AUD — Auditing & Attestation — Quiz 6

Questions in this quiz (8)

1. An auditor notes that a client's revenue is recognized upon shipment, but shipping documents are sometimes prepared after the billing date. What is the most appropriate audit response?

   • Accept the revenue if totals are consistent with prior years
   • Perform cutoff testing around period-end
   • Confirm accounts payable balances
   • Only perform analytical procedures

2. A CPA performing a review engagement observes a significant fluctuation in gross profit percentage compared to prior periods. What should the CPA do?

   • Ignore the fluctuation if management provides an explanation
   • Perform additional inquiry and analytical procedures
   • Issue an audit opinion
   • Convert the engagement to a compilation

3. An auditor is evaluating whether to rely on a client's internal controls over cash disbursements. Controls appear well designed but have not been tested. What is the auditor's best course of action?

   • Rely on controls without testing
   • Perform tests of controls before relying on them
   • Ignore controls and only perform analytical procedures
   • Issue a qualified opinion

4. A CPA performing a compilation engagement becomes aware that the financial statements omit required disclosures and management refuses to revise them. What should the CPA do?

   • Issue the compilation report without changes
   • Modify the report to disclose the omission
   • Withdraw from the engagement
   • Perform additional audit procedures

5. An auditor is testing the valuation of accounts receivable and identifies a high number of overdue balances. What is the most appropriate audit procedure?

   • Confirm inventory balances
   • Evaluate the allowance for doubtful accounts
   • Recalculate depreciation expense
   • Observe internal controls

6. A company's IT system allows unauthorized changes to vendor master files without approval. What is the auditor's best response?

   • Ignore if no fraudulent payments are detected
   • Assess control deficiency and increase substantive testing
   • Rely on management representations
   • Only perform analytical procedures

7. An auditor identifies that expenses are consistently understated due to unrecorded liabilities at year-end. What is the most appropriate audit procedure?

   • Confirm accounts receivable
   • Review subsequent cash disbursements
   • Inspect inventory counts
   • Perform ratio analysis only

8. A CPA conducting a review engagement finds that management's explanations for unusual fluctuations are inconsistent and unsupported. What should the CPA do?

   • Accept the explanations as provided
   • Perform additional procedures or consider modifying the report
   • Issue an unmodified review report
   • Convert the engagement to an audit automatically