As inherent risk increases, and other risk factors remain constant, what happens to the extent of audit work?

As inherent risk increases, and other risk factors remain constant, what happens to the extent of audit work? 

A. Increases
B. Decreases
C. Stays the same
D. Becomes less reliable








Answer: A

What type of relationship exists between audit risk and detection risk?

What type of relationship exists between audit risk and detection risk? 

A. Direct
B. Inverse
C. Indirect
D. No relationship







Answer: A

Which of the following statements is true regarding analytical techniques?

Which of the following statements is true regarding analytical techniques? 

A. Ratio analysis takes advantage of economic relationships between two or more accounts.
B. Ratio trend analysis are generally carried out through a comparison of client data with expectations based on industry data, prior-period data, and expectations developed from industry trends, client budgets, and so on.
C. Developing expectations is the first step in performing analytical procedures.
D. All of the above are true.








Answer: D

Which of the following types of audit evidence is the most reliable?

Which of the following types of audit evidence is the most reliable? 

A. Evidence from the client's organization
B. Evidence from a poorly controlled system.
C. Directly observable evidence
D. Facsimiles of documents






Answer: C

Which of the following is not a type of internal documentation?

Which of the following is not a type of internal documentation? 

A. Legal documents
B. Business documents
C. Third-party documents
D. Accounting documents








Answer: C

To be reliable evidence, confirmations must be controlled by which of the following individuals?

To be reliable evidence, confirmations must be controlled by which of the following individuals? 

A. A client employee responsible for accounts receivable.
B. An external auditor
C. A client's internal audit department
D. A client's controller or CFO.








Answer: B

An audit program is created to specify which of the following?

An audit program is created to specify which of the following? 

A. The type of audit opinion to be rendered based upon procedures performed.
B. The audit procedures that will be performed every year for the client.
C. How an auditor should think while performing audit procedures
D. Audit objectives and procedures to be followed during the audit process.









Answer: C

Which of the following assertions is the primary assertions is the primary assertions is the primary assertion that is satisfied by physically observing the client's count of inventory?

Which of the following assertions is the primary assertions is the primary assertions is the primary assertion that is satisfied by physically observing the client's count of inventory? 

A. Rights
B. Valuation
C. Completeness
D. Existence








Answer: D

An auditor selects a sample of items recorded and traces them back (vouches) to the supporting documentation. This is an example of which of the following?

An auditor selects a sample of items recorded and traces them back (vouches) to the supporting documentation. This is an example of which of the following? 

A. Directional testing for existence
B. Directional testing for completeness
C. Direct testing for valuation
D. Direct testing for rights








Answer: A

A date at which audit evidence is collected earlier than the balance sheet date is referred to as what?

A date at which audit evidence is collected earlier than the balance sheet date is referred to as what? 

A. Subsequent date
B. Cutoff period
C. Significant Date
D. Interim Date








Answer: D

Vouching of transactions deals with which of the following?

Vouching of transactions deals with which of the following? 

A. Testing forward
B. Testing backward
C. Testing at a point in time
D. Directional Testing either forward or backward







Answer: B

Recalculations of the client's computations would not include which of the following types of evidence?

Recalculations of the client's computations would not include which of the following types of evidence? 

A. Cutoff
B. Footing
C. Extension
D. Cross-footing







Answer: A

Which of the following audit judgements would an auditor be least likely to use an audit specialist?

Which of the following audit judgements would an auditor be least likely to use an audit specialist? 

A. Existence of case
B. Valuation of works of art.
C. Valuation of oil and gas reserves
D. Interpretation of laws and regulations








Answer: A

To satisfy the fieldwork standards, what must an auditor do?

To satisfy the fieldwork standards, what must an auditor do?

a. Act with due care.
b. Gather sufficient appropriate evidence.
c. Be independent in mental attitude.
d. Have adequate knowledge about the client's industry.
e. All of the above.







Answer: B

The first general standard of the PCAOB requires that an audit be performed by which type of person?

The first general standard of the PCAOB requires that an audit be performed by which type of person?

a. Au auditor with seasoned judgment in varying degrees of supervision and review.
b. An auditor with appropriate technical training and proficiency.
c. An auditor with adequate knowledge of the standards of fieldwork and reporting.
d. An auditor satisfying the independence standards.








Answer: B

With a dual purpose test, what is an auditor likely to do?

With a dual purpose test, what is an auditor likely to do? 

A. Perform a substantive procedure concurrently with a test of control.
B. Perform a substantive procedure concurrently with a risk assessment test.
C. Perform a risk assessment test concurrently with a test of a control.
D. None of the above.










Answer: A

With a substantive audit strategy, what is an auditor likely to do?

With a substantive audit strategy, what is an auditor likely to do? 

A. Extensively test internal controls.
B. Limit the testing of internal controls.
C. Not access control risk.
D. Issue an adverse opinion on the financial statements.





Answer: B

Which statement is true concerning materiality?

Which statement is true concerning materiality? 

A. Misstatements are material if they could reasonably be expected to influence the decisions of users of the financial statements.
B. Materiality guidelines are specifically prescribed by the PCAOB.
C. Materiality is not a useful concept in assessing internal control effectiveness.
D. Materiality is a concept applied to financial statement presentation but not to disclosures.







Answer: A

Which of the following is not a typical accounting cycle?

Which of the following is not a typical accounting cycle? 

A. Revenue
B. Inventory
C. Cash
D. Internal Controls







Answer: D

Which of the following statements about the auditing standards issues by the AICPA is true?

Which of the following statements about the auditing standards issues by the AICPA is true? 

A. The auditing standards issued by the AICPA are no longer recognized by the PCAOB.
B. The auditing standards issued by the AICPA are no longer recognized by the profession because the AICPA voted itself out of existence.
C. The auditing standards issues by the AICPA continue to be issued by that organization for audits of public companies.
D. The auditing standards issued by the AICPA were used by the PCAOB as a starting point.







Answer: D