Reviewer for Auditing Theory

1. Which of the following eliminates voluminous details from the auditor's

working trial balance by classifying and summarizing similar or related items?

a. Account analyses.

b. Lead schedules.

c. Control accounts.

d. Supporting schedules.

2. An auditor who accepts an audit engagement and does not possess the
industry expertise of the business entity should

a. engage financial experts familiar with the nature of the business entity.

b. obtain a knowledge of matters that relate to the nature of the entity's

business.

c. refer a substantial portion of the audit to another CPA who will act as
the principal auditor.

d. first inform management that an unqualified opinion cannot be issued.

3. Early appointment of the independent auditor will enable

a. a more thorough examination to be performed.

b. a proper study and evaluation of internal control to be performed.

c. sufficient competent evidential matter to be obtained.

d. a more efficient examination to be planned.

4. The first standard of fieldwork requires, in part, that audit work be properly
planned. Proper planning as intended by the first standard of fieldwork would occur
when the auditor
 a. physically observes the movement of securities already counted to
guard against the substitution of such securities for others that are not actually on
hand.

b. uses negative accounts receivable confirmations instead of positive

confirmations because the latter require mailing of second requests and review of
subsequent cash collections.

c. compares all cash as of a particular date to avoid performing time-

consuming cash cutoff procedures.

d. eliminates the possibility of counting inventory items more than once

by arranging to make extensive test counts.

5. A CPA is conducting the first examination of a non-public company's

financial statements. The CPA hopes to reduce the audit work by consulting with the
predecessor auditor and reviewing the predecessor's working papers. This
procedure is

a. acceptable if the client and the predecessor auditor agree to it.

b. acceptable if the CPA refers in the audit report to reliance upon the
predecessor auditor's work.

c. required if the CPA is to render an unqualified opinion.

d. unacceptable because the CPA should bring an independent viewpoint

to a new engagement.

6. Before applying principal substantive tests to the details of asset and

liability accounts at an interim date, the auditor should

a. assess the difficulty in controlling incremental audit risk.

b. investigate significant fluctuations that have occurred in the asset and

liability accounts since the previous balance-sheet date.

c. select only those accounts which can effectively be sampled during

year-end audit work.

d. consider the tests of controls that must be applied at the balance-

sheet date to extend the audit conclusions reached at the interim date.
7. Which of the following is not one of the three main reasons why the auditor
should properly plan engagements?

a. To enable proper on-the-job training of employees.

b. To enable the auditor to obtain sufficient competent evidence.

c. To avoid misunderstandings with the client.

d. To help keep audit costs reasonable.

8. Which of the following would not be a consideration of a CPA firm in

deciding whether to accept a new client?

a. Client's standing in the business community.

b. Client's financial stability.

c. Client's relation with its previous CPA firm.

d. Client's probability of achieving an unqualified opinion.

9. The working papers are

a. the property of client.

b. property of the auditor although prepared by client.

c. the primary means of documenting that an adequate audit was

conducted in accordance with GAAS.

d. used primarily as a basis for the partners to review and reward the
work of the managers, seniors, and staff.

10. Audit programs are modified to suit the circumstances on particular

engagements. A complete audit program for an engagement generally should be
developed

a. prior to beginning the actual audit work.

b. after the auditor has completed an evaluation of the existing internal

accounting control.

c. after reviewing the client's accounting records and procedures.

d. when the audit engagement letter is prepared.