Answer Sheet

Students ID NO. ____________________

Students Name ____________________
PART A: Multiple choice questions ( 30 points)
1
2
3
4
5

PART B: Translation (40 points)

1
2

10

10

11

12

13

14

15

16

17

18

19

20

PART C: Problem ( 30 points)

1. ( 10 points)
a.
b.

c.

d.

e.

2. ( 10 points)
(1)

(2)

(3)

(4)

(5)

3. ( 10 points)
(1)

(2)

(3)

(4)

(5)

A: The final exam Auditing 2010.1.21 9:10 A.M. ~ 10:00A.M.

PART A: Multiple choice questions (30 points)
( )1. An independent audit aids in the communication of economic data because the audit
(1) confirms the accuracy of management's financial representations. (2) assures the
readers of financial statements that any fraudulent activity has been corrected. (3)
guarantees that financial data are fairly presented. (4) lends credibility to the financial
statements.
( )2. Which of the following statements describes why a properly designed and executed
audit may not detect a material misstatement in the financial statements resulting from
fraud?
(1) The factors considered in assessing control risk indicated an increased risk of
intentional misstatements, but only a low risk of unintentional misstatements.
(2) An audit is designed to provide reasonable assurance of detecting material errors, but
there is no similar responsibility concerning fraud.
(3) Audit procedures that are effective for detecting unintentional misstatements may be
ineffective for an intentional misstatement that is concealed through collusion.
(4) The auditor did not consider factors influencing audit risk for account balances that
have effects pervasive to the financial statements taken as a whole.
( )3. The most reliable type of audit evidence that an auditor can obtain is
(1) physical examination by the auditor. (2) calculations by the auditor from company
records. (3) confirmations received directly from third parties. (4) external documents.
( )4. During an audit engagement, pertinent data are compiled and included in the audit files.
The audit files primarily are considered to be
(1) a client-owned record of conclusions reached by the auditors who performed the
engagement. (2) support for the auditor's representations as to compliance with generally
accepted auditing standards. (3) evidence supporting financial statements. (4) a record to
be used as a basis for the following year's engagement.
( )5. The permanent file of an auditors working papers most likely would include copies of
the (1) lead schedule. (2) attorneys letters. (3) debt agreements. (4) bank statements.
( )6. Which of the following will most likely indicate the existence of related parties?
(1) Writing down obsolete inventory prior to year end. (2) Borrowing money at a rate
significantly below the market rate. (3) An unexplained increase in gross margin.
(4) Failing to correct weaknesses in the clients internal control.
( )7. Although the quantity, type, and content of audit documentation will vary with the
circumstances, audit documentation generally would include the
(1) copies of those client records examined by the auditor during the course of the
engagement. (2) evaluation of the efficiency and competence of the audit staff assistants
by the partner responsible for the audit. (3) auditor's comments concerning the efficiency
and competence of client management personnel. (4) auditing procedures followed and
the testing performed in obtaining evidential matter.
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( )8. When using the work of a specialist, the auditor may indentify and refer to the
specialist in the auditors report if the (1) auditor expresses a qualified opinion as a result
of the specialists findings. (2) specialist is not independent of the client. (3) auditor
wishes to indicate a division of responsibility. (4) specialists work provides the auditor
greater assurance of reliability.
( )9. When approached to perform an audit for the first time, the CPA should make inquiries
of the predecessor auditor. This is a necessary procedure because the predecessor maybe
able to provide the successor with information that will assist the successor in
determining whether (1) the predecessor's work should be used. (2) the company
follows the policy of rotating its auditors. (3) in the predecessors opinion internal control
of the company has been satisfactory. (4) the engagement should be accepted.
( )10. Analytical procedures used in planning an audit should focus on identifying
(1) material weaknesses of internal control. (2) the predictability of financial data from
individual transactions. (3) areas that may represent specific risks relevant to the audit.
(4) the various assertions that are embodied in the financial statements.
PART B: Translation into Chinese about the following items ( 40 points)
1. Substantive tests of transactions. 2. Test of controls. 3.Illegal acts. 4. Management
assertions. 5. Misappropriation of assets 6. Cycle approach 7. Fraud 8. Relevant assertions.
9. Appropriateness of evidence 10. Audit procedure. 11. Permanent files. 12. Tick marks.
13. Confirmation. 14. Vouching. 15. Observation. 16.Engagement letter
17. Related party. 18. Audit strategy. 19. Inherent risk. 20. Acceptable audit risk.
PART C: Problem ( 30 points)
1. The following (1 through 18) are the balance-related, transaction-related, and presentation
and disclosure related audit objectives.
Balance-Related Transaction-Related
Presentation and disclosure
Audit Objectives
Audit Objectives
Audit Objectives
(1). Existence
(9). Occurrence
(15). Occurrence and rights
(2). Completeness (10). Completeness
(16). Completeness
(3). Accuracy
(11). Accuracy
(17). Accuracy and valuation
(4). Classification (12). Classification
(18). Classification and
(5). Cutoff
(13). Timing
understandability
(6). Detail tie-in
(14). Posting and summarization
(7). Realizable value
(8). Rights and obligations
Required: Identify the specific audit objective (1-18) that each of the following specific
audit procedures (a. through e.) satisfies in the audit of sales, accounts receivable
and cash receipts for fiscal year ended December 31, 2009.
a. Examine a sample of duplicate sales invoices to determine whether each one has a
shipping document attached.

b. Inquire of the client whether any accounts receivable balances have been pledged as
collateral on long-term debt and determine whether all required information is included in
the footnote description for long-term debt.
c. For a sample of shipping documents selected from shipping records, trace each shipping
document to a transaction recorded in the sales journal.
d. Discuss with credit department personnel the likelihood of collection of all accounts as of
December 31, 2009 with a balance greater than $100,000 and greater than 90 days old as of
year end.
e. Examine sales invoices for the last five sales transactions recorded in the sales journal in
2009 and examine shipping documents to determine they are recorded in the correct
period.
2. Following are 5 audit procedures with words missing and a list of several terms commonly
used in audit procedures.
Audit Procedures
(1).
the ration of cost of goods sold to sales and compare the ratio to previous years.
(2).
the sales journal, looking for large and unusual transactions requiring investigation.
(3).
all marketable securities as of the balance sheet date to determine whether they equal
the total on the clients list.
(4).
the unit selling price times quantity on the duplicate sales invoice and compare the
total to the amount on the duplicate sales invoice.
(5).
the agreement between Johnson Wholesale Company and the client to determine
whether the shipment is a sale or a consignment.
Terms : a. Examine b. Scan c. Read d. Compute e. Recompute f. Foot g. Trace h.
Compare i. Count j. Observe k. Inquire l. Confirm.
Required : For each of the 5 blanks in procedures (1) through (5), identify the most
appropriate term. No term can be used more than once.
3.The following are various activities an auditor does during audit planning.
(1). Send an engagement letter to the client.
(2). Compare key ratios for the company to industry competitors.
(3). Review managements risk management controls and procedures.
(4). Identify potential related parties that may require disclosure.
(5). Determine the likely users of the financial statements.
Required : For each procedure, indicate which of the first four parts of audit planning the
procedure primarily relates to: (1) accept client and perform initial audit planning;
(2) understand the clients business and industry; (3) assess client business risk;
(4) perform preliminary analytical procedures.
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