Midterm test 2 (90 m)
No 1. Multiple choices
1. Which of the following deal with ongoing or periodic assessment of quality of internal
control by management?
a. Quality control activities
b. Monitoring activities
c. Oversight activities
d. Management activities
2. Which of the following assertions is described as "this assertion addresses whether all
transactions that should be included in the financial statements are in fact included"?
A) occurrence
B) completeness
C) rights and obligations
D) existence
3. The evaluations of financial information through analysis of plausible relationships
among financial and nonfinancial data is the definition of
A) analytical procedures.
B) tests of transactions.
C) tests of balances.
D) auditing.
4. Audit evidence has two primary qualities for the auditor; relevance and reliability.
Given the choices below, which provides the auditor with the most reliable audit
evidence?
A) general ledger account balances
B) confirmation of accounts receivable balance received from a customer
C) internal memo explaining the issuance of a credit memo
D) copy of month-end adjusting entries
5. Which of the following circumstances most likely would cause an auditor to consider
whether material misstatements exist in an entity’s financial statements?
a. Management places little emphasis on meeting earnings projections.
b. The board of directors makes all major financing decisions.
c. Reportable conditions previously communicated to management are not corrected.
d. Transactions selected for testing are not supported by proper documentation.
6. Which of the following types of evidence would an auditor most likely examine to
determine whether controls are operating as designed?
a. Confirmations of receivables verifying account balances.
b. Letters of representations corroborating inventory pricing.
c. Attorneys’ responses to the auditor’s inquiries.
d. Client records documenting the use of computer programs
7. An auditor uses the knowledge provided by the understanding of internal control and
the final assessed level of control risk primarily to determine the nature, timing and extent
of the:
