You are on page 1of 4

Auditing Theory

1. A control which relates to all parts of the EDP system is called a(n) a. Systems control c. Applications control b. General control d. Universal control 2. Which of the following is not an output control? a. Proper authorization of transaction b. Control totals c. Check digits d. Adequate documents 3. Should the auditor feel, after obtaining an understanding of the EDP internal control structure, that control risk cannot be reduced, he or she will a. Issue a disclaimer b. Issue an adverse opinion c. Increase the sample size for tests of controls d. Expand the substantive testing portion of the audit 4. The real-time feature normally would be least useful when applied to accounting for a firms a. Bank-account balances b. Property and depreciation c. Customer accounts receivable d. Merchandise inventory 5. A sample in which the characteristics in the sample are the same as those of the population is a a. Random sample c. Attributes sample b. Variables sample d. Representative sample 6. Establishing a route through the random number table a. Is an arbitrary decision b. Needs to be done in advance of choosing the numbers c. Is essential and the route must be followed consistently d. Requires that all three of the above is true 7. When an auditor goes through a population and selects items for the sample without regard to their size, source, or other distinguishing characteristics, it is called a. Block selection b. Haphazard selection c. Systematic selection

d. Statistical selection 8. Which of the following may be used to reduce the risk of non sampling errors? a. Increasing the size of audit samples b. Stratifying audit samples c. Adequately planning audit samples d. Using statistical sampling techniques 9. A number of factors influences the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to larger sample size? a. Greater reliance on internal control b. c. Smaller reliance o analytical procedures d. Smaller measures of tolerable misstatement 10. Fraudulent financial reporting is often called a. Management fraud c. Defalcation b. Theft of assets d. Employee fraud 11. The most important general ledger account included in and affecting several cycles is the a. General cash account c. Income tax expense ad liability accounts b. Inventory accounts d. Retained earnings account 12. In testing for cut-off , the objective is to determine a. Whether all of the current periods transactions are recorded b. That no transactions from the prior period are included in the current periods balances c. That no transactions of the curret period have been delayed and recorded in the future period. d. Whether transactions are recorded in the proper period. 13. The primary difference between an audit of the balance sheet and an audit of the income statement lies in the fact that the audit of the income statement deals with the verification of a. Transactions c. Costs b. Authorization d. Cutoffs 14. Documentation is a form of evidence a. Used in every financial statement audit b. Used in most financial statement audit c. Used o the rate occasions when it is both readily available ad less costly than other procedures d. Used when nothing is available that is more competent

15. The current file of the auditors working papers generally should include a. a flowchart of internal controls b. organization charts c. a copy of the financial statements d. copies of bond and note indentures 16. An audit working paper that reflects the major components of an amount reported in the financial statements is referred to as(an) a. Lead schedule c. Audit control schedule b. Supporting schedule d. Working trial balance 17. The major reason an independent auditor gathers audit evidence is to a. Form an opinion on the financial statements b. Detect fraud c. Evaluate management d. Evaluate internal control 18. An auditor most likely would analyze inventory turnover rates to obtain evidence concerning managements assertions about a. Existence or occurrence b. Rights and obligations c. Presentation and disclosure d. Valuation and allocation 19. To which type of the following matters would materiality limits not apply when obtaining client representations? a. Losses from sales commitments. b. Unasserted claims and assessments c. Irregularities involving management d. Noncompliance with contractual agreements 20. Which of the following procedures is more likely to be performed i a review engagement of a non-public entity that i n a compilation engagement? a. Gaining an understading of the entitys business transactions b. Making a preliminary assessment of control risk c. Obtaining a representation letter from the chief executive officer d. Assisting the entity i adjusting the accounting records

21. In auditing accounts payable, an auditors procedures most likely would focus primarily o managements assertion of a. Existence or occurrence

b. Presentation and disclosure c. Completeness d. Valuation or allocation 22. Before goods are shipped on account, a properly authorized person must a. Prepare the sales invoice b. Approve the journal entry

You might also like