Kayla Harbaugh
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Auditing chapter 6 pre quiz

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Kayla Harbaugh
Created by Kayla Harbaugh over 3 years ago
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Auditing chapter 6 pre quiz

Question 1 of 10

1

An auditor determines that management integrity is high, the risk of material misstatement is low, and the client's internal controls are effective. Which of the following conclusions can be reached regarding the need to obtain direct evidence about the account balances?

Select one of the following:

  • Direct evidence of account balances is not needed.

  • Direct evidence can be obtained solely through analytical procedures.

  • Direct evidence can be limited to material account balances, and the extent of testing should be sufficient to corroborate the auditor's assessment of low risk.

  • Direct evidence should be obtained for all accounts, regardless of the auditor's assessment of control risk.

Explanation

Question 2 of 10

1

The auditor is testing the completeness assertion. Which of the following statements is true regarding the auditor's work?

Select one of the following:

  • The auditor would take a sample of source documents and obtain additional supporting documents for those transactions.

  • The auditor would take a sample of recorded transactions and obtain supporting documentation for those transactions.

  • The auditor would perform a process referred to as tracing.

  • For a sample of items recorded in the sales journal, the auditor would obtain the related shipping documents and customer orders.

Explanation

Question 3 of 10

1

The auditor is gathering evidence to test the assertion that the client's capitalization of leased equipment assets is properly valued. Which of the following sources of evidence will the auditor generally find to be of the highest quality (most reliable and relevant)?

Select one of the following:

  • Inspection of documents, including the lease contract and recalculation of capitalized amount and current amortization.

  • Inspection of the leased equipment.

  • Confirmation of the original cost of the equipment with the lessor.

  • Confirmation of the current purchase price for similar equipment with vendors.

Explanation

Question 4 of 10

1

Which of the following transactions would be least likely to be a related-party transaction?

Select one of the following:

  • Writing off obsolete inventory prior to year-end.

  • A purchase transaction between an entity and its owners.

  • An exchange of property between an entity and a joint venture in which the entity has part ownership.

  • A debt-related transaction between an entity and one of its SPEs

Explanation

Question 5 of 10

1

Which of the following procedures would an auditor typically perform first when assessing the reasonableness of management's estimate of its pension liability?

Select one of the following:

  • Develop an understanding of management's process for developing the estimate.

  • Inspect documentation related to the pension transactions that the client has recorded.

  • Review transactions occurring prior to the report release date to assess the reasonableness of management estimates.

  • Identify sensitive management assumptions.

Explanation

Question 6 of 10

1

Which of the following statements describes a purpose of an audit program?

Select one of the following:

  • An audit program is used to specify the procedures to be performed in obtaining audit evidence.

  • An audit program is used to record the completion of each audit step.

  • An audit program is useful for monitoring the progress of the audit.

  • All of these statements describe a purpose of an audit program.

Explanation

Question 7 of 10

1

A procedure that involves only inspection of documentation is usually considered to be of lower quality than a procedure involving reperformance.

Select one of the following:

  • True
  • False

Explanation

Question 8 of 10

1

Substantive analytical procedures are required on every audit.

Select one of the following:

  • True
  • False

Explanation

Question 9 of 10

1

One of the most rigorous approaches to substantive analytical procedures is regression analysis.

Select one of the following:

  • True
  • False

Explanation

Question 10 of 10

1

The auditor should use a standardized audit program, without any modifications, for all clients.

Select one of the following:

  • True
  • False

Explanation

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