… Which of the following statements is true if the misstatement is not corrected and Kerry issues an unqualified opinion on Sammy's financial statements? D) a test of dual controls with multiple procedures. The engagement letter includes a statement acknowledging that audited financial statements will be provided to financial institutions for a loan, but does not name any financial institutions. Lauren is late filing the financial statements and is fined $100,000 by the regulatory body. Stratification is a way of improving audit efficiency in sampling. When using statistical sampling a method that estimates the population mean is called the: If the auditor is testing for an understatement of accounts payable, the appropriate population from which to draw a sample is: If there is an increase in the total error that the auditor is willing to accept, the effect on the sample size is: What effect would stratification of a population have upon the sample for substantive procedures undertaken by an auditor? which of the following acts by a CPA who is in business most likely is a violation of the ethical standards of the profession? b. a price list master file contains the product unit prices that are used for billing customers, the accountants who record cash receipts and credits to customer accounts should not handle the cash, credit checks should be performed by the sales department before credit is approved, the aging information for accounts receivable is typically used in connection with assessing the allowance for doubtful accounts, a comparison of checks listed on a sample of deposit slips to the detail of customer credits posted to customer accounts receivable can be an audit test for lapping, if control risk is assessed very low, the substantive audit procedures on account balances must be expanded, a confirmation procedure scheduled on the year end date with a large sample of customer account balances is necessary if tests of controls reveal control weaknesses, auditors should not place total reliance on controls to the exclusion of other substantive testing procedures, an objective for an audit is to obtain evidence related to management's financial statement assertions, when obtaining evidence about accounts receivable, auditors must put emphasis on the completeness and obligations assertions, inquiries of management usually do not provide very convincing evidence about the existence and rights assertions, a computer generally cannot be used for scanning large files of accounts receivable for unusual credit balances, the use of confirmation to test accounts receivable is considered a generally accepted audit procedure. Dual-purpose tests are audit tests designed as: In planning the audit, the auditor should assess materiality at two levels: Professional standards recognise that a misstatement that is quantitatively immaterial may be qualitatively material. View Test Prep - TEST BANK from ACTG 492 at Portland State University. The predecessor auditor firm should tell the successor auditor firm: In the investigation of a potential new client, if the client refuses to give permission to inquire of the existing auditor, or if the existing auditor does not respond fully, the prospective auditor should: The exercise of 'due professional care' requires an auditor to: Engagement letters are widely used in practice for professional engagements of all types. which of the following defines the imperative principle of ethics? b. an out of town client takes the audit engagement team out to dinner at a renowned local restaurant. Type d. Accounting for unused prenumbered purchase orders and receiving reports. Beroepskeuzetest! A) Auditors typically gather audit evidence about one whole financial statement at a time rather than one account at a time. A high risk of misstatement is associated with inventory due to the: The auditor would need to be alert for transactions that have occurred with related parties, because: If the predominantly substantive approach preliminary audit strategy is used, planned detection risk will be: If the acceptable level of detection risk decreases, the assurance directly provided from: Which of these is not considered a substantive procedure? I repeat, a test of control tests controls, not amounts in the FS. Mays must prove that: B. the financial statements contained a material misstatement, Lauren hires Humphrey, a CPA, to audit her financial statements. In terms of determining what is a 'significant deficiency' in internal controls, the auditor considers: Which of these is an option that the auditor has to choose from when assessing control risk in an IT environment? which of the following is not a key element of the definition of ethics? Tests confirming receivables. What would be an appropriate sample of invoices to gain reasonable assurance that all payments are properly authorised as part of the annual audit? Client evaluations involve: Dealings between a predecessor and proposed auditor normally includes: An auditor has been offered a new audit. An auditor need not abide by a particular auditing standard if the auditor … What is the purpose of the preliminary assessment of control risk? according to the profession's ethical standards, which of the following events may justify a departure from an established accounting principle? Effective monitoring of internal control involves: When an auditor that performs a transaction walk-through review, the procedure used is: The preliminary assessment of internal control risk will normally be high when: Audit risk is commonly assessed within the components: When the auditor's assessment of inherent risk and control risk is high, the resulting detection risk would be: Which risk is the 'possibility that a material misstatement could occur in an assertion, either individually or when aggregated with other misstatements, assuming there are no related controls'? Chapter 12 Quiz Review of attempt 1 Started on Tuesday, February 22, 2011, Instead, audit testing aims to examine a testing process already in place for coverage and accuracy of … Hart & Co., CPAs, gave an unqualified opinion on McCovey's financial statements that were included in the registration statement filed with the SEC. Ja Nee 2. Start studying Audit Test 4. The exercise of 'due professional care' requires that an auditor: The statement that is not correct concerning an audit engagement letter is: For most engagements, the auditor makes a preliminary visit to the entity before its year end. An audit is carried out in firms to affirm that their books of accounts reflect a true and fair view of the position of the company and note incidences where fraud has taken place. Cram.com makes it easy to get the grade you want! 25. They are therefore tests of control. Which sampling technique could be said to have a similar effect to stratification? Flowcharts should depict all of the following except: The auditor's understanding of internal control is documented to substantiate: For a given assertion, the relationship between the assessed control risk (CR) and inherent risk (IR) and the level of detection risk (DR) is shown correctly in which of the following (assume + means an increase in the risk and - means a decrease): For a particular assertion, control risk is the risk that: Inherent risk could be best described as: Which materiality benchmark is often used for continuing operations of profit-oriented entities? 1. You can skip questions if … Learn vocabulary, terms, and more with flashcards, games, and other study tools. Four months later, Lauren files for bankruptcy. Study Flashcards On Audit Test Test #3 Ch. What is the auditor's responsibility in assessing the risk of fraud in planning? The auditor's acceptable risk of incorrect acceptance (ARIA) for the test of details of balances for accounts payable will most likely be Test out what you know about audits by taking up the audit test below, covering various terminologies and procedures. The auditor would not consider which of the following in considering the effectiveness of the internal auditors? Een audit is een systematische en periodieke controle van een organisatie of bedrijf, en dan vooral van de boekhouding en jaarrekeningen. four months later, lauren files for bankruptcy. auditors should not be liable to any party if they perform services that met the standards of, a principle that may reduce or eliminate auditors' liability to clients is. Humphrey completes the audit and issues an unqualified opinion. 9 Test Bank at Cram.com. Each of these audit tests are testing a control or control procedure. The only risk that can be manipulated by the auditor is: The auditor assesses control risk because it: In regard to analytical procedures the correct statements is: An example of 'tracing' a transaction is: An example of 'vouching' a transaction is: An example of a test of details of balances is: A substantive procedure commonly performed prior to the client's balance sheet date is: When using analytical procedures to test accounts receivable, which of these substantive procedures would not be able to be used: The audit procedure that is designed to obtain reasonable assurance that expenses and accruals transactions are recorded in the correct accounting period is: Which of the following substantive audit procedures is to obtain evidence as to the completeness assertion of inventories in the financial report? In order for an auditor to assess control risk at a low level based on computer application controls, the auditor should test: The types of testing that an auditor can use in a computer information system are: With computer-assisted audit techniques, using the test data approach, it is true that: With computer-assisted audit techniques using an integrated test facility, it is true that: Which of these is not an advantage of parallel simulation? based on the audited financial statements, key largo bank approves a loan to lauren. which of the following situations would not impair objectivity, integrity, or independence with respect to an audit client? if elliot sues adam & co., elliot must prove that adam & co. c. failed to exercise the appropriate level of professional care. 12. Print test 69 Multiple choice questions. Print test 102 Multiple choice questions. Choose your answers to the questions and click 'Next' to see the next set of questions. Tests of the specific items making up the balance in a given general ledger account. An example of a high-risk condition that may provide Incentives/pressures leading to fraudulent financial reporting include: An example of a high-risk condition that may provide a fraudulent financial reporting opportunity includes: What type of risk factor is relevant when misappropriation of assets may occur due to lack of mandatory holidays for employees performing key control functions? in april 2006, the PEEC adopted the conceptual framework for AICPA independence standards, which describes the PEEC's risk-based approach to analyzing independence issues that arise: familiarity threat- cpa's having a close or longstanding relationship with a client, must be 1. realized or realizable and 2. earned, assertions-- three are the correct answers, Regulates daily trading of securities and requires periodic financial statements and information to be filed with the SEC, agency that has the ultimate authority over us, uses legal precedent to identify responsibility. after the acquisition, the fraud was discovered and elliot corp. suffered substantial losses. 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