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Audit Final Exam 2022 Solved Correctly, Exams of Nursing

Virginia State University (VSU)Nursing

Audit Final Exam 2022 Solved Correctly

Typology: Exams

2021/2022

Available from 08/15/2022

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Audit Final Exam 2022 Solved Correctly
P a g e 1 | 13
1
Which of the following is not one of the four decisions about what evidence to gather
and how much of it to accumulate?
A) Which audit procedures to use
B) Which accounts must agree to the general ledger
C) When to perform the procedures
D) What sample size to select for a given procedure - B
Which of the following is not a characteristic of the reliability of evidence?
A) Effectiveness of client internal controls
B) Education of auditor
C) Independence of information provider
D) Timeliness - B
The auditor must gather sufficient and appropriate evidence during the course of the
audit. Sufficient evidence must:
A) be well documented and cross-referenced in the audit documents.
B) be based on sources that are external to company.
C) provide evidence that prove or disprove an audit objective/assertion.
D) be persuasive enough to enable the auditor to issue an audit report. - D
Which of the following forms of evidence would be least persuasive in forming the
auditor's opinion about marketable securities and other investments held by the
company?
A) Responses to auditor's questions by the president and controller regarding the
investments account
B) Correspondence with a stockbroker regarding the quantity of client's investments
held in street name by the broker
C) Minutes of the board of directors authorizing the purchase of stock as an investment
D) The auditor's count of marketable securities - A
Determine which of the following is most correct regarding the reliability of audit
evidence.
A) Information that is indirectly obtained from external sources is the most reliable audit
evidence.
B) Reliability of audit evidence is dependent upon the evidence being subjective.
C) Reliability of evidence refers to the amount of evidence obtained.
D) If internal controls are effective, evidence obtained is more reliable than when the
controls are not effective. - D
To be considered reliable evidence, confirmations must be controlled by:
A) the client's employee responsible for accounts receivable.
B) the external auditor.
C) the client's internal audit department.
D) the client's controller or CFO. - B
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Audit Final Exam 2022 Solved Correctly

Which of the following is not one of the four decisions about what evidence to gather and how much of it to accumulate? A) Which audit procedures to use B) Which accounts must agree to the general ledger C) When to perform the procedures D) What sample size to select for a given procedure - B Which of the following is not a characteristic of the reliability of evidence? A) Effectiveness of client internal controls B) Education of auditor C) Independence of information provider D) Timeliness - B The auditor must gather sufficient and appropriate evidence during the course of the audit. Sufficient evidence must: A) be well documented and cross-referenced in the audit documents. B) be based on sources that are external to company. C) provide evidence that prove or disprove an audit objective/assertion. D) be persuasive enough to enable the auditor to issue an audit report. - D Which of the following forms of evidence would be least persuasive in forming the auditor's opinion about marketable securities and other investments held by the company? A) Responses to auditor's questions by the president and controller regarding the investments account B) Correspondence with a stockbroker regarding the quantity of client's investments held in street name by the broker C) Minutes of the board of directors authorizing the purchase of stock as an investment D) The auditor's count of marketable securities - A Determine which of the following is most correct regarding the reliability of audit evidence. A) Information that is indirectly obtained from external sources is the most reliable audit evidence. B) Reliability of audit evidence is dependent upon the evidence being subjective. C) Reliability of evidence refers to the amount of evidence obtained. D) If internal controls are effective, evidence obtained is more reliable than when the controls are not effective. - D To be considered reliable evidence, confirmations must be controlled by: A) the client's employee responsible for accounts receivable. B) the external auditor. C) the client's internal audit department. D) the client's controller or CFO. - B

Audit Final Exam 2022 Solved Correctly

A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the: A) inherent risk. B) acceptable audit risk. C) statistical risk. D) financial risk. - B A measure of the auditor's assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client's internal control is called: A) control risk. B) acceptable audit risk. C) statistical risk. D) inherent risk. - D When dealing with audit risk: A) auditors accept some level of risk in performing the audit function. B) most risks that auditors encounter are relatively easy to measure. C) the audit risk model is only used for classes of transactions. D) most audit firms prefer to use a quantitative assessment for risk - A Initial audit planning involves four matters. Which of the following is not one of these? A) Develop an overall audit strategy. B) Request that bank balances be confirmed. C) Schedule engagement staff and audit specialists. D) Identify the client's reason for the audit. - B Most auditors assess inherent risk as high for related parties and related-party transactions because: A) of the unique classification of related-party transactions required on the balance sheet. B) of the lack of independence between the parties. C) of the unique classification of related-party transactions required on the income statement. D) it is required by generally accepted accounting principles. - B An official record of meetings of the board of directors and stockholders is included in the corporate: A) bylaws. B) charter. C) minutes. D) license. - C

Audit Final Exam 2022 Solved Correctly

Which of the following is not one of the three primary objectives of effective internal control? A) Reliability of financial reporting B) Efficiency and effectiveness of operations C) Compliance with laws and regulations D) Assurance of elimination of business risk - D Internal controls: A) are implemented by and are the responsibility of the auditors. B) consist of policies and procedures designed to provide reasonable assurance that the company achieves its objectives and goals. C) guarantee that the company complies with all laws and regulations. D) only apply to SEC companies. - B The PCAOB places responsibility for the reliability of internal controls over the financial reporting process on: A) the company's board of directors. B) the audit committee of the board of directors. C) management. D) the CFO and the independent auditors. - C Which of the following statements is most correct with respect to separation of duties? A) A person who has temporary or permanent custody of an asset should account for that asset. B) Employees who authorize transactions should not have custody of related assets. C) Employees who open cash receipts should record the amounts in the subsidiary ledgers. D) Employees who authorize transactions should have recording responsibility for these

  • B Authorizations can be either general or specific. Which of the following is not an example of a general authorization? A) Automatic reorder points for raw materials inventory B) A sales manager's authorization for a sales return C) Credit limits for various classes of customers D) A sales price list for merchandise - B Which of the following is correct with respect to the design and use of business documents? A) The documents should be in paper format. B) Documents should be designed for a single purposes to avoid confusion in their use. C) Documents should be designed to be understandable only by those who use them. D) Documents should be prenumbered consecutively to facilitate control over missing documents. - D

Audit Final Exam 2022 Solved Correctly

It is important for the CPA to consider the competence of the clients' personnel because their competence has a direct impact upon the: A) cost/benefit relationship of the system of internal control. B) achievement of the objectives of internal control. C) comparison of recorded accountability with assets. D) timing of the tests to be performed. - B When the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system, the auditor is said to be: A) tracing. B) vouching. C) performing a walk-through. D) testing controls. - C Narratives, flowcharts, and internal control questionnaires are three common methods of: A) testing the internal controls. B) documenting the auditor's understanding of internal controls. C) designing the audit manual and procedures. D) documenting the auditor's understanding of a client's organizational structure. - B How must significant deficiencies and material weaknesses be communicated to those charged with governance? A) Either oral or written communication is acceptable. B) Oral communication is required. C) Written communication is required. D) Written communication is required for material weaknesses, but oral communication is allowed for significant deficiencies. - C A system walkthrough is primarily used to help the auditor: A) test the ending account balances. B) test the details of transactions. C) determine whether internal controls are in place. D) determine whether the audit engagement should be accepted. - C When controls are deemed ineffective and assessed control risk is at the maximum for a private company, which of the following would normally be true? A) No emphasis is placed on the controls. B) Relatively little emphasis is placed on the controls. C) Moderate emphasis is placed on the controls. D) Heavy emphasis is placed on the controls. - A

Audit Final Exam 2022 Solved Correctly

D) audit risk model. - B Which of the following is an account that is not affected by the sales and collection cycle? A) Cash B) Accounts receivable C) Allowance for doubtful accounts D) Accounts payable - D The auditor's objectives for the sales and cash collections activities when the client is primarily an e-commerce business as compared to a "bricks and mortar" business are: A) unchanged. B) expanded. C) mitigated. D) decreased. - A What event initiates a transaction in the sales and collection cycle? A) Receipt of cash B) Delivery of product to a customer C) Identification of a new customer D) Customer request for goods - D What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected? A) Determination of correct delivery address B) Credit approval C) Matching of shipping document with sales invoice D) Receipt of sales order from the customer - B Most companies recognize sales revenue when: A) sales are invoiced. B) payment is received from the customer. C) goods are shipped. D) the customer's order is received. - C The total of the individual account balances in the accounts receivable subsidiary ledger should equal the: A) total sales for the period. B) balance of the sales account in the general ledger. C) total sales less the total cash received for the period. D) balance of the accounts receivable account in the general ledger. - D Credit memos are normally issued to:

Audit Final Exam 2022 Solved Correctly

A) adjust the customers balance to the amount owed to the company because of returned goods or an allowance. B) assist in the aging of accounts receivable. C) reduce customer frustration and sales losses. D) inform the customer of the balance due. - A When sales invoices are automatically calculated and posted by a computer, the auditor may be able to reduce substantive tests of transactions for which, if any, assertion? A) Accuracy B) Existence C) Completeness D) None of the above - A When assessing planned control risk for sales: A) the key internal controls and deficiencies for sales will be the same for every company. B) the audit objectives for sales will differ from company to company. C) a flowchart is required to help assess control risk for sales. D) assessing control risk for sales is a highly subjective decision. - D A sample in which the characteristics of the sample are the same as those of the population is a(n): A) variables sample. B) representative sample. C) attributes sample. D) random sample. - B There are three phases in both statistical and nonstatistical sampling. The first phase is to: A) generate random numbers for the sample. B) evaluate the results. C) plan the sample. D) select the sample. - C A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a: A) random sample. B) statistical sample. C) judgment sample. D) representative sample. - A The process which requires the calculation of an interval and then selects the items based on the size of the interval is: A) statistical sampling.

Audit Final Exam 2022 Solved Correctly

The most effective audit evidence gathered for accounts receivable is the: A) detail tie-in of the records. B) analysis of the allowance for doubtful accounts. C) confirmation of accounts receivable. D) examination of sales invoices. - C A positive confirmation is more reliable evidence than a negative confirmation because: A) fewer confirmations can be sent out. B) the auditor has a document which can be used in court. C) the debtor's lack of response indicates agreement with the stated balance. D) follow-up procedures are performed if a response is not received from the debtor. - D The auditor's primary concern relative to presentation and disclosure-related objectives is: A) accuracy. B) existence. C) completeness. D) occurrence. - C If a potential loss on a contingent liability is remote, the liability usually is: A) disclosed in footnotes, but not accrued. B) neither accrued nor disclosed in footnotes. C) accrued and indicated in the body of the financial statements. D) disclosed in the auditor's report but not disclosed on the financial statements. - B Which of the following groups has the responsibility for identifying and deciding the appropriate accounting treatment for recording or disclosing contingent liabilities? A) Auditors B) Legal counsel C) Management D) Management and the auditors - C You are auditing Rodgers and Company. You are aware of a potential loss due to non- compliance with environmental regulations. Management has assessed that there is a 40% chance that a $10M payment could result from the non-compliance. The appropriate financial statement treatment is to: A) accrue a $4 million liability. B) disclose a liability and provide a range of outcomes. C) since there is less than a 50% chance of occurrence, ignore. D) since there is greater that a remote chance of occurrence, accrue the $10 million. - B One of the primary approaches in dealing with uncertainties in loss contingencies uses a ________ threshold.

Audit Final Exam 2022 Solved Correctly

A) monetary B) materiality C) probability D) analytical - C When using the probability threshold for contingencies, the likelihood of the occurrence of the event is classified as: A) not likely, likely, or highly likely. B) remote, reasonably possible, or probable. C) slight, moderate, great. D) remote, likely, possible. - B The standard letter of inquiry to the client's legal counsel should be prepared on: A) plain paper (no letterhead) and be unsigned. B) lawyer's stationery and signed by the lawyer. C) auditor's stationery and signed by an audit partner. D) client's stationery and signed by a company official. - D The auditor has a responsibility to review transactions and activities occurring after the balance sheet date to determine whether anything occurred that might affect the statements being audited. The procedures required to verify these transactions are commonly referred to as the review for: A) contingent liabilities. B) subsequent year's transactions. C) late unusual occurrences. D) subsequent events. - D An auditor has the responsibility to actively search for subsequent events that occur subsequent to the: A) balance sheet date. B) date of the auditor's report. C) balance sheet date, but prior to the audit report. D) date of the management representation letter. - C Which of the following would be a subsequent discovery of facts which would not require a response by the auditor? A) Discovery of the inclusion of material nonexistent sales B) Discovery of the failure to write off material obsolete inventory C) Discovery of the omission of a material footnote D) Discovery of management's intent to increase selling prices in the future - D In connection with the annual audit, which of the following is not a "subsequent events" procedure? A) Prepare any necessary closing journal entries.

Audit Final Exam 2022 Solved Correctly

The audit firm issues an audit report for its client. The auditor's have NO obligation to make further inquiries with respect to the client's audited financial statements unless: A) a development occurs that may affect the company's long term viability as a company. B) final resolution was made on disclosed contingency for which no liability needed to be accrued. C) new information comes to the auditor's attention concerning an event that occurred prior to the date of the audit report that, if known, would have impacted the audit opinion. D) a lawsuit, in which the risk of loss was considered remote, was resolved in the company's favor. - C What is fraud? - Intentional misstatement of the financial statements ___________ is fraud involving theft of an entities assets? - Misappropriation of assets In the fraud triangle, fraud, financial reporting, and misappropriation of assets ____________? - Share the same three conditions Auditors need to exhibit professional skepticism, which is? - Relying on neither the dishonesty or honesty of management What is the auditor not required to ask when accessing fraud? - Is management using all assets effectively? A walkthrough is used how? - To confirm the auditor's understanding of the internal controls