Auditing & Attestation Mini Exam 18 — AUD — Auditing & Attestation Mini Exams

Questions in this quiz (10)

1. Which of the following is a key consideration when selecting audit procedures for a specific assertion?

   • The auditor’s personal preferences
   • The relevance and reliability of audit evidence
   • The client’s desired outcome
   • The audit firm’s billing structure

2. An auditor is performing analytical procedures on a company’s financial statements and notes that gross margin has significantly increased compared to prior periods. What should the auditor do next?

   • Conclude that profitability has improved
   • Investigate the cause of the increase
   • Accept management’s explanation without verification
   • Document the change and proceed

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

   • Reviewing bank reconciliations
   • Confirming bank balances directly with financial institutions
   • Vouching cash receipts to deposit slips
   • Performing analytical procedures on cash balances

4. Which of the following is a limitation of audit sampling?

   • It cannot be used for substantive testing
   • It increases detection risk to zero
   • It introduces the possibility of sampling risk
   • It requires testing the entire population

5. An auditor selects a sample of shipping documents and traces them to recorded sales to test completeness. What type of sampling is this?

   • Attribute sampling
   • Variables sampling
   • Discovery sampling
   • Monetary-unit sampling

6. When performing substantive analytical procedures, the auditor should:

   • Rely exclusively on internal data
   • Develop expectations using a variety of relevant data sources
   • Avoid using prior-year comparisons
   • Focus only on immaterial accounts

7. In audit sampling, tolerable misstatement is best defined as:

   • The misstatement identified in the sample
   • The expected error in the population
   • The maximum error acceptable without affecting the auditor’s opinion
   • The difference between recorded and audited amounts

8. An auditor is performing substantive testing on a company’s fixed assets. Which procedure would be most effective for testing the valuation assertion?

   • Observing the physical existence of assets
   • Confirming asset balances with management
   • Recalculating depreciation expense
   • Reviewing asset turnover ratios

9. Which of the following best describes the difference between detection risk and control risk?

   • Detection risk relates to internal controls; control risk relates to audit procedures
   • Detection risk is the risk that audit procedures fail to detect misstatements; control risk is the risk that internal controls fail to prevent or detect them
   • Detection risk is assessed by management; control risk is assessed by the auditor
   • Detection risk exists independently of internal controls; control risk does not

10. An auditor is evaluating the results of audit sampling for a test of controls. The sample deviation rate exceeds the tolerable deviation rate. What should the auditor do?

    • Conclude that controls are effective
    • Increase reliance on controls
    • Reassess control risk and modify audit procedures
    • Ignore the deviations as sampling anomalies