Audit Chapter 2 Test Questions and Answers All Correct
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Course
Audit
Institution
Audit
Audit Chapter 2 Test Questions and Answers All Correct
Which of the following recognizes that an audit conducted under generally accepted audit-ing standards may not detect all material misstatements?
a. Absolute assurance.
b. Professional judgment.
c. Reliability of audit evidence.
d. Reas...
Audit Chapter 2 Test
Questions and
Answers All Correct
Which of the following recognizes that an audit conducted under generally accepted
audit-ing standards may not detect all material misstatements?
a. Absolute assurance.
b. Professional judgment.
c. Reliability of audit evidence.
d. Reasonable assurance. - Answer ✔ d. Correct Reasonable assurance recognizes
that an audit conducted under GAAS may fail to detect all material misstatements.
Which of the following combinations would provide the auditor the most reliable
evidence?
Source of Evidence
a. Internal b. Internal c. External d. External
Effectiveness of Internal control
More effective Less effective More effective Less effective - Answer ✔ c. Correct
Evidence is most reliable when the source of the evidence is external and when the
evidence is developed under more effective internal control.
Which of the following is most closely related to the relevance of audit evidence?
a. Auditors decide to physically inspect investment securities held by a custodian
instead of
obtaining confirmations from the custodian.
b. In addition to confirmations of accounts receivable, auditors perform an analysis of
theaging of accounts receivable to evaluate the collectability of accounts receivable.
c. In response to less effective internal control, auditors increase the number of
customer
accounts receivable confirmations mailed compared to that in the prior year.
d. Because of a large number of transactions occurring near year-end,auditors decide to
confirm a larger number of receivables following year-end instead of during the interim
period. - Answer ✔ b. Correct The aging of accounts receivable will evaluate valuation,
, which is not directly evaluated through confirmation. Therefore, aging provides relevant
evidence with respect to the valuation assertion.
Which of the following statements is not true with respect to the performance principle?
a. Auditors are required to prepare a written audit plan during the planning stages of
initial audits but are not required to do so in continuing audits.
b. Audit teams consider materiality in planning the audit,performing the audit,and
evaluating the effect of misstatements on the entity's financial statements.
c. In assessing the risk of material misstatements,the audit team considers the
effectiveness of the entity's internal controls in preventing and detecting misstatements.
d. Auditors are required to consider both the relevance and reliability of evidence in
evalu- ating whether the evidence they have gathered is appropriate. - Answer ✔ a.
Correct Written audit plans are required in both initial and continuing audits.
Which of the following is true with respect to PCAOB inspections of accounting firms?
a. All firms performing audits of public companies are required to have annual
inspections conducted by the PCAOB.
b. PCAOB inspections review a sample of audits conducted by firms as well as the
firm's systems of quality control.
c. All results of PCAOB inspections are made available to the public following the
inspection.
d. Firms performing audits of 100 or fewer public entities may elect to have a peer
review
conducted through the AICPA in lieu of a PCAOB inspection. - Answer ✔ b. Correct In a
PCAOB inspection, a sample of audits as well as the firm's system of quality control are
reviewed by the inspection team.
The particular and specialized actions that auditors take to obtain evidence during a
specific
engagement are known as
a. Audit procedures.
b. Audit standards.
c. Interpretive publications.
d. Statements on Auditing Standards. - Answer ✔ a. Correct Audit procedures are
particular and specialized actions that auditors take to obtain evidence during a specific
engagement.
Which of the following categories of principles is most closely related to gathering audit
evidence?
a. Performance.
b. Reasonable assurance. c. Reporting.
d. Responsibilities. - Answer ✔ a. Correct Gathering audit evidence is a component of
the performance principle.
Which of the following is not related to ethical requirements of auditors?
a. Due care.
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