81) The assessment of inherent risk requires considering matters that have a pervasive effect on assertions for all or many accounts and matters that may pertain only to assertions for specific accounts. Which of the following is an example of a pervasive effects matter?
A.
Complexity of calculations
B.
Management turnover, reputation, and accounting skills
C.
Susceptibility to misappropriation
D.
Sensitivity of operating results to economic factors
82) Specific audit objectives are normally
A.
the same as the categories of management’s financial statement assertions
B.
developed for each item in the financial statements and derived from the categories of management’s financial statement assertions
C.
management’s assertion of fairness.
D.
broken down into eight types.
83) The Committee of Sponsoring Organizations (COSO) report identified five interrelated components of internal control. Since then, a sixth category has been identified, which is
A.
monitoring
B.
risk assessment
C.
information and communication
D.
antifraud programs and controls
84) Which of the following necessary controls would address a potential misstatement arising from a voucher being paid twice?
A.
Periodic independent bank reconciliations
B.
Electronic cancellation of vouchers and supporting information when a check is issued
C.
Separate duties for approving payment vouchers and signing checks
D.
A computer comparing the sum of checks issued with the entry to cash disbursements
85) An effective accounting system should identify and record only the valid transaction of the entity that occurred in the current period, which relates to the
A.
rights and obligations assertion
B.
presentation and disclosure assertion
C.
valuation or allocation assertion
D.
existence or occurrence assertion
86) One of the six steps involved in performing analytical procedures includes the following:
A.
Understand the role of analytical procedures in planning and performing the audit.
B.
Understand the relationship between materiality and audit evidence.
C.
Analyze data and identify significant differences.
D.
Perform the calculations using industry data.
87) In a normal audit, the relationship between the level of materiality used to plan the engagement and the level of materiality used to evaluate evidence is that
A.
they must be identical
B.
the former may be higher or lower than the latter
C.
the former is higher than the latter
D.
the former is lower than the latter
88) Use of auditor judgment or of a risk matrix is necessary in revising planned detection risk whenever
A.
risk assessments are not quantified
B.
assessed control risk at the account balance level does not support the planned level of control risk
C.
control risk is assessed above the minimum
D.
control risk is assessed below the maximum
89) In the audit risk model, audit sampling applies to
A.
detection risk
B.
inherent risk and control risk
C.
control risk and detection risk
D.
inherent risk and detection risk
90) Audit sampling is involved whenever an auditor
A.
examines 100% of the population
B.
makes an inference about a population characteristic based on a partial examination of that population
C.
performs tests of controls
D.
performs tests of details
91) How can long-term assets best be tested for ownership?
A.
Examining documents of title
B.
Reviewing the ledger to ensure the item is listed
C.
Inquiring with management
D.
Reviewing prior year workpapers
92) How can long-term assets best be tested for current present value?
A.
Reviewing the depreciation schedule for accuracy and completeness
B.
Physically examining the assets and appraising the assets
C.
Applying time value of money analysis
D.
Performing an analytical review
93) Because of the effects of circulation, some audit evidence is more reliable than other evidence. Which of the following is generally considered to be most reliable?
A.
Purchase requisitions
B.
Suppliers’ invoices
C.
Receipted bank deposit slips
D.
Cutoff bank statements
94) Which of the following accounts in a merchandising company is affected by both the revenue cycle and another cycle?
A.
Sales
B.
Sales returns and allowances
C.
Inventory
D.
Accounts receivable
95) The auditor’s strategy in performing test counts during the inventory observation is to
A.
concentrate tests on high-dollar items and take a representative sample of other items
B.
test all high dollar items
C.
randomly select all test items
D.
concentrate tests in areas where employees seem to be disregarding the inventory instructions
96) Which one of the following analytical procedures may indicate possible inventory obsolescence problems when ratios are large?
A.
Inventory turnover
B.
Finished goods produced to raw material used
C.
Inventory growth to cost of sales growth
D.
Finished goods produced to direct labor
97) The control of all funds during the count of cash on hand is meant primarily to prevent
A.
transfers by the client
B.
any chance of double counting
C.
unauthorized disbursements
D.
client personnel from viewing the count procedure
98) Whether the entity maintains effective controls to provide reasonable assurance that private customer information obtained because of e-commerce is protected is defined as
A.
transaction integrity
B.
information protection
C.
risk assessment
D.
performance measurement
99) A lawyer’s refusal to respond to a letter of audit inquiry normally requires the auditor to
A.
issue a qualified opinion or a disclaimer of opinion
B.
issue an unqualified opinion with an explanatory paragraph
C.
issue a qualified or adverse opinion
D.
issue a standard three-paragraph unqualified opinion
100) Which of the following is a tort?
A.
Breach of contract
B.
A wrongful act that does not injure another person’s property, body, or reputation
C.
Gross negligence
D.
Unintentional error where appropriate degree of care was exercised and no one was injured
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