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MULTIPLE CHOICE

1. Which of the following 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
a) Textbooks and periodicals related to the industry
b) Audit and accounting guides
c) Financial statements of the entities in the industry
d) Results of performing substantive tests
MULTIPLE CHOICE
2. A useful starting point for becoming familiar with the
client’s inventory is for the auditor to:
a) Read the PICPA’s Industry Audit Guide
b) Review accounting theory covering special problems
such as oil and gas accounting, or accounting for
lease-purchase agreements
c) Read the client’s accounting manual
d) Tour the client’s facilities
MULTIPLE CHOICE
3. To obtain an understanding of a continuing client’s
business in planning an audit, an auditor most likely
would
a) Perform tests of details of transactions and balances
b) Review prior-year working papers and the permanent
file for the client
c) Read specialized industry journals
d) Reevaluate client’s internal control environment
MULTIPLE CHOICE
4. A purpose of reviewing first quarter financial results
during audit planning is to
a) Identify unexpected fluctuations occurring in account
balances since the prior year’s financial statements
b) Become familiar with accounts likely to appear in the
financial statements
c) Plan evidence to be gathered in auditing accounts that
are new to the first quarter financial statements
d) Assess first quarter financial position, results of
operations and cash flows
MULTIPLE CHOICE
5. Which of the following will most likely help the auditor
to identify and understand the events, transactions and
practices of his audit client?
a) Obtaining a sufficient knowledge of the business of his
client.
b) Understanding of accounting and internal control.
c) Testing control policies and procedures.
d) Obtaining a representation letter from the client
management.
MULTIPLE CHOICE
6. Analytical procedures used in planning an audit should
focus on:
a) Enhancing the auditor’s understanding of the client’s
business
b) Evaluating the adequacy of evidence gathered
concerning unusual balances
c) Testing individual account balances that depend on
accounting estimates
d) Identifying material weaknesses in the internal control
structure
TRUE OR FALSE
7. Comparisons of recorded amounts of major
disbursements with appropriate invoices is an
example of analytical procedure
TRUE OR FALSE
8. The auditor may discuss elements of planning
with those charged with governance and the
entity’s management.
TRUE OR FALSE
9. Planning is a repetitive and iterative process
TRUE OR FALSE
10.Analytical procedures cannot replace tests of
details of transactions and balances
TRUE OR FALSE
11.The study of financial ratios is an acceptable
alternative to the investigation of unusual
fluctuations
TRUE OR FALSE
12.Statistical tests of financial information will lead to
the detection of material misstatements in the FS
TRUE OR FALSE
13.Analytical procedures are more efficient, but not
more effective, than tests of details of
transactions
TRUE OR FALSE
14.Analytical procedures can replace test of controls
in gathering audit evidence to support the
assessed level of control risk
TRUE OR FALSE
15.Analytical procedures usually involve
comparisons of ratios developed from recorded
amounts with ratios developed by management
MULTIPLE CHOICE
1. Which of the following 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
a) Textbooks and periodicals related to the industry
b) Audit and accounting guides
c) Financial statements of the entities in the industry
d) Results of performing substantive tests

C
MULTIPLE CHOICE
2. A useful starting point for becoming familiar with the
client’s inventory is for the auditor to:
a) Read the PICPA’s Industry Audit Guide
b) Review accounting theory covering special problems
such as oil and gas accounting, or accounting for
lease-purchase agreements
c) Read the client’s accounting manual
d) Tour the client’s facilities

D
MULTIPLE CHOICE
3. To obtain an understanding of a continuing client’s
business in planning an audit, an auditor most likely
would
a) Perform tests of details of transactions and balances
b) Review prior-year working papers and the permanent
file for the client
c) Read specialized industry journals
d) Reevaluate client’s internal control environment

B
MULTIPLE CHOICE
4. A purpose of reviewing first quarter financial results
during audit planning is to
a) Identify unexpected fluctuations occurring in account
balances since the prior year’s financial statements
b) Become familiar with accounts likely to appear in the
financial statements
c) Plan evidence to be gathered in auditing accounts that
are new to the first quarter financial statements
d) Assess first quarter financial position, results of
operations and cash flows

A
MULTIPLE CHOICE
5. Which of the following will most likely help the auditor
to identify and understand the events, transactions and
practices of his audit client?
a) Obtaining a sufficient knowledge of the business of his
client.
b) Understanding of accounting and internal control.
c) Testing control policies and procedures.
d) Obtaining a representation letter from the client
management.

A
MULTIPLE CHOICE
6. Analytical procedures used in planning an audit should
focus on:
a) Enhancing the auditor’s understanding of the client’s
business
b) Evaluating the adequacy of evidence gathered
concerning unusual balances
c) Testing individual account balances that depend on
accounting estimates
d) Identifying material weaknesses in the internal control
structure

A
TRUE OR FALSE
7. Comparisons of recorded amounts of major
disbursements with appropriate invoices is an
example of analytical procedure

FALSE
TRUE OR FALSE
8. The auditor may discuss elements of planning
with those charged with governance and the
entity’s management.

FALSE
TRUE OR FALSE
9. Planning is a repetitive and iterative process

TRUE
TRUE OR FALSE
10.Analytical procedures cannot replace tests of
details of transactions and balances

FALSE

For some assertions, the application of analytical


procedures alone may provide the auditor with the
level of assurance he/she desires
TRUE OR FALSE
11.The study of financial ratios is an acceptable
alternative to the investigation of unusual
fluctuations

FALSE
analytical procedures, such as ratio analysis, enable
an auditor to identify significant differences that
should be evaluated and investigated
TRUE OR FALSE
12.Statistical tests of financial information will lead to
the detection of material misstatements in the FS

FALSE

The use of analytical procedures (e.g. simple


comparisons) does not necessarily require statistical
sampling
TRUE OR FALSE
13.Analytical procedures are more efficient, but not
more effective, than tests of details of
transactions

FALSE
For many assertions, test of details are still more
effective or efficient in providing the level of
assurance desired by the auditor
TRUE OR FALSE
14.Analytical procedures can replace test of controls
in gathering audit evidence to support the
assessed level of control risk

FALSE

analytical procedures can be used as substantive


test, not as tests of controls
TRUE OR FALSE
15.Analytical procedures usually involve
comparisons of ratios developed from recorded
amounts with ratios developed by management

FALSE
analytical procedures involve comparisons of
recorded amounts or ratios developed from recorded
amount with expectations developed by the auditor,
not with assertions developed by management