio" of i"ter"a! co"tro! is to 'ro&ide a basis for a. *etermi"i"/ ,(et(er 'rocedres a"d records t(at are co"cer"ed ,it( t(e safe/ardi"/ of assets are

re!iab!e. b. Co"strcti&e s//estio"s to c!ie"ts co"cer"i"/ deficie"cies i" i"ter"a! co"tro!.c. *etermi"i"/ t(e "atre% timi"/% a"d e)te"t of adit tests to be a''!ied.d. T(e e)'ressio" of a" o'i"io". #AICPA A*APTE*$

A"s,er0 C


9/30

7. T(e 'r'ose of tests of co"tro!s is to 'ro&ide reaso"ab!e assra"ce t(at t(ea. Acco"ti"/ treatme"t of tra"sactio"s a"d ba!a"ces is &a!id a"d 'ro'er. b. Co"tro! 'rocedres are f"ctio"i"/ as i"te"ded.c. E"tit+ (as com'!ied ,it( disc!osre reireme"ts of 9AAP.d. E"tit+ (as com'!ied ,it( reireme"ts of a!it+ co"tro!. #AICPA A*APTE*$

A"s,er0 B

:. T(e aditor2s re&ie, of t(e c!ie"t2s i"ter"a! co"tro! is docme"ted i" order to sbsta"tiatea. Co"formit+ of t(e acco"ti"/ records ,it( 9AAP. b. Com'!ia"ce ,it( /e"era!!+ acce'ted aditi"/ sta"dards.c. Ad(ere"ce to reireme"ts of ma"a/eme"t.d. T(e fair"ess of t(e fi"a"cia! stateme"t 'rese"tatio". #AICPA A*APTE*$

A"s,er0 B

=. After co"sideratio" of a c!ie"t2s i"ter"a! co"tro!% a" aditor mi/(t decide toa. I"crease t(e e)te"t of sbsta"ti&e testi"/ i" areas ,(ere t(e co"tro! strctre is stro"/. b. Redce t(e e)te"t of tests of co"tro!s i" areas ,(ere t(e co"tro!s are stro"/.c. Redce t(e e)te"t of bot( sbsta"ti&e tests a"d tests of co"tro!s i" areas ,(ere t(e co"tro!s are stro"/.d. I"crease t(e e)te"t of sbsta"ti&e testi"/ i" areas ,(ere t(e co"tro!s are ,ea.

#AICPAA*APTE*$

A"s,er0 *

?. After docme"ti"/ i"ter"a! co"tro! i" a" adit e"/a/eme"t% t(e aditor ma+ 'erform tests o"a. T(ose co"tro!s t(at t(e aditor '!a"s to re!+ o". b. T(ose co"tro!s i" ,(ic( deficie"cies ,ere ide"tified.

c. T(ose co"tro!s t(at (a&e a materia! effect o" t(e fi"a"cia! stateme"t ba!a"ces.d. A ra"dom sam'!e of t(e co"tro!s t(at ,ere re&ie,ed. #AICPA A*APTE*$

A"s,er0 A

1@. T(e aditor is e)ami"i"/ co'ies of sa!es i"&oices o"!+ for t(e i"itia!s of t(e 'erso" res'o"sib!e for c(eci"/

t(e e)te"sio"s. T(is is a" e)am'!e of a

a. Test of co"tro!s. b. Sbsta"ti&e test.c. *a!-'r'ose test.d. Test of ba!a"ces. #AICPA A*APTE*$

A"s,er0 A

11. I" a" aditor2s co"sideratio" of i"ter"a! co"tro!% t(e com'!etio" of a estio""aire is most c!ose!+ associated

,it( ,(ic( of t(e fo!!o,i"/<

a. Se'aratio" of dties. b. U"dersta"di"/ t(e s+stem.c. >!o,c(art accrac+.d. Tests of co"tro!s. #AICPA A*APTE*$

A"s,er0 B


10/30

1. T(e re!ia"ce '!aced o" sbsta"ti&e tests i" re!atio" to co"tro! ris &aries i" a re!atio"s(i' t(at is ordi"ari!+a. Para!!e!.

b. I"&erse.c. *irect.d. Ea!. #AICPA A*APTE*$

A"s,er0 B

14. T(e aditor obser&es c!ie"t em'!o+ees i" order toa. Pre'are a f!o,c(art. b. U'date i"formatio" co"tai"ed i" t(e or/a"iatio" a"d 'rocedre ma"a!s.c. Corroborate t(e i"formatio" obtai"ed dri"/ t(e i"itia! re&ie, of t(e s+stem.d. *etermi"e t(e e)te"t of com'!ia"ce ,it( a!it+ co"tro! sta"dards. #AICPA A*APTE*$

A"s,er0 C

15. A co"sideratio" of i"ter"a! co"tro! made dri"/ a" adit is sa!!+ "ot sfficie"t to e)'ress a" o'i"io" o" a"e"tit+2s co"tro!s becase

a. ;ea"esses i" t(e s+stem ma+ /o ""oticed dri"/ t(e adit e"/a/eme"t. b. A co"sideratio" of i"ter"a! co"tro! is "ot "ecessari!+ made dri"/ a" adit e"/a/eme"t.c. "!+ t(ose co"tro!s o" ,(ic( a" aditor i"te"ds to re!+ are re&ie,ed% tested% a"d e&a!ated.d. Co"tro!s ca" c(a"/e eac( +ear. #AICPA A*APTE*$

A"s,er0 C

16. A" aditor2s re'ort o" i"ter"a! co"tro! of a 'b!ic!+ (e!d com'a"+ ,o!d ordi"ari!+ be of !east se to

a. S(are(o!ders. b. fficers.c. *irectors.d. Re/!ator+ a/e"cies. #AICPA A*APTE*$

A"s,er0 A

17. T(e acco"ta"t2s re'ort e)'ressi"/ a" o'i"io" o" a" e"tit+2s i"ter"a! co"tro!s s(o!d state t(at t(ea. Estab!is(me"t a"d mai"te"a"ce of i"ter"a! co"tro! is t(e res'o"sibi!it+ of ma"a/eme"t. b. b3ecti&es of t(e c!ie"t2s i"ter"a! co"tro!s are bei"/ met.c. Co"sideratio" of t(e i"ter"a! co"tro!s ,as co"dcted i" accorda"ce ,it( /e"era!!+ acce'ted aditi"/

sta"dards.d. I"(ere"t !imitatio"s of t(e c!ie"t2s i"ter"a! co"tro!s ,ere e)ami"ed. #AICPA A*APTE*$

A"s,er0 A

1:. T(e acco"ta"t2s re'ort e)'ressi"/ a" o'i"io" o" a" e"tit+2s i"ter"a! co"tro!s ,o!d "ot i"c!de aa. *escri'tio" of t(e sco'e of t(e e"/a/eme"t. b. S'ecific date t(at t(e re'ort co&ers rat(er t(a" a 'eriod of time.c. Brief e)'!a"atio" of t(e broad ob3ecti&es a"d i"(ere"t !imitatio"s of i"ter"a! co"tro!.d. Stateme"t t(at t(e e"tit+2s i"ter"a! co"tro!s are co"siste"t ,it( t(at of t(e 'rior +ear after /i&i"/ effect to

sbsee"t c(a"/es. #AICPA A*APTE*$

A"s,er0 *


11/30

1=. A CPA2s co"sideratio" of i"ter"a! co"tro! i" a" adita. Is /e"era!!+ more !imited t(a" t(at made i" co""ectio" ,it( a" e"/a/eme"t to e)'ress a" o'i"io" o"

i"ter"a! co"tro!.

b. Is /e"era!!+ more e)te"si&e t(a" t(at made i" co""ectio" ,it( a" e"/a/eme"t to e)'ress a" o'i"io" o"i"ter"a! co"tro!.c. ;i!! /e"era!!+ be ide"tica! to t(at made i" co""ectio" ,it( a" e"/a/eme"t to e)'ress a" o'i"io" o"

i"ter"a! co"tro!.d. ;i!! /e"era!!+ res!t i" t(e CPA e)'ressi"/ a" o'i"io" o" t(e i"ter"a! co"tro!.


1?. T(e aditor ,(o becomes a,are of re'ortab!e co"ditio"s is reired to comm"icate t(is to t(ea. Adit committee a"d c!ie"t2s !e/a! co"se!. b. Board of directors a"d i"ter"a! aditors.c. Se"ior ma"a/eme"t a"d board of directors.

d. I"ter"a! aditors a"d se"ior ma"a/eme"t. #AICPA A*APTE*$

A"s,er0 C

@. ;(ic( of t(e fo!!o,i"/ is !ie!+ to be of !east im'orta"ce to a" aditor ,(e" assessi"/ co"tro! ris i" acom'a"+ t(at 'rocesses data b+ com'ter<a. T(e se/re/atio" of dties ,it(i" t(e com'ter de'artme"t. b. T(e co"tro! o&er sorce docme"ts.c. T(e docme"tatio" mai"tai"ed for acco"ti"/ a''!icatio"s.d. T(e cost-be"efit ratio of data 'rocessi"/ o'eratio"s. #AICPA A*APTE*$

A"s,er0 *

Chapter ) - *rofessional +ia'ility and the ,eed for $uality Auditor udgments and Ethical .ecisions

1. ;(ic( of t(e fo!!o,i"/ best describes a tre"d i" !iti/atio" i"&o!&i"/ CPAs<a. A CPA ca""ot re"der a" o'i"io" o" a com'a"+ "!ess t(e CPA (as adited a!! affi!iates of t(at com'a"+. b. A CPA ma+ sccessf!!+ assert as a defe"se t(at t(e CPA (ad "o moti&e to be 'art of a frad.c. A CPA ma+ be e)'osed to crimi"a! as ,e!! as ci&i! !iabi!it+.d. A CPA is 'rimari!+ res'o"sib!e for a c!ie"t2s foot"otes i" a" a""a! re'ort fi!ed ,it( t(e SEC.

#AICPA A*APTE*$A"s,er0 C

. As a co"see"ce of fai!re to ad(ere to /e"era!!+ acce'ted aditi"/ sta"dards i" t(e corse of a" adit of t(e8am' Cor'.% Harriso"% CPA% did "ot detect t(e embe!eme"t of a materia! amo"t of f"ds b+ t(ecom'a"+2s co"tro!!er. As a matter of commo" !a,% to ,(at e)te"t ,o!d Harriso" be !iab!e to t(e 8am'Cor'. for !osses attribtab!e to t(e t(eft<

a. No !iabi!it+ si"ce t(e ordi"ar+ e)ami"atio" ca""ot be re!ied o" to detect defa!catio"s. b. No !iabi!it+ becase 'ri&it+ of co"tract is !aci"/.c. 8iab!e for !osses attribtab!e to (er or (is "e/!i/e"ce.d. 8iab!e o"!+ if it co!d be 'ro&ed t(at (e or s(e ,as /ross!+ "e/!i/e"t. #AICPA A*APTE*$

A"s,er0 C


12/30

4. T(e A'e) Sret+ Com'a"+ ,rote a /e"era! fide!it+ bo"d co&eri"/ defa!catio"s b+ t(e em'!o+ees of ;atso"%I"c. T(ereafter% 9ra"d% a" em'!o+ee of ;atso"% embe!ed 1=%??? of com'a"+ f"ds. ;(e" (is acti&ities,ere disco&ered% A'e) 'aid ;atso" t(e f!! amo"t i" accorda"ce ,it( t(e terms of t(e fide!it+ bo"d a"d t(e"

so/(t reco&er+ a/ai"st ;atso"2s aditors% Ka"e F *obbs% CPAs. ;(ic( of t(e fo!!o,i"/ ,o!d be Ka"e F*obbs2 best defe"se<a. A'e) is "ot i" 'ri&it+ of co"tract. b. T(e s(orta/es ,ere t(e res!t of c!e&er for/eries a"d co!!si&e frad t(at ,o!d "ot be detected b+ a"

e)ami"atio" made i" accorda"ce ,it( /e"era!!+ acce'ted aditi"/ sta"dards.c. Ka"e F *obbs ,ere "ot /i!t+ of eit(er /ross "e/!i/e"ce or frad.d. Ka"e F *obbs ,ere "ot a,are of t(e A'e)-;atso" sret+ re!atio"s(i'. #AICPA A*APTE*$

A"s,er0 B

5. Marti" Cor'oratio" ora!!+ e"/a/ed Hmm F *a,so" to adit its +ear-e"d fi"a"cia! stateme"ts. T(ee"/a/eme"t ,as to be com'!eted ,it(i" t,o mo"t(s after t(e c!ose of Marti"2s fisca! +ear for a fi)ed fee of

%6@@. U"der t(ese circmsta"ces% ,(at ob!i/atio" is assmed b+ Hmm F *a,so"itc( 'rc(ased stoc i" Mar). S(ort!+ t(ereafter% Mar) becamei"so!&e"t% casi"/ t(e 'rice of t(e stoc to dec!i"e drastica!!+. >itc( (as comme"ced !e/a! actio" a/ai"st *oefor dama/es based o" Sectio" 1@#b$ a"d R!e 1@b-6 of t(e Secrities E)c(a"/e Act of 1?45. *oe2s bestdefe"se to sc( a" actio" ,o!d be t(ata. >itc( !acs 'ri&it+ to se.

b. T(e e"/a/eme"t !etter s'ecifica!!+ disc!aimed a!! !iabi!it+ to t(ird 'arties.c. T(ere is "o 'roof of scie"ter.d. T(ere (as bee" "o sbsee"t sa!e for ,(ic( a !oss ca" be com'ted. #AICPA A*APTE*$

A"s,er0 C


13/30

:. Ha!! 'rc(ased bo"ds for Eo" Cor'. i" a 'b!ic offeri"/ sb3ect to t(e Secrities Act of 1?44. Kosso" a"dCo.% CPAs% re"dered a" "a!ified o'i"io" o" Eo"2s fi"a"cia! stateme"ts% ,(ic( ,ere i"c!ded i" Eo"2sre/istratio" stateme"t. Kosso" is bei"/ sed b+ Ha!! based o" misstateme"ts co"tai"ed i" t(e fi"a"cia!

stateme"ts. I" order to be sccessf!% Ha!! mst 'ro&e materia!it+ of Kosso"2s

Damages Misstatement Scienter a. Ges Ges Ges b. Ges Ges Noc. Ges No Nod. No Ges Ges #AICPA A*APTE*$

A"s,er0 B

=. 8e,is F C!ar% CPAs% re"dered a" "a!ified o'i"io" o" t(e fi"a"cia! stateme"ts of a com'a"+ t(at so!dcommo" stoc i" a 'b!ic offeri"/ sb3ect to t(e Secrities Act of 1?44. Based o" a fa!se stateme"t i" t(e

fi"a"cia! stateme"ts% 8e,is F C!ar are bei"/ sed b+ a" i"&estor ,(o 'rc(ased s(ares of t(is 'b!icofferi"/. ;(ic( of t(e fo!!o,i"/ re'rese"ts a &iab!e defe"se<a. T(e i"&estor (as "ot met t(e brde" of 'ro&i"/ frad or "e/!i/e"ce b+ 8e,is F C!ar. b. T(e i"&estor did "ot acta!!+ re!+ o" t(e fa!se stateme"t.c. *etectio" of t(e fa!se stateme"t b+ 8e,is F C!ar occrred after t(eir e)ami"atio" date.d. T(e fa!se stateme"t is immateria! i" t(e o&era!! co"te)t of t(e fi"a"cia! stateme"ts.


?. 9ibso" is si"/ Sim'so" F S!oa"% CPAs% to reco&er !osses i"crred i" co""ectio" ,it( 9ibso"2s tra"sactio"s i"ebra Cor'oratio" secrities. ebra2s A""a! >orm 1@-K Re'ort co"tai"ed materia! fa!se a"d mis!eadi"/stateme"ts i" t(e fi"a"cia! stateme"ts adited b+ Sim'so" F S!oa". To reco&er "der t(e Secrities a"d

E)c(a"/e Act of 1?45% 9ibso" mst% amo"/ ot(er t(i"/s% estab!is( t(ata. A!! of (is 'ast tra"sactio"s i" ebra secrities% bot( before a"d after t(e aditors2 re'ort date% res!ted i""et !osses.

b. T(e tra"sactio" i" ebra secrities t(at res!ted i" a !oss occrred ,it(i" ?@ da+s of t(e aditors2 re'ortdate.

c. He re!ied o" t(e fi"a"cia! stateme"ts i" (is decisio" to 'rc(ase or se!! ebra secrities.d. T(e maret 'rice of t(e stoc dro''ed si/"ifica"t!+ after ebra issed corrected fi"a"cia! stateme"ts.

#AICPAA*APTE*$

A"s,er0 C

1@. ;(ic( of t(e fo!!o,i"/ !timate!+ determi"es t(e s'ecific adit 'rocedres "ecessar+ to 'ro&ide a"i"de'e"de"t aditor ,it( a reaso"ab!e basis for t(e e)'ressio" of a" o'i"io"<a. T(e adit 'ro/ram. b. T(e aditor2s 3d/me"t.c. 9e"era!!+ acce'ted aditi"/ sta"dards.d. T(e aditor2s ,ori"/ 'a'ers. #AICPA A*APTE*$

A"s,er0 B

11. A" aditor ,(o be!ie&es t(at a materia! irre/!arit+ ma+ e)ist s(o!d i"itia!!+a. *iscss t(e matter ,it( t(ose be!ie&ed to be i"&o!&ed i" t(e 'er'etratio" of t(e materia! irre/!arit+. b. *iscss t(e matter ,it( a (i/(er !e&e! of ma"a/eme"t.c. ;it(dra, from t(e e"/a/eme"t.


14/30

d. Co"s!t !e/a! co"se!. #AICPA A*APTE*$

A"s,er0 B

1. ;(ic( of t(e fo!!o,i"/% if materia!% ,o!d be a" irre/!arit+<a. Mistaes i" t(e a''!icatio" of acco"ti"/ 'ri"ci'!es.

b. C!erica! mistaes i" t(e acco"ti"/ data "der!+i"/ t(e fi"a"cia! stateme"ts.c. Misa''ro'riatio" of a" asset or /ro's of assets.d. Misi"ter'retatio"s of facts t(at e)isted ,(e" t(e fi"a"cia! stateme"ts ,ere 're'ared.


14. ;(e" "ab!e to determi"e t(e amo"ts associated ,it( certai" i!!e/a! acts committed b+ a c!ie"t% t(e aditor,o!d most !ie!+ isse

a. A re&ie, o'i"io" ,it( a se'arate e)'!a"ator+ 'ara/ra'(. b. "!+ a" ad&erse o'i"io".c. Eit(er a a!ified o'i"io" or a" ad&erse o'i"io".d. Eit(er a a!ified o'i"io" or a disc!aimer of o'i"io". #AICPA A*APTE*$

A"s,er0 *

15. T(e aditor is most !ie!+ to 'resme t(at a (i/( ris of irre/!arities e)ists if a. T(e c!ie"t is a m!ti"atio"a! com'a"+ t(at does bsi"ess i" "meros forei/" co"tries. b. T(e c!ie"t does bsi"ess ,it( se&era! re!ated 'arties.c. I"adeate se/re/atio" of dties '!aces a" em'!o+ee i" a 'ositio" to 'er'etrate a"d co"cea! t(efts.d. I"adeate em'!o+ee trai"i"/ res!ts i" !e"/t(+ E*P e)ce'tio" re'orts eac( mo"t(.

#AICPAA*APTE*$

A"s,er0 C

16. A" aditor ,(o fi"ds t(at t(e c!ie"t (as committed a" i!!e/a! act ,o!d be most !ie!+ to ,it(dra, from t(ee"/a/eme"t ,(e" t(ea. I!!e/a! act affects t(e aditor2s abi!it+ to re!+ o" ma"a/eme"t re'rese"tatio"s. b. I!!e/a! act (as materia! fi"a"cia! stateme"t im'!icatio"s.c. I!!e/a! act (as recei&ed ,ides'read 'b!icit+.d. Aditor ca""ot reaso"ab!+ estimate t(e effect of t(e i!!e/a! act o" t(e fi"a"cia! stateme"ts.


17. A t(ird 'art+ ses a 'b!ic acco"ti"/ firm for "e/!i/e"ce "der commo" !a, o" t(e basis of materia!!+ fa!sefi"a"cia! stateme"ts. ;(ic( of t(e fo!!o,i"/ is t(e firm2s defe"se<a. 8ac of 'ri&it+. b. 8ac of re!ia"ce.c. 8ac of i"te"t.d. Co"tribtor+ "e/!i/e"ce. #AICPA A*APTE*$

A"s,er0 A

1:. Prc(asers of secrities (a&e bro/(t sit a/ai"st a" i"de'e"de"t aditor "der t(e Securities Act of 1933. T(e firm ,i!! 're&ai! i" t(e sit% e&e" t(o/( t(e firm issed a" "a!ified o'i"io" o" materia!!+misstated fi"a"cia! stateme"ts% if

a. T(e firm ,as "a,are of t(e materia! misstateme"ts. b. T(e 'rc(asers (ad "o direct dea!i"/s ,it( t(e aditor.c. T(e firm ca" s(o, t(at t(e 'rc(asers did "ot re!+ o" t(e fi"a"cia! stateme"ts.


15/30

d. T(e firm ca" s(o, t(at t(ere ,as "o i"te"t to decei&e or ma"i'!ate t(e 'rc(asers.#AICPA A*APTE*$

A"s,er0 C

1=. A" aditor is sb3ect to crimi"a! !iabi!it+ if (e or s(e

a. Refses to retr" a c!ie"t2s ,ori"/ 'a'ers. b. Performs a" adit "e/!i/e"t!+.c. ;i!!f!!+ omits a materia! fact reired to be stated i" a re/istratio" stateme"t.d. ;i!!f!!+ breac(es a co"tract ,it( a c!ie"t. #AICPA A*APTE*$

A"s,er0 C

1?. If a" i"de'e"de"t aditor be!ie&es t(at materia! errors or frad e)ist% (e or s(e s(o!da. Co"sider t(e im'!icatio"s a"d discss t(e matter ,it( a''ro'riate !e&e!s of ma"a/eme"t. b. Mae t(e i"&esti/atio" "ecessar+ to determi"e ,(et(er t(e errors or frad (a&e% i" fact% occrred.c. Reest t(at ma"a/eme"t i"&esti/ate ,(et(er t(e errors or frad (a&e% i" fact% occrred.d. Co"sider ,(et(er t(e errors or frad ,ere t(e res!t of a fai!re b+ em'!o+ees to com'!+ ,it( e)isti"/

i"ter"a! co"tro!s. #AICPA A*APTE*$

A"s,er0 A

@. *o"a!ds F Com'a"+% CPAs% adited t(e fi"a"cia! stateme"ts i"c!ded i" t(e a""a! re'ort sbmitted b+Marm I"dstries% I"c. to t(e Secrities a"d E)c(a"/e Commissio". T(e adit ,as deficie"t i" se&era!res'ects. Marm is "o, i"so!&e"t a"d "ab!e to satisf+ s(are(o!ders2 c!aims. T(e s(are(o!ders (a&e tae"!e/a! actio" a/ai"st *o"a!ds "der Sectio" 1@b a"d R!e 1@b6 of t(e Securities Exchange Act of 1934. ;(ic(of t(e fo!!o,i"/ is *o"a!ds2 best defe"se<a. *o"a!ds did "ot i"te"d to decei&e% ma"i'!ate% or defrad Marm2s s(are(o!ders. b. Sectio" 1@b does "ot a''!+.c. *o"a!ds ,as "ot i" 'ri&it+ to t(e s(are(o!ders.

d. T(e e"/a/eme"t !etter s'ecifica!!+ disc!aimed !iabi!it+ to a"+ t(ird 'art+. #AICPA A*APTE*$A"s,er0 A

Chapter / - *rofessional Auditing 0tandards and the Audit pinion Formulation *rocess

1. T(e reaso" a" i"de'e"de"t aditor /at(ers e&ide"ce is toa. >orm a" o'i"io" o" t(e fi"a"cia! stateme"ts. b. *etect frad.c. E&a!ate ma"a/eme"t.d. E&a!ate i"ter"a! co"tro!s. #AICPA A*APTE*$

A"s,er0 A

. T(e adit 'rocess isa. A s'ecia! a''!icatio" of t(e scie"tific met(od of i"ir+. b. Re/!ated b+ t(e AICPA.c. T(e o"!+ ser&ice a CPA is a!!o,ed to 'erform b+ !a,.d. Performed o"!+ b+ CPAs.

A"s,er0 A

4. ;(ic( of t(e fo!!o,i"/ (as (istorica!!+ (ad t(e !east i"f!e"ce o" t(e 'ractice of 'b!ic acco"ti"/<a. T(e 9o&er"me"ta! Acco"ti"/ Sta"dards Board.


16/30

b. T(e I"stitte of I"ter"a! Aditors.c. T(e Secrities a"d E)c(a"/e Commissio".d. T(e U.S. Co"/ress.

A"s,er0 *

5. ;(ic( of t(e fo!!o,i"/ "der!ies t(e a''!icatio" of /e"era!!+ acce'ted aditi"/ sta"dards% 'artic!ar!+ t(e

sta"dards of fie!d,or a"d re'orti"/


17/30

?. A" aditor (as bee" e"/a/ed to adit fi"a"cia! stateme"ts t(at ,ere 're'ared o" a cas( basis. T(e aditor

a. Mst ascertai" t(at t(ere is 'ro'er disc!osre of t(e fact t(at t(e cas( basis (as bee" sed% t(e /e"era!"atre of materia! items omitted% a"d t(e "et effect of t(e omissio"s. b. Ma+ "ot be associated ,it( stateme"ts t(at are "ot i" accorda"ce ,it( 9AAP.c. Mst re"der a a!ified re'ort e)'!ai"i"/ t(e de'artre from 9AAP i" t(e o'i"io" 'ara/ra'(.d. Mst restate t(e fi"a"cia! stateme"ts o" a" accra! basis a"d t(e" isse t(e sta"dard re'ort.


1@. o"es ,as e"/a/ed to adit t(e fi"a"cia! stateme"ts of 9amma Cor'oratio"% a "e 4@ +ear-e"d c!ie"t.Ha&i"/ com'!eted testi"/ of t(e i"&estme"t secrities% ,(ic( of t(e fo!!o,i"/ is t(e best met(od of &erif+i"/t(e accrac+ of recorded di&ide"d i"come<a. Traci"/ recorded di&ide"d i"come to cas( recei'ts records a"d &a!idated de'osit s!i's.

b. Uti!ii"/ a"a!+tica! re&ie, tec("ies a"d statistica! sam'!i"/.c. Com'ari"/ recorded di&ide"ds ,it( amo"ts a''eari"/ o" >edera! I"formatio" >orm 1@??.d. Com'ari"/ recorded di&ide"ds ,it( a sta"dard fi"a"cia! re'orti"/ ser&ice2s record of di&ide"ds.


11. As o"e of t(e +ear-e"d adit 'rocedres% t(e aditor i"strcted t(e c!ie"t2s 'erso""e! to 're'are a sta"dard ba" co"firmatio" reest for a ba" acco"t t(at (ad bee" c!osed dri"/ t(e +ear. After t(e c!ie"t2s treasrer(ad si/"ed t(e reest% it ,as mai!ed b+ t(e assista"t treasrer. ;(at is t(e ma3or f!a, i" t(is adit 'rocedre<a. T(e co"firmatio" reest ,as si/"ed b+ t(e treasrer. b. Se"di"/ t(e reest ,as mea"i"/!ess becase t(e acco"t ,as c!osed before t(e +ear-e"d.

c. T(e reest ,as mai!ed b+ t(e assista"t treasrer.d. T(e CPA did "ot si/" t(e co"firmatio" reest before it ,as mai!ed. #AICPA A*APTE*$

A"s,er0 C

1. ;(ic( of t(e fo!!o,i"/ stateme"ts best describes t(e 'rimar+ 'r'ose of Stateme"ts o" Aditi"/ Sta"dards<a. 9ides i"te"ded to set fort( aditi"/ 'rocedres t(at are a''!icab!e to a &ariet+ of sitatio"s. b. t!i"es i"te"ded to "arro, t(e areas of i"co"siste"c+ a"d di&er/e"ce of aditor o'i"io".c. At(oritati&e stateme"ts% e"forced t(ro/( t(e code of 'rofessio"a! co"dct% a"d i"te"ded to !imit t(e

de/ree of aditor 3d/me"t.d. I"ter'retatio"s i"te"ded to c!arif+ t(e mea"i"/ of genera!!" accepted auditing standards.

#AICPA A*APTE*$

A"s,er0 *

14. f t(e fo!!o,i"/% ,(ic( is t(e most efficie"t adit 'rocedre for testi"/ accred i"terest ear"ed o" bo"di"&estme"ts<

a. Traci"/ i"terest dec!aratio"s to a" i"de'e"de"t record boo. b. Recom'ti"/ i"terest ear"ed.c. Co"firmi"/ i"terest rate ,it( t(e isser of t(e bo"ds.d. oc(i"/ t(e recei't a"d de'osit of i"terest c(ecs. #AICPA A*APTE*$

A"s,er0 B


18/30

15. T(e adit 'rocedre of a"a!+i"/ t(e re'airs a"d mai"te"a"ce acco"ts is 'rimari!+ desi/"ed to 'ro&ide

e&ide"ce i" s''ort of t(e adit 'ro'ositio" t(at a!!

a. E)'e"ditres for '!a"t assets (a&e bee" recorded i" t(e 'ro'er 'eriod. b. Ca'ita! e)'e"ditres (a&e bee" 'ro'er!+ at(oried.c. No"ca'ita!iab!e e)'e"ditres (a&e bee" 'ro'er!+ e)'e"sed.d. E)'e"ditres for '!a"t assets (a&e bee" ca'ita!ied. #AICPA A*APTE*$

A"s,er0 *

16. A commo" adit 'rocedre i" t(e adit of 'a+ro!! tra"sactio"s i"&o!&es traci"/ se!ected items from t(e 'a+ro!! 3or"a! to em'!o+ee time cards t(at (a&e bee" a''ro&ed b+ s'er&isor+ 'erso""e!. T(is 'rocedre is desi/"edto 'ro&ide e&ide"ce i" s''ort of t(e adit 'ro'ositio" t(ata. "!+ bo"a fide em'!o+ees ,ored% a"d t(eir 'a+ ,as 'ro'er!+ com'ted. b. obs o" ,(ic( em'!o+ees ,ored ,ere c(ar/ed ,it( t(e a''ro'riate !abor cost.

c. I"ter"a! co"tro!s re!ati"/ to 'a+ro!! disbrseme"ts are o'erati"/ effecti&e!+.d. A!! em'!o+ees ,ored t(e "mber of (ors for ,(ic( t(eir 'a+ ,as com'ted.


17. Ta+!or Sa!es Cor'. mai"tai"s a !ar/e f!!-time i"ter"a! adit staff% ,(ic( re'orts direct!+ to t(e c(ief acco"ta"t. Adit re'orts 're'ared b+ t(e i"ter"a! aditors i"dicate t(at t(e s+stem is f"ctio"i"/ as its(o!d a"d t(at co"tro! ris is !o,. T(e i"de'e"de"t aditor ,i!! 'robab!+

a. E!imi"ate com'!ia"ce testi"/. b. I"crease tests of co"tro!s.c. A&oid d'!icati"/ t(e ,or 'erformed b+ t(e i"ter"a! adit staff.d. P!ace !imited re!ia"ce o" t(e ,or 'erformed b+ t(e i"ter"a! adit staff. #AICPA A*APTE*$

A"s,er0 *

1:. To &erif+ t(at a!! sa!es tra"sactio"s (a&e bee" recorded% a test of tra"sactio"s s(o!d be com'!eted o" are'rese"tati&e sam'!e dra," froma. E"tries i" t(e sa!es 3or"a!. b. T(e bi!!i"/ c!er2s fi!e of sa!es orders.c. A fi!e of d'!icate co'ies of sa!es i"&oices for ,(ic( a!! 're"mbered forms i" t(e series (a&e bee"

acco"ted.d. T(e s(i''i"/ c!er2s fi!e of d'!icate co'ies of s(i''i"/ docme"ts. #AICPA A*APTE*$

A"s,er0 *

1=. I" a fi"a"cia! stateme"t adit% t(e i"de'e"de"t aditor ,o!d "ot re!+ o" t(e ,or of a" i"ter"a! aditor i"a. btai"i"/ a" "dersta"di"/ of t(e i"ter"a! co"tro! strctre. b. Assessi"/ ris.c. *etermi"i"/ a 're!imi"ar+ estimate of materia!it+.d. Performi"/ sbsta"ti&e tests.

A"s,er0 C


19/30

1?. A" attor"e+ is res'o"di"/ to a" i"de'e"de"t aditor as a res!t of t(e adit c!ie"t2s !etter of i"ir+. T(eattor"e+ ma+ a''ro'riate!+ !imit t(e res'o"se to

a. Asserted c!aims a"d !iti/atio".

b. Matters to ,(ic( t(e attor"e+ (as /i&e" sbsta"ti&e atte"tio" i" t(e form of !e/a! co"s!tatio" orre'rese"tatio".c. Asserted% o&ert!+ t(reate"ed% or 'e"di"/ c!aims a"d !iti/atio".d. Items t(at (a&e a" e)treme!+ (i/( 'robabi!it+ of bei"/ reso!&ed to t(e c!ie"t2s detrime"t.

#AICPA A*APTE*$

A"s,er0 B

@. To stre"/t(e" co"tro! 'rocedres o&er t(e cstod+ of (ea&+ mobi!e ei'me"t% t(e c!ie"t ,o!d most !ie!+i"stitte a 'o!ic+ reiri"/ a 'eriodica. I"crease i" i"sra"ce co&era/e. b. I"s'ectio" of ei'me"t a"d reco"ci!iatio" ,it( acco"ti"/ records.c. erificatio" of !ie"s% '!ed/es% a"d co!!atera!iatio"s.

d. Acco"ti"/ for ,or orders. #AICPA A*APTE*$

A"s,er0 B

Chapter - A Frame3ork for Audit E#idence

1. f t(e fo!!o,i"/% ,(ic( is t(e !east 'ersasi&e t+'e of adit e&ide"ce<a. *ocme"ts mai!ed b+ otsiders to t(e aditor. b. Corres'o"de"ce bet,ee" aditor a"d &e"dors.c. Co'ies of sa!es i"&oices i"s'ected b+ t(e aditor.d. Com'tatio"s made b+ t(e aditor. #AICPA A*APTE*$

A"s,er0 C

. A"a!+tica! 'rocedres area. Sbsta"ti&e tests desi/"ed to e&a!ate a s+stem of i"ter"a! co"tro!. b. Tests of co"tro!s desi/"ed to e&a!ate t(e &a!idit+ of ma"a/eme"t2s re'rese"tatio" !etter.c. Sbsta"ti&e tests desi/"ed to e&a!ate t(e reaso"ab!e"ess of fi"a"cia! i"formatio".d. Tests of co"tro!s desi/"ed to e&a!ate t(e reaso"ab!e"ess of fi"a"cia! i"formatio".


4. ;(ic( of t(e fo!!o,i"/ best describes t(e 'rimar+ 'r'ose of adit 'rocedres<

a. To detect errors or irre/!arities. b. To com'!+ ,it( /e"era!!+ acce'ted acco"ti"/ 'ri"ci'!es.c. To /at(er corroborati&e e&ide"ce.d. To &erif+ t(e accrac+ of acco"t ba!a"ces. #AICPA A*APTE*$

A"s,er0 C

5. T(e 'rocedres s'ecifica!!+ ot!i"ed i" a" adit 'ro/ram are 'rimari!+ desi/"ed toa. Protect t(e aditor i" t(e e&e"t of !iti/atio". b. *etect errors or irre/!arities.c. Test i"ter"a! co"tro! strctre.d. 9at(er e&ide"ce. #AICPA A*APTE*$


20/30

A"s,er0 *

6. ;(ic( of t(e fo!!o,i"/ is ordi"ari!+ desi/"ed to detect 'ossib!e materia! do!!ar errors o" t(e fi"a"cia!stateme"ts<

a. Tests of co"tro!s. b. A"a!+tica! 'rocedres.

c. Com'ter co"tro!s.d. Post adit ,ori"/ 'a'er re&ie,. #AICPAA*APTE*$

A"s,er0 B

7. ;(ic( of t(e fo!!o,i"/ stateme"ts re!ati"/ to t(e com'ete"ce of e&ide"tia! matter is a!,a+s tre<a. E&ide"tia! matter /at(ered b+ a" aditor from otside a" e"ter'rise is re!iab!e. b. Acco"ti"/ data de&e!o'ed "der satisfactor+ co"ditio"s of i"ter"a! co"tro! are more re!e&a"t t(a" data

de&e!o'ed "der "satisfactor+ co"ditio"s.c. ra! re'rese"tatio"s made b+ ma"a/eme"t are "ot &a!id.d. E&ide"ce /at(ered b+ aditors mst be bot( &a!id a"d re!e&a"t to be co"sidered com'ete"t.


:. I" t(e co"te)t of a" adit of fi"a"cia! stateme"ts% sbsta"ti&e tests are adit 'rocedres t(ata. Ma+ be e!imi"ated "der certai" co"ditio"s. b. Are desi/"ed to disco&er si/"ifica"t sbsee"t e&e"ts.c. Ma+ be eit(er tests of tra"sactio"s% direct tests of fi"a"cia! ba!a"ces% or a"a!+tica! tests.d. ;i!! i"crease 'ro'ortio"ate!+ ,it( t(e aditor2s assessme"t of co"tro! ris.


=. ;(ic( of t(e fo!!o,i"/ e!eme"ts !timate!+ determi"es t(e s'ecific aditi"/ 'rocedres t(at are "ecessar+ i"

t(e circmsta"ces to afford a reaso"ab!e basis for a" o'i"io"


21/30

A"s,er0 A

11. ;(ic( of t(e fo!!o,i"/ is "ot a 'rimar+ 'r'ose of adit ,ori"/ 'a'ers<a. To coordi"ate t(e e)ami"atio". b. To assist i" 're'aratio" of t(e adit re'ort.

c. To s''ort t(e fi"a"cia! stateme"ts.d. To 'ro&ide e&ide"ce of t(e adit ,or 'erformed. #AICPA A*APTE*$

A"s,er0 C

1. T(e "dersta"di"/ bet,ee" t(e c!ie"t a"d t(e aditor as to t(e de/ree of res'o"sibi!it+ to be assmed b+ eac(is "orma!!+ set fort( i" a#"$

a. Re'rese"tatio" !etter. b. E"/a/eme"t !etter.c. Ma"a/eme"t !etter.d. Comfort !etter. #AICPA A*APTE*$

A"s,er0 B

14. Adit e&ide"ce taes differe"t forms a"d &aries i" 'ersasi&e"ess. ;(ic( of t(e fo!!o,i"/ is t(e !east 'ersasi&e t+'e of e&ide"ce<a. e"dor2s i"&oice. b. Ba" stateme"t obtai"ed from t(e c!ie"t.c. Com'tatio"s made b+ t(e aditor.d. Ca"ce!ed c(ecs. #AICPA A*APTE*$

A"s,er0 B

15. T(e fo!!o,i"/ stateme"ts ,ere made i" a discssio" of adit e&ide"ce b+ t,o i"de'e"de"t aditors. ;(ic(

stateme"t is "tre


22/30

A"s,er0 *

1:. T(e 'r'ose of tests of co"tro!s is to 'ro&ide reaso"ab!e assra"ce t(ata. T(e e)te"t of sbsta"ti&e testi"/ is mi"imied. b. E&ide"ce ,i!! be obtai"ed to determi"e a" assessed !e&e! of co"tro! ris.

c. Errors a"d irre/!arities are 're&e"ted or detected i" a time!+ ma""er.d. T(e aditor (as a" "dersta"di"/ of t(e co"tro! e"&iro"me"t. #AICPAA*APTE*$

A"s,er0 B

1=. A" aditor2s ,ori"/ 'a'ers s(o!da. Not be 'ermitted to ser&e as a refere"ce sorce for t(e c!ie"t. b. Not co"tai" comme"ts critica! of ma"a/eme"t.c. S(o, t(at t(e acco"ti"/ records a/ree or reco"ci!e ,it( t(e fi"a"cia! stateme"ts.d. Be co"sidered t(e 'rimar+ s''ort for t(e fi"a"cia! stateme"ts bei"/ adited.

#AICPA

A*APTE*$A"s,er0 C

1?. ;(ic( of t(e fo!!o,i"/ is "ot a factor affecti"/ t(e i"de'e"de"t aditor2s 3d/me"t abot t(e a"tit+% t+'e%a"d co"te"t of adit ,ori"/ 'a'ers<a. T(e "eeds for s'er&isio" a"d re&ie, of t(e ,or 'erformed b+ assista"ts. b. T(e "atre a"d co"ditio" of t(e c!ie"t2s records a"d i"ter"a! co"tro!s.c. T(e e)'ertise of c!ie"t 'erso""e! a"d t(eir 'artici'atio" i" 're'ari"/ sc(ed!es.d. T(e t+'e of t(e fi"a"cia! stateme"ts% sc(ed!es% or ot(er i"formatio" o" ,(ic( t(e aditor is re'orti"/.

#AICPA

A*APTE*$

A"s,er0 C

@. *ri"/ a" adit e"/a/eme"t% data are com'i!ed a"d i"c!ded i" t(e adit ,ori"/ 'a'ers. T(e ,ori"/ 'a'ersarea. A c!ie"t-o,"ed record of co"c!sio"s reac(ed b+ t(e aditors ,(o 'erformed t(e e"/a/eme"t. b. E&ide"ce s''orti"/ fi"a"cia! stateme"ts.c. S''ort for t(e aditor2s com'!ia"ce ,it( /e"era!!+ acce'ted aditi"/ sta"dards.d. A record to be sed as a basis for t(e fo!!o,i"/ +ear2s e"/a/eme"t. #AICPA A*APTE*$

A"s,er0 C

Chapter 4 - *lanning an Audit: Identifying and Responding to the Risk of aterial isstatement

1. *e 'rofessio"a! care reiresa A critica! re&ie, of t(e ,or do"e at e&er+ !e&e! of s'er&isio". b T(e e)ami"atio" of a!! corroborati"/ e&ide"ce a&ai!ab!e.c T(e e)ercise of error-free 3d/me"t.d A co"sideratio" of i"ter"a! co"tro! strctre t(at i"c!des tests of co"tro!s.


. T(e first /e"era! sta"dard reires t(at t(e adit of fi"a"cia! stateme"ts be 'erformed b+ a 'erso" or 'erso"s(a&i"/ adeate tec("ica! trai"i"/ a"da I"de'e"de"ce ,it( res'ect to t(e fi"a"cia! stateme"ts a"d s''!eme"tar+ disc!osres.


23/30

b E)ercisi"/ 'rofessio"a! care as 3d/ed b+ 'eer re&ie,ers.c Proficie"c+ as a" aditor% ,(ic( !ie!+ (as bee" acired from 're&ios e)'erie"ce.d b3ecti&it+ as a" aditor% as &erified b+ 'ro'er s'er&isio". #AICPA A*APTE*$

A"s,er0 C

4. A" aditor% ,(i!e 'erformi"/ a" adit% stri&es to ac(ie&e t(e a''eara"ce of i"de'e"de"ce i" order toa Redce ris a"d !iabi!it+. b Com'!+ ,it( t(e /e"era!!+ acce'ted sta"dards of fie!d,or.c Become i"de'e"de"t i" fact.d Mai"tai" 'b!ic co"fide"ce i" t(e 'rofessio". #AICPA A*APTE*$

A"s,er0 *

5. Adeate tec("ica! trai"i"/ a"d 'roficie"c+ as a" aditor e"com'asses a" abi!it+ to "dersta"d a com'ters+stem sfficie"t!+ to ide"tif+ a"d e&a!atea T(e 'rocessi"/ a"d im'arti"/ of i"formatio". b Esse"tia! acco"ti"/ co"tro! featres.

c A!! co"tro! 'rocedres.d T(e de/ree to ,(ic( 'ro/rammi"/ co"forms to t(e a''!icatio" of /e"era!!+ acce'ted acco"ti"/ 'ri"ci'!es. #AICPA A*APTE*$

A"s,er0 *

6. U!timate!+% t(e decisio" abot ,(et(er or "ot a" aditor is i"de'e"de"t mst be made b+ t(ea Aditor. b C!ie"t.c Adit committee.d Pb!ic. #AICPA A*APTE*$

A"s,er0 A

7. Madiso" Cor'oratio" (as a fe, !ar/e acco"ts recei&ab!e t(at tota! 1%@@@%@@@. Nassa Cor'oratio" (as a /reat"mber of sma!! acco"ts recei&ab!e t(at a!so tota! 1%@@@%@@@. T(e im'orta"ce of a" error i" a"+ o"e acco"tis% t(erefore% /reater for Madiso" t(a" for Nassa. T(is is a" e)am'!e of t(e aditor2s co"ce't of a Acco"t bias. b Adit ris.c Materia!it+.d Reaso"ab!e assra"ce. #AICPA A*APTE*$

A"s,er0 C

:. ;(ic( of t(e fo!!o,i"/ best describes ,(at is mea"t b+ /e"era!!+ acce'ted aditi"/ sta"dards<a Acts to be 'erformed b+ t(e aditor. b Measres of t(e a!it+ of a" aditor2s 'erforma"ce.c Procedres sed to /at(er e&ide"ce to s''ort fi"a"cia! stateme"ts.d Adit ob3ecti&es /e"era!!+ determi"ed o" adit e"/a/eme"ts. #AICPA A*APTE*$

A"s,er0 B

=. T(ere is a" i"&erse re!atio"s(i' bet,ee" t(e effecti&e"ess of a" e"tit+2s i"ter"a! co"tro! strctre a"d t(ea Re!iabi!it+ of fi"a"cia! stateme"ts. b E)te"t of detai!ed adit tests reired.c *e/ree of staff s'er&isio" reired i" t(e 'erforma"ce of a" adit.


24/30

d >air"ess of ma"a/eme"t assertio"s i" t(e fi"a"cia! stateme"ts.

A"s,er0 B

?. ;(ic( of t(e fo!!o,i"/ best describes t(e c(aracter of t(e t(ree /e"era!!+ acce'ted aditi"/ sta"dards

c!assified as /e"era! sta"dards


25/30

d Co"s!tatio". #AICPA A*APTE*$

A"s,er0 A

16. I" a fi"a"cia! stateme"t adit% adit ris re'rese"ts t(e 'robabi!it+ t(at

a I"ter"a! co"tro! fai!s a"d t(e fai!re is "ot detected b+ t(e aditor2s 'rocedres. b T(e aditor ""o,i"/!+ fai!s to modif+ a" o'i"io" o" materia!!+ misstated fi"a"cia! stateme"ts.c I"(ere"t a"d co"tro! ris case errors t(at co!d be materia! to t(e fi"a"cia! stateme"ts.d T(e aditor is "ot retai"ed to co"dct a fi"a"cia! stateme"t adit i" t(e scceedi"/ +ear.

A"s,er0 B

17. T(e D(a!!marD of aditi"/ isa A&ai!ab!e adit tec("o!o/+. b 9e"era!!+ acce'ted aditi"/ sta"dards.c Professio"a! 3d/me"t.d Materia!it+ a"d adit ris.

A"s,er0 C

1:. A" aditor is most !ie!+ to refer to o"e or more of t(e t(ree /e"era! aditi"/ sta"dards i" determi"i"/a T(e "atre of a re'ort a!ificatio". b T(e sco'e of aditi"/ 'rocedres.c Reireme"ts for t(e co"sideratio" of i"ter"a! co"tro!.d ;(et(er t(e aditor s(o!d "dertae a" adit e"/a/eme"t. #AICPA A*APTE*$

A"s,er0 *

1=. ;(ic( of t(e fo!!o,i"/ is ma"dator+ if t(e aditor is to com'!+ ,it( t(e /e"era! sta"dards of t(e AICPALs

/e"era!!+ acce'ted aditi"/ sta"dards


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A"s,er0 *

Chapter 5 - 0peciali6ed Audit Tools: 0ampling and "enerali6ed Audit 0oft3are

1. T(e a''!icatio" of statistica! sam'!i"/ tec("ies is !east re!ated to ,(ic( of t(e fo!!o,i"/ /e"era!!+ acce'tedaditi"/ sta"dards<

a. T(e ,or is to be adeate!+ '!a""ed% a"d assista"ts% if a"+% are to be 'ro'er!+ s'er&ised. b. I" a!! matters re!ati"/ to t(e assi/"me"t% i"de'e"de"ce i" me"ta! attitde is to be mai"tai"ed b+ t(e

aditor or aditors.c. A sfficie"t "dersta"di"/ of i"ter"a! co"tro! is to be obtai"ed to '!a" t(e adit a"d to determi"e t(e

"atre% timi"/% a"d e)te"t of tests to be 'erformed.d. Sfficie"t com'ete"t e&ide"tia! matter is to be obtai"ed t(ro/( i"s'ectio"% obser&atio"% i"iries% a"d

co"firmatio"s to afford a reaso"ab!e basis for a" o'i"io" abot t(e fi"a"cia! stateme"ts "der adit.

A"s,er0 B

. A" aditor '!a"s to test a sam'!e of @ c(ecs for co"ter si/"atres as 'rescribed b+ t(e c!ie"t2s co"tro! 'rocedres. "e of t(e c(ecs i" t(e c(ose" sam'!e of @ ca""ot be fo"d. T(e aditor s(o!d co"sider t(ereaso"s for t(is !imitatio" a"da. E&a!ate t(e res!ts as if t(e sam'!e sie (ad bee" 1?. b. Treat t(e missi"/ c(ec as a de&iatio" for t(e 'r'ose of e&a!ati"/ t(e sam'!e.c. Treat t(e missi"/ c(ec i" t(e same ma""er as t(e ma3orit+ of t(e ot(er 1? c(ecs% i.e.% co"tersi/"ed or

"ot.d. C(oose a"ot(er c(ec to re'!ace t(e missi"/ c(ec i" t(e sam'!e. #AICPA A*APTE*$

A"s,er0 B

4. T(e to!erab!e rate of de&iatio" for tests of co"tro!s "ecessar+ to 3stif+ a co"tro! ris assessme"t de'e"ds 'rimari!+ o" ,(ic( of t(e fo!!o,i"/<a. T(e case of errors. b. T(e e)te"t of re!ia"ce to be '!aced o" t(e 'rocedres.c. T(e amo"t of a"+ sbsta"ti&e errors.d. T(e !imit sed i" adits of simi!ar c!ie"ts. #AICPA A*APTE*$

A"s,er0 B

5. ;(ic( of t(e fo!!o,i"/ sam'!i"/ met(ods is most sef! to aditors ,(e" 'erformi"/ tests of co"tro!s<a. *isco&er+ sam'!i"/. b. Attribte estimatio".c. ariab!e sam'!i"/.d. U"restricted ra"dom sam'!i"/ ,it( re'!aceme"t. #AICPA A*APTE*$

A"s,er0 B

6. A" "der!+i"/ featre of ra"dom sam'!i"/ is t(at eac(a. Stratm of t(e acco"ti"/ 'o'!atio" be /i&e" ea! re'rese"tatio" i" t(e sam'!e. b. Item i" t(e acco"ti"/ 'o'!atio" be ra"dom!+ ordered.c. Item i" t(e acco"ti"/ 'o'!atio" s(o!d (a&e a" o''ort"it+ to be se!ected.d. Item mst be s+stematica!!+ se!ected si"/ re'!aceme"t. #AICPA A*APTE*$

A"s,er0 C


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7. 9i&e" ra"dom sam'!i"/% t(e same sam'!e sie% a"d t(e same to!erab!e error for t(e testi"/ of t,o "ea!

'o'!atio"s% t(e ris of assessi"/ co"tro! ris too !o, o" t(e sma!!er 'o'!atio" isa. T(e same as t(e ris of assessi"/ co"tro! ris too !o, o" t(e !ar/er 'o'!atio". b. Hi/(er t(a" t(e ris of assessi"/ co"tro! ris too !o, o" t(e !ar/er 'o'!atio".c. 8o,er t(a" t(e ris of assessi"/ co"tro! ris too !o, o" t(e !ar/er 'o'!atio".d. I"determi"ab!e re!ati&e to t(e ris of assessi"/ co"tro! ris too !o, o" t(e !ar/er 'o'!atio".


:. At times% a sam'!e ma+ i"dicate t(at t(e aditor2s assessed !e&e! of co"tro! ris for a /i&e" co"tro! is reaso"ab!e,(e"% i" fact% t(e tre com'!ia"ce rate does "ot 3stif+ t(e assessed !e&e!. T(is sitatio" i!!strates t(e ris of a. Assessi"/ co"tro! ris too !o,. b. Assessi"/ co"tro! ris too (i/(.

c. I"correct 'recisio".d. I"correct re3ectio". #AICPA A*APTE*$

A"s,er0 A

=. ;(ic( of t(e fo!!o,i"/ is a" e!eme"t of sam'!i"/ ris<a. C(oosi"/ a" adit 'rocedre t(at is i"co"siste"t ,it( t(e adit ob3ecti&e. b. C(oosi"/ a sam'!e sie t(at is too sma!! to ac(ie&e t(e sam'!i"/ ob3ecti&e.c. >ai!i"/ to detect a" error o" a docme"t t(at (as bee" i"s'ected b+ t(e aditor.d. >ai!i"/ to 'erform adit 'rocedres t(at are reired b+ t(e sam'!i"/ '!a".


?. A" aditor e)ami"i"/ i"&e"tor+ ma+ a''ro'riate!+ a''!+ sam'!i"/ for attribtes i" order to estimate t(ea. A&era/e 'rice of i"&e"tor+ items. b. Perce"ta/e of s!o,-mo&i"/ i"&e"tor+ items.c. *o!!ar &a!e of i"&e"tor+.d. P(+sica! a"tit+ of i"&e"tor+ items. #AICPA A*APTE*$

A"s,er0 B

1@. T(e to!erab!e rate of de&iatio"s for a test of co"tro!s is /e"era!!+a. 8o,er t(a" t(e e)'ected rate of errors i" t(e re!ated acco"ti"/ 'o'!atio". b. Hi/(er t(a" t(e e)'ected rate of errors i" t(e re!ated acco"ti"/ records.c. Ide"tica! to t(e e)'ected rate of errors i" t(e re!ated acco"ti"/ records.d. U"re!ated to t(e e)'ected rate of errors i" t(e re!ated acco"ti"/ records. #AICPA A*APTE*$

A"s,er0 B

11. I" com'ariso" ,it( 'robabi!it+-'ro'ortio"a!-to-sie #PPS$ sam'!i"/% ,(ic( of t(e fo!!o,i"/ is a" ad&a"ta/eof c!assica! &ariab!es sam'!i"/ i" aditi"/<

a. If "o errors are e)'ected% c!assica! &ariab!es sam'!i"/ sa!!+ res!ts i" a sma!!er sam'!e sie t(a" PPSsam'!i"/.

b. A c!assica! &ariab!es sam'!e ca" be desi/"ed more easi!+ a"d sam'!e se!ectio" ca" be/i" before t(ecom'!ete 'o'!atio" is a&ai!ab!e.


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c. If t(ere are ma"+ i"di&ida! differe"ces bet,ee" recorded a"d adited amo"ts i" t(e 'o'!atio"%c!assica! &ariab!es sam'!i"/ ma+ res!t i" a sma!!er sam'!e sie.

d. C!assica! &ariab!es sam'!i"/ atomatica!!+ res!ts i" a stratified sam'!e becase items are se!ected i" 'ro'ortio" to t(eir do!!ar amo"ts.

A"s,er0 C

1. I" assessi"/ t(e ris of i"correct acce'ta"ce% a" aditor s(o!d co"sider eac( of t(e fo!!o,i"/ e)ce'ta. Adit ris. b. T(e ris t(at i"ter"a! co"tro! strctre fai!s to detect materia! errors t(at occr.c. To!erab!e error.d. T(e ris t(at a"a!+tica! 'rocedres a"d ot(er tests fai! to detect materia! errors t(at occr a"d t(at are "ot

detected b+ i"ter"a! co"tro!.

A"s,er0 C

14. A" aditor is e&a!ati"/ t(e res!ts of a &ariab!es sam'!i"/ '!a". ;(ic( of t(e fo!!o,i"/ is "ot re!e&a"t to t(eaditor2s 3d/me"t abot t(e sam'!e<a. Ma"a/eme"t2s e)'!a"atio"s for ,(+ errors i" t(e sam'!e occrred.

b. Pro3ecti"/ t(e sam'!e error to t(e 'o'!atio".c. Co"sideri"/ t(e effects of sam'!i"/ ris.d. Qa!itati&e i"formatio" t(at !e"ds i"si/(t i"to errors fo"d.

A"s,er0 A

15. I" com'ariso" ,it( c!assica! &ariab!es sam'!i"/% ,(ic( of t(e fo!!o,i"/ is a" ad&a"ta/e of 'robabi!it+- 'ro'ortio"a!-to-sie #PPS$ sam'!i"/<

a. PPS sam'!i"/ atomatica!!+ res!ts i" a stratified sam'!e. b. PPS sam'!i"/ res!ts i" a sma!!er sam'!e sie if ma"+ differe"ces are e)'ected bet,ee" adited a"d

recorded amo"ts.c. PPS sam'!i"/ is 'artic!ar!+ a''ro'riate ,(e" "derstateme"t errors are e)'ected.

d. PPS sam'!i"/ is !ess !ie!+ to o&erstate t(e a!!o,a"ce for sam'!i"/ ris ,(e" errors are fo"d i" t(esam'!e.

A"s,er0 A

16. A" aditor is a''!+i"/ 'robabi!it+-'ro'ortio"a!-to-sie #PPS$ sam'!i"/. I" determi"i"/ sam'!e sie% ,(ic( of t(e fo!!o,i"/ is "ot "ecessar+<

a. A re!iabi!it+ factor for o&erstateme"t errors. b. A re!iabi!it+ factor for "derstateme"t errors.c. To!erab!e error.d. A"tici'ated error.

A"s,er0 B

17. Probabi!it+-'ro'ortio"a!-to-sie #PPS$ sam'!i"/ is most a''ro'riate ,(e"a. T(e aditor a"tici'ates "derstateme"t errors. b. T(e aditor a"tici'ates o&erstateme"t errors.c. T(e aditor e)'ects "o errors.d. T(e aditor (as assessed co"tro! ris at t(e ma)imm.

A"s,er0 C

1:. ;(ic( of t(e fo!!o,i"/ sam'!i"/ met(ods co!d be desi/"ed to estimate t(e do!!ar &a!e of a" adit 'o'!atio"


29/30

a. Sam'!i"/ for &ariab!es. b. Sam'!i"/ for attribtes.c. *isco&er+ sam'!i"/.d. Probabi!it+-'ro'ortio"a!-to-sie sam'!i"/. #AICPA A*APTE*$

A"s,er0 A

1=. ;(ic( of t(e fo!!o,i"/ stateme"ts is correct abot statistica! sam'!i"/


30/30

A"s,er0 C

audit mcqs ricchiute test bank

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