Audit Planning Chapter 8 Test Questions and Answers All Correct
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Audit Planning
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Audit Planning
Audit Planning Chapter 8 Test Questions and Answers All Correct
Which of the following would an auditor most likely use in determining the auditor's preliminary judgment about materiality?
A. The anticipated sample size of the planned substantive tests.
B. The entity's annualized interim fina...
Audit Planning Chapter 8 Test Questions
and Answers All Correct
Which of the following would an auditor most likely use in determining the auditor's
preliminary judgment about materiality?
A. The anticipated sample size of the planned substantive tests.
B. The entity's annualized interim financial statements.
C. The results of the internal control questionnaire.
D. The contents of the management representation letter. - Answer ✔ B
Which of the following controls most likely would provide reasonable assurance that all
credit sales transactions of an entity are recorded?
A. The accounting department supervisor controls the mailing of monthly statements to
customers and investigates any differences reported by customers.
B. The accounting department supervisor independently reconciles, on a monthly basis,
the accounts receivable subsidiary ledger to the accounts receivable control account.
C. The billing department supervisor matches prenumbered shipping documents with
entries in the sales journal.
D. The billing department supervisor sends copies of approved sales orders to the credit
department for comparison to authorized credit limits and current customer account
balances. - Answer ✔ C
Which of the following control activities in an entity's revenue/receipt cycle would
provide reasonable assurance that all billed sales are correctly posted to the accounts
receivable ledger?
A. Each shipment of goods on credit is supported by a prenumbered sales invoice.
B. The accounts receivable subsidiary ledger is reconciled daily to the accounts
receivable control account in the general ledger.
C. Daily sales summaries are compared to daily postings to the accounts receivable
ledger.
D. Each sales invoice is supported by a prenumbered shipping document. - Answer ✔ C
Which of the following controls is not usually performed in the accounts payable
department?
A. Indicating on the voucher the affected asset and expense accounts to be debited.
B. Approving vouchers for payment by having an authorized employee sign the
vouchers.
C. Accounting for unused prenumbered purchase orders and receiving reports.
D. Matching the vendor's invoice with the related purchase requisition, purchase order,
and receiving report. - Answer ✔ C
,After gaining an understanding of internal control and assessing the risks of material
misstatement, an auditor decided to perform tests of controls. The auditor most likely
decided that
A. Additional evidence to support a further reduction in control risk is not available.
B. It is not possible or practicable to reduce the risks of material misstatement at the
assertion level to an acceptably low level with audit evidence obtained only from
substantive test procedures.
C. There were many internal control weaknesses that could allow misstatements to
enter the accounting system.
D. An increase in the assessed level of control risk is justified for certain financial
statement assertions. - Answer ✔ B
An auditor may decide to assess control risk at the maximum level for certain assertions
because the auditor believes
A. Controls are unlikely to pertain to the assertions.
B. The entity's control components are interrelated.
C. Sufficient appropriate audit evidence to support the assertions is likely to be
available.
D. More emphasis on tests of controls than substantive tests is warranted. - Answer ✔ A
Which of the following statements is correct concerning an auditor's assessment of
control risk?
A. Assessing control risk may be performed concurrently during an audit with obtaining
an understanding of the entity's internal control.
B. Evidence about the operation of controls in prior audits may not be considered during
the current year's assessment of control risk.
C. The basis for an auditor's conclusions about the assessed level of control risk need
not be documented unless control risk is assessed at the maximum level.
D. The lower the assessed level of control risk, the less assurance the evidence must
provide that the controls are operating effectively. - Answer ✔ A
In performing tests of the operating effectiveness of an entity's controls, an auditor
selects from a variety of techniques, including
A. Reperformance and observation.
B. Inquiry and analytical procedures.
C. Comparison and confirmation.
D. Inspection and verification. - Answer ✔ A
Which of the following tests of controls most likely would help assure an auditor that
goods shipped are properly billed?
A. Scan the sales journal for sequential and unusual entries.
B. Examine shipping documents for matching sales invoices.
C. Compare the accounts receivable ledger to daily sales summaries.
D. Inspect unused sales invoices for consecutive prenumbering. - Answer ✔ B
, When there are numerous property and equipment transactions during the year, an
auditor who plans to assess control risk at a low level usually performs
A. Tests of controls and extensive tests of property and equipment balances at the end
of the year.
B. Analytical procedures for current year property and equipment transactions.
C. Tests of controls and limited tests of current year property and equipment
transactions.
D. Analytical procedures for property and equipment balances at the end of the year. -
Answer ✔ C
1. The development of a general strategy and a detailed approach for the expected
nature, timing, and extent of audit refers to:
a. Supervision b. Audit procedures c. Directing d. Planning - Answer ✔ D
2. The auditor should consider the nature, extent, and timing of the work to be
performed and should prepare a written audit program for every audit. Which audit
standard is most closely related to this requirement?
a. The audit is to be performed by a person or persons having adequate technical
training and proficiency as an auditor.
b. In all matters relating to the assignment, an independent mental attitude is to be
maintained by the auditor(s).
c. Due professional care is to be exercised in the planning and performance of the audit
and preparation of the report.
d. The work is to be adequately planned and assistants, if any, are to be properly
supervised. - Answer ✔ D
3. Which of the following would a successor auditor normally perform after acceptance
of an audit client?
a. Inquiry of predecessor auditor regarding the client.
b. Review the SEC filings of the client.
c. Inquiry of bankers regarding the client.
d. Review of predecessor auditor working papers. - Answer ✔ D
4. To obtain an understanding of a continuing client's business in planning an audit, an
auditor most likely would
a. Perform tests of details of transactions and balances.
b. Review prior-year working papers and the permanent file for the client.
c. Read specialized industry journals.
d. Reevaluate client's internal control environment. - Answer ✔ B
5. Which of the following is required documentation in an audit in accordance with
generally accepted auditing standards?
a. A flowchart or narrative of the information system describing the recording and
classification of transactions for financial reporting.
b. An audit program setting forth in detail the procedures necessary to accomplish the
engagement's objectives.
, c. A planning memorandum establishing the timing of the audit procedures and
coordinating the assistance of entity personnel.
d. An internal control questionnaire identifying policies and procedures that assure
specific objectives will be achieved. - Answer ✔ B
6. Which 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. - Answer ✔ B
7. Analytical procedures used in planning an audit should focus on
a. Reducing the scope of tests of controls and substantive tests.
b. Providing assurance that potential material misstatements will be identified.
c. Enhancing the auditor's understanding of the client's business.
d. Assessing the adequacy of the available evidential matter. - Answer ✔ C
8. Analytical procedures, which means the analysis of significant ratios and trends
including the resulting investigation of fluctuations and relationships that are
inconsistent with other relevant information or which deviate from predicted amounts,
are not required to be applied
a. At the planning stage of the audit c. As substantive procedures
b. Overall review stage of the audit d. None of the above - Answer ✔ C
9. Which of the following statements is correct concerning analytical procedures?
a. Analytical procedures usually involve comparisons of ratios developed from recorded
amounts to assertions developed by management.
b. Analytical procedures used in planning an audit generally use data aggregated at a
high level.
c. Analytical procedures can replace tests of controls in gathering evidence to support
the assessed level of control risk.
d. Analytical procedures are more efficient, but not more effective, than tests of details
and transactions. - Answer ✔ B
10. Which of the following is an effective audit planning and control procedures that
helps prevent misunderstandings and inefficient use of audit personnel?
a. Make copies, for inclusion in the working papers, of those client supporting
documents examined by the auditor.
b. Provide the client with copies of the audit programs to be used during the audit.
c. Arrange a preliminary conference with the client to discuss audit objectives, fees,
timing, and other information.
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