Auditing & Attestation Mini Exam 17 — AUD — Auditing & Attestation Mini Exams

Questions in this quiz (10)

1. In audit sampling, tolerable misstatement refers to:

   • The misstatement identified in the sample
   • The projected misstatement to the population
   • The maximum misstatement acceptable without affecting the opinion
   • The smallest detectable misstatement

2. Which of the following procedures best tests the existence assertion for inventory?

   • Reviewing inventory turnover ratios
   • Tracing inventory records to shipping documents
   • Observing the physical inventory count
   • Confirming inventory balances with suppliers

3. Which of the following is NOT part of performing analytical procedures?

   • Developing expectations
   • Comparing expectations to recorded amounts
   • Investigating differences
   • Confirming balances with third parties

4. An auditor is using audit sampling to test the completeness of a public company’s accounts payable. The auditor selects a sample of 60 transactions and finds that 4 liabilities were unrecorded. What should the auditor do next?

   • Conclude that liabilities are fairly stated
   • Project the misstatement to the entire population
   • Ignore the misstatements as immaterial
   • Reduce the sample size for further testing

5. Which of the following is a key advantage of tests of details?

   • They require less time than analytical procedures
   • They provide direct evidence about account balances
   • They eliminate audit risk
   • They are only used in planning

6. In substantive testing, which of the following procedures would be most effective for testing the existence assertion for liabilities?

   • Vouching recorded liabilities to supporting invoices
   • Reviewing subsequent cash disbursements
   • Confirming liabilities with creditors
   • Performing analytical procedures on liability trends

7. An auditor is evaluating the results of audit sampling for a test of details. The projected misstatement exceeds the tolerable misstatement. What should the auditor conclude?

   • The population is fairly stated
   • The population is materially misstated
   • The sample size was too large
   • The procedures performed were excessive

8. Which of the following best describes the concept of expectation precision in analytical procedures?

   • The level of detail in audit documentation
   • The closeness of the auditor’s expectation to the actual amount
   • The cost associated with performing procedures
   • The number of accounts tested

9. An auditor is performing substantive testing on a public company’s inventory valuation. The company uses complex costing methods and estimates for obsolescence. Which procedure would be most effective for testing the valuation assertion?

   • Confirming inventory quantities with third parties
   • Recalculating inventory costs and reviewing obsolescence reserves
   • Performing analytical procedures on inventory turnover
   • Observing the physical inventory count

10. In audit sampling, the risk that the auditor’s procedures will not detect a misstatement that exists in a sample is known as:

    • Inherent risk
    • Detection risk
    • Sampling risk
    • Control risk