1. An auditor is planning an audit engagement for a new client in a business unfamiliar to the auditor. Which is the least useful source of information for the auditor during the preliminary planning stage, when the auditor is trying to obtain a general understanding of audit problems that might be encountered?
2. Which of the following tests of controls would most likely be performed by an auditor to obtain evidence about management’s assertion concerning the completeness of sales transactions?
3. It is the susceptibility of an account balance or class of transactions to misstatement that could be material, individually or when aggregated with misstatements in other balances or classes, assuming that there were no related internal controls.
4. Holding other planning considerations equal, a decrease in the amount of misstatements in a class of transactions that an auditor could tolerate most likely would cause the auditor to
5. The steps that an audit firm should take prior to accepting an audit engagement include all of the following except
6. The risk that the auditor’s own work will lead to the decision that material misstatements do not exist in the financial statements, when in fact such misstatements do exist, is
7. In planning an audit, the auditor considers audit risk. Audit risk is the
8. Which of the following discoveries by the auditor would not raise the red flag of increased inherent risk?
9. Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. Audit risk is a function of the
10. Certain management characteristics may heighten the auditor’s concern about the risk of material misstatements. The characteristic that is least likely to cause concern is that management
11. Which of the following types of risk increases when an auditor performs substantive analytical audit procedures for financial statement accounts at an interim date?
12. When an auditor believes that an understanding with the client has not been established, he or she should ordinarily
13. Which of the following would be considered an analytical procedure?
14. With respect to the concept of materiality, which of the following statements is correct?
15. The preliminary judgment about materiality
16. Fraud refers to an intentional act by one or more individuals among management, employees or third parties, which results in a misrepresentation of financial statements while error refers to unintentional mistakes in financial statements. Fraud may involve
Manipulation, falsification or alteration of records or documents. Misappropriation of assets. Mathematical or clerical mistakes in the underlying records and accounting data. Suppression or omission of the effects of transactions from records or documents. Oversight or misinterpretation of facts Recording of transactions without substance. Misapplication of accounting policies.
A. 1, 2, 4, 6, and 7.
B. 1, 2, 3, and 6.
C. 1, 2, 3, 4, 6, and 7.
D. 1, 2, 4, 5, and 6.
None
17. Is the risk that a misstatement, which could occur in an account balance or class of transaction and that, could be material individually or when aggregated with misstatements in other balances or classes, will not be prevented or detected and corrected on a timely basis by the accounting and internal controls.
18. One of the typical characteristics of management fraud is
19. An auditor must compensate for a weakness in the internal control by increasing the
20. Which of the following statements is not correct?
21. An auditor is required to assess the risk of material misstatement in the financial statements. In doing so, the auditor assesses both inherent risk and control risk. Which of the following condition would most likely result to a “lower” inherent risk assessment by the auditor?
22. When setting a preliminary judgement about materiality
23. Which of the following is an important consideration when deciding the nature of tests to use in a financial statement audit?
24. A proposed assurance engagement can be accepted when the practitioner’s preliminary knowledge about the engagement circumstances indicates that relevant ethical requirements will be satisfied and
I. The subject matter of the engagement is appropriate.
A. I, II, and 111 only
B. I, II, III, and IV only
C. I, 11, IV, and V only
D. I, II, III, IV, and V
None
25. An auditor manages audit risk by performing the following, except
