Multiple Choice 1. An audit that involves obtaining and evaluating evidence about the efficiency and effectiveness of an entity’s operating activities in relation to specified objectives is a(n): a....

1 answer below »










































































































































Multiple Choice



1.
An audit that involves obtaining and evaluating evidence about the efficiency and effectiveness of an entity’s operating activities in relation to specified objectives is a(n):
a.internal audit.
b.external audit.
c.operational audit.
d.compliance audit.
e.financial statement audit.

2.
An audit that involves obtaining and evaluating evidence in order to determine whether certain financial or operating activities of an entity conform to specified conditions, rules, or regulations is a(n):
a.internal audit.
b.external audit.
c.operational audit.
d.compliance audit.
e.financial statement audit.

3.
Which one of the following statements is not true of the AICPA?
a.It is public accounting’s national professional organization.
b.Membership is mandatory for all CPA firms who practice in more than one state.
c.It operates through a number of divisions.
d.Its publications include the
Journal of Accountancy.
e.It provides a broad range of services to members.

4.
State accountancy laws are administered by:
a.state boards.
b.state societies.
c.the AICPA.
d.the SEC.
e.the GAO.



































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































5.What level of assurance does the reader of a private company financial statement receive on the company’s system of internal controls?
a.positive assurance
b.reasonable assurance
c.negative assurance
d.no assurance
e.limited assurance

6.
How many different opinions must an auditor of a publicly held company issue?
a.1
b.2
c.3
d.4
e.5
7.There are several paragraphs included in the auditor’s standard report in internal control over financial reporting. Which paragraph defines internal control over financial reporting?
a.introductory paragraph
b.scope paragraph
c.inherent limitations paragraph
d.definition paragraph
e.explanatory paragraph

8.
Statements on auditing standards (SAS’s) are interpretations of?
a.generally accepted auditing standards
b.generally accepted accounting principles
c.generally accepted accounting policies
d.generally accepted auditing services
e.AICPA code of professional conduct
9.Auditing is based on the assumption that financial data are verifiable. Data are verifiable when two or more qualified individuals,
a.working together, can prove, beyond doubt, the accuracy of the data.
b.working independently, each reach essentially similar conclusions.
c.working independently, can prove, beyond reasonable doubt, the truthfulness of the data.
d.working together, can agree upon the accuracy of the data.
e.working together, each reach essentially similar conclusions.
10.Which one of the following assertions is not made by management in placing an item in the financial statements?
a.existence or occurrence
b.direct controls
c.rights and obligations
d.presentation and disclosure
e.completeness
11.If reported sales for 20X0 erroneously include sales that occurred in 20X1, the assertion violated on the 20X0 statements would be:
a.existence or occurrence
b.completeness
c.valuation or allocation.
d.presentation and disclosure
e.rights and obligations




12.
The completeness assertion would be violated if:
a.fictitious sales transactions were included in accounts receivable.
b.the allowance for doubtful accounts was understated.
c.unbilled shipments had occurred during the period.
d.disclosure in the statements of pledged receivables was inadequate.
e.the balance of accounts payable was overstated.


13.
The rights and obligations assertion applies to:
a.current liability items only.
b.revenue and expense items only.
c.both income statement and balance sheet items.
d.assets that are not owned by the company.
e.balance sheet items only.

14.
Determining whether amounts are in conformity with GAAP addresses the proper measurement of assets, liabilities, revenues, and expenses which includes all of the following except:
a.the reasonableness of management’s accounting estimates.
b.proper application of valuation principles such as cost, net reliable value, market value, and present value.
c.consistency in the application of accounting principles.
d.the reasonableness of management’s accounting policies.
e.proper application of the matching principle.

15.
Choices about audit evidence are influenced by all of the following except:
a.the auditor’s understanding of the business and industry.
b.decisions about inherent risk and control risk.
c.comparisons of the auditor’s expectations of the financial statements with the client’s books and records.
d.decisions about immaterial risk factors.
e.decisions about assertions that are material to the financial statements.

16.
Accounting records generally include:
a.contracts.
b.minutes of meetings.
c.internal control manuals.
d.confirmations from third parties.
e.Analysts’ reports
17.When planning the audit, the auditor must make the following important decisions except the:
a.assignment of staff to perform audit tests.
b.nature of tests to be performed.
c.characteristics of tests to be performed.
d.extent of tests to be performed.
e.timing of tests to be performed.




18.
The five management assertions outlined in generally accepted auditing standards include all of the following except:
a.rights and obligations.
b.materiality.
c.existence and occurrence.
d.presentation and disclosure.
e.valuation or allocation.

19.
With respect to audit objectives, the term
validity
relates to which of the assertions below?
a.existence and occurrence
b.Completeness
c.valuation or allocation
d.presentation and disclosure
e.rights and obligations

20.
Knowledge of an entity’s financial reporting activities includes understanding such matters as the entity’s:
a.acquisitions, mergers, and disposals of business activities.
b.revenue recognition practices.
c.debt structure
d.use of information technology.
e.products, services and markets.
21.Knowledge of external factors affecting an entity’s business is necessary when planning an audit. Which of the following factors would least likely be considered an external factor:
a.interest rates.
b.market demand.
c.Inflation.
d.industry-specific accounting practices.
e.related party transactions.

22.
Which of the following items is not one of the seven key steps in performing risk assessment procedures?
a.Develop preliminary audit strategies for significant assertions.
b.Consider audit risk, including the risk of fraud.
c.Test the entity’s system of internal control.
d.Make preliminary judgments about materiality.
e.Obtain an understanding of the entity and its environment.

23.
The third phase of the audit involves performing audit tests. The primary purpose of this step is to obtain evidence about:
a.the integrity of management.
b.the effectiveness of management.
c.the effectiveness of the internal control structure.
d.the effectiveness and the integrity of management.
e.the effectiveness of the internal control structure and the fairness of the financial statements.

24.
Before accepting an engagement, the auditor should evaluate whether other conditions exist that raise questions as to the prospective client’s auditability. Which of the following factors would be the least likely to cause concern about an entity’s auditability?
a.Related party transactions.
b.Lack of audit trail.
c.Disregard of responsibility to maintain adequate internal controls.
d.Important evidence available only in electronic form.
e.Inability to review the details supporting beginning balances.

25.
The susceptibility of an assertion to a material misstatement, assuming that there are no controls, is:
a.audit risk.
b.control risk.
c.analytical procedures risk.
d.inherent risk.
e.tests of details risk.

26.
The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated is:
a.analytical procedures risk.
b.control risk.
c.tests of details risk.
d.inherent risk.
e.audit risk.

27.
The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity’s internal controls is:
a.control risk.
b.audit risk.
c.inherent risk.
d.rejection risk.
e.detection risk.

28.
The risk that the auditor will not detect a material misstatement that exists in an assertion is:
a.control risk.
b.audit risk.
c.inherent risk.
d.rejection risk.
e.detection risk.




29.
The assessment of inherent risk requires consideration of 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 “specific account” matter?
a.going concern problems such as lack of sufficient working capital.
b.profitability of the entity relative to the industry.
c.sensitivity of operating results to economic factors.
d.complexity of calculations.
e.management turnover, reputation, and accounting skills.

30.Materiality at the account balance level is stated in planning an audit because:
a.some users make decisions based upon individual account balances.
b.the auditor verifies account balances in reaching an overall conclusion on the fairness of the financial statements.
c.the opinion on the fairness of the financial statements extends to the individual account balances.
d.official pronouncements have specified different levels of materiality for various financial statement items.
e.the opinion on the fairness of the financial statements extends to the individual transactions.

31.
In making a preliminary judgments about materiality, the auditor initially determines the aggregate (overall) level of materiality for each statement. For planning purposes, the auditor should use the:
a.levels separately.
b.level he or she judges to be the more reliable.
c.average of these levels.
d.largest aggregate level.
e.smallest aggregate level.

32.
Quantitative guidelines for setting materiality levels are currently provided by:
a.neither GAAP nor GAAS.
b.GAAP.
c.GAAS.
d.both GAAP and GAAS.
e.the AICPA.

33.
Professional standards recognize that a misstatement that is quantitatively immaterial may be qualitatively material. In regard to these items, professional standards require the auditor to:
a.plan the audit to search for them.
b.design explicit procedures to detect them.
c.be on the alert for them.
d.report them to the audit committee.
e.report them directly to client management.
34.“Tolerable misstatement” is the termed used to indicate materiality at the:
a.balance sheet level.
b.account balance level.
c.income statement level.
d.company-wide level.
e.transactions level.

35.
Which one of the following is not an inherent limitation in an entity’s internal controls?
a.mistakes in judgment
b.Collusion
c.cost versus market
d.Breakdowns
e.management override


36.
Revision of the planned level of detection risk will be necessary whenever:
a.accounts are affected by more than one transaction class.
b.the multiple control risk assessments for the same account balance assertion differ.
c.the lower assessed control risk approach is used.
d.the final assessed control risk does not support the planned level.
e.the final assessed control risk is not the same as the actual level.





































































































































37.
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.
e.tests of controls reveal substantial deviations from prescribed policies.
38.The primary means by which the auditor meets the requirements of the third field work standard is through:
a.designing substantive tests.
b.gathering evidence to support the assessed level of control risk.
c.preparing a detailed audit program.
d.evaluating the results of substantive tests.
e.performing substantive tests.
39.The least costly form of testing is usually:
a.tests of controls.
b.tests of detail of transactions.
c.analytical procedures.
d.tests of detail of balances.
e.tests of compliance.

40.The auditor has decided to use PPS sampling in the confirmation of individual sales transactions with customers. The population and the logical sampling unit are most likely to be, respectively:
a.all customer accounts and the individual dollars in the accounts.
b.customer accounts with debit balances and individual dollars in the accounts.
c.the sales invoice file and the individual dollars on the invoices.
d.all recorded sales during the year and individual sales invoices.
e.all sales invoices during the year and individual sales orders.


Answered Same DayDec 29, 2021

Answer To: Multiple Choice 1. An audit that involves obtaining and evaluating evidence about the efficiency and...

Robert answered on Dec 29 2021
113 Votes
Multiple Choice
    Multiple Choice
Correct answer is differentiated by green color
     
      1.
    An audit that involves obtaining and evaluating evidence about the efficiency and effectiveness of an entity’s operating activities in relation to specified objectives is a(n):
     
     
    a.
    Internal audit.
     
     
    b.
    External audit.
     
     
    c.
    Operational audit.
     
     
    d.
    Compliance audit.
     
     
    e.
    Financial statement audit.
     
     
     
     
     
      2.
    An audit
that involves obtaining and evaluating evidence in order to determine whether certain financial or operating activities of an entity conform to specified conditions, rules, or regulations is a(n):
     
     
    a.
    internal audit.
     
     
    b.
    external audit.
     
     
    c.
    operational audit.
     
     
    d.
    compliance audit.
     
     
    e.
    financial statement audit.
     
     
     
     
     
      3.
    Which one of the following statements is not true of the AICPA?
     
     
    a.
    It is public accounting’s national professional organization.
     
     
    b.
    Membership is mandatory for all CPA firms who practice in more than one state.
     
     
    c.
    It operates through a number of divisions.
     
     
    d.
    Its publications include the Journal of Accountancy.
     
     
    e.
    It provides a broad range of services to members.
     
     
     
     
     
      4.
    State accountancy laws are administered by:
     
     
    a.
    state boards.
     
     
    b.
    state societies.
     
     
    c.
    the AICPA.
     
     
    d.
    the SEC.
     
     
    e.
    the GAO.
     
     
     
     
     
     
 
    5.
    What level of assurance does the reader of a private company financial statement receive on the company’s system of internal controls?
     
    a.
    positive assurance
     
    b.
    reasonable assurance
     
    c.
    negative assurance
     
    d.
    no assurance
     
    e.
    limited assurance
     
     
     
      6.
    How many different opinions must an auditor of a publicly held company issue?
     
    a.
    1
     
    b.
    2
     
    c.
    3
     
    d.
    4
     
    e.
    5
     
     
     
    7.
    There are several paragraphs included in the auditor’s standard report in internal control over financial reporting.  Which paragraph defines internal control over financial reporting?
     
    a.
    introductory paragraph
     
    b.
    scope paragraph
     
    c.
    inherent limitations paragraph
     
    d.
    definition paragraph
     
    e.
    explanatory paragraph
     
     
     
      8.
    Statements on auditing standards (SAS’s) are interpretations of?
     
    a.
    generally accepted auditing standards
     
    b.
    generally accepted accounting principles
     
    c.
    generally accepted accounting policies
     
    d.
    generally accepted auditing services
     
    e.
    AICPA code of professional conduct
     
     
     
     9.
    Auditing is based on the assumption that financial data are verifiable.  Data are verifiable when two or more qualified individuals,
     
    a.
    working together, can prove, beyond doubt, the accuracy of the data.
     
    b.
    working independently, each reach essentially similar conclusions.
     
    c.
    working independently, can prove, beyond reasonable doubt, the truthfulness of the data.
     
    d.
    working together, can agree upon the accuracy of the data.
     
    e.
    working together, each reach essentially similar conclusions.
     
    10.
    Which one of the following assertions is not made by management in placing an item in the financial statements?
     
    a.
    existence or occurrence
     
     
    b.
    direct controls
     
     
    c.
    rights and obligations
     
     
    d.
    presentation and disclosure
     
     
    e.
    completeness
     
     
     
     
     
     11.
    If reported sales for 20X0 erroneously include sales that occurred in 20X1, the assertion violated on the 20X0 statements would be:
     
     
    a.
    existence or occurrence
     
     
    b.
    completeness
     
     
    c.
    valuation or allocation.
     
     
    d.
    presentation and disclosure
     
     
    e.
    rights and obligations
     
     
 
     
     
     
      12.
    The completeness assertion would be violated if:
     
     
    a.
    fictitious sales transactions were included in accounts receivable.
     
     
    b.
    the allowance for doubtful accounts was understated.
     
     
    c.
    unbilled shipments had occurred during the period.
     
     
    d.
    disclosure in the statements of pledged receivables was inadequate.
     
     
    e.
    the balance of accounts payable was overstated.
 
 
     
     
     
     
     
      13.
    The rights and obligations assertion applies to:
     
     
    a.
    current liability items only.
     
     
    b.
    revenue and expense items only.
     
     
    c.
    both income statement and balance sheet items.
     
     
    d.
    assets that are not owned by the company.
     
     
    e.
    balance sheet items only.
     
     
     
     
     
      14.
    Determining whether amounts are in conformity with GAAP addresses the proper measurement of assets,...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here