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Audit 4100 Exam 2 2024/2025 Questions With Completed & Verified Solutions.
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Audit 4100 Exam 2 2024/2025 Questions With Completed & Verified Solutions.
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Audit 4100 Exam #2Which of the following procedures would an auditor most likely perform in planning a financial
statement audit?
a. Inquiring of the client's legal counsel concerning pending litigation.
b. Comparing the financial statements to anticipated results.
c. Examining computer generated exception reports to verify the effectiveness of internal
controls.
d. Searching for unauthorized transactions that may aid in detecting unrecorded liabilities. - ANS
c. (Examining computer generated exception reports to verify the effectiveness of internal
controls.)
An auditor obtains knowledge about a new client's business and its industry to:
a. Make constructive suggestions concerning improvements to the client's internal control.
b. Develop an attitude of professional skepticism concerning management's financial statement
assertions.
c. Evaluate whether the aggregation of identified misstatements causes the financial statements
taken as a whole to be materially misstated.
d. Understand the events and transactions that may have an effect on the client's financial
statements. - ANS d. (Understand the events and transactions that may have an effect on the
client's financial statements.)
Analytical procedures used in planning an audit should focus on:
a. Evaluating the adequacy of evidence gathered concerning unusual balances.
b. Testing individual account balances that depend on accounting estimates.
c. Enhancing the auditor's understanding of the client's business.
d. Identifying material weaknesses in internal control. - ANS c. (Enhancing the auditor's
understanding of the client's business.)
Which of the following is an analytical procedure that an auditor most likely would perform when
planning an audit?
a. Confirming a sample of accounts payable.
b. Scanning payroll files for terminated employees.
c. Comparing current year balances to budgeted balance.
d. Recalculating interest expense based on notes payable balances. - ANS c. (Comparing
current year balances to budgeted balance.)
, In obtaining an understanding of a manufacturing entity's internal control concerning inventory
balances, an auditor most likely would:
a. Analyze the liquidity and turnover ratios of the inventory.
b. Perform analytical procedures designed to identify cost variances.
c. Review the entity's descriptions of controls over inventory.
d. Perform test counts of inventory during the entity's physical count. - ANS c. (Review the
entity's descriptions of controls over inventory.)
In an audit of financial statements in accordance with generally accepted auditing standards, an
auditor is required to:
a. Document the auditor's understanding of the entity's internal control.
b. Search for significant deficiencies in the operation of internal control.
c. Perform tests of control to evaluate the effectiveness of the entity's information system
relevant to financial reporting.
d. Determine whether controls operated effectively to prevent or detect material misstatements.
- ANS a. (Document the auditor's understanding of the entity's internal control.)
The responsibility to establish, maintain and monitor internal controls is that of the entity's:
a. Accounting department.
b. Internal auditor.
c. Management.
d. External auditor. - ANS c. (Management.)
An advantage of using systems flowcharts to document information about internal control
instead of using internal control questionnaires is that systems flowcharts:
a. Identify internal control weaknesses more prominently.
b. Provide a visual depiction of client's activities.
c. Indicate whether control activities are operating effectively.
d. Reduce the need to observe client's employees performing routine tasks. - ANS b. (Provide a
visual depiction of client's activities. )
Which of the following most accurately describes the process of a walkthrough?
a. Testing and documenting the results of tests of selected controls.
b. Inspection of selected documents, records, and internal control documentation.
c. Observation of an entity's activities and operations.
d. Following a transaction from its origination until it is reflected in the financial statements. -
ANS d. (Following a transaction from its origination until it is reflected in the financial
statements.)
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