Complete the mcq:
1) From which one of the following evidence-gathering audit procedures would an auditor obtain most assurance concerning the existence of inventories?
Select one:
a. Observation of physical inventory counts.
b. Auditor's re-computation of inventory extensions.
c. Confirmation of inventories in a public warehouse
d. Written inventory representations from management.
2) When designing audit procedures, the direction of tests is a crucial step in satisfying the:
Select one:
a. Valuation objective.
b. Completeness objective.
c. Classification objective.
d. Cutoff objective.
3) Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?
Select one:
a. Vouch a sample of creditor balances to supporting invoices, receiving reports, and purchase orders.
b. Compare the ratio of accounts payable to purchases with the prior year's ratio.
c. Compare cash payments occurring after the balance sheet date with the list of creditors at year-end.
d. Reconcile receiving reports with related cash payments made just prior to year-end.
4) A common test is to account for a sequence of various types of documents, such as duplicate sales invoices selected from the sales journal, watching for omitted and duplicate numbers or invoices outside the normal sequence. This test provides evidence of:
Select one:
a. Existence.
b. Completeness.
c. Neither completeness or existence.
d. Both completeness and existence.
5) The statement that best expresses the auditor's responsibility with respect to events occurring between the balance sheet date and the end of the audit examination is that:
Select one:
a. the auditor is responsible for determining that a proper cutoff has been made and performing a general review of events occurring in the subsequent period.
b. the auditor's responsibility is to determine that a proper cutoff has been made and that transactions recorded on or before the balance sheet date actually occurred.
c. the auditor has no responsibility for events occurring in the subsequent period unless these events affect transactions recorded on or before the balance sheet date.
d. the auditor is fully responsible for events occurring in the subsequent period and should extend all detailed procedures through the last day of fieldwork.
6) The audit of a financial report includes the initial approach of addressing fraud. How must an auditor address fraud in the planning stage?
Select one:
a. The auditor must not be aggressive in its initial approach to fraud as trust may be lost by the client.
b. The auditor must realise that most people are honest and not automatically assume that fraud exists when planning the audit.
c. The auditor must consider the likelihood of fraud existing in the company in the planning stage.
d. The auditor must test for fraud in the planning stage by sampling accounts.
7) In many audits of sales transactions, no substantive tests of transactions are performed for the completeness objective because:
Select one:
a. understatements of assets and income are a greater concern than overstatements.
b. overstatements of assets and income are a greater concern than understatements.
c. the unrecorded sales cause a reduction of accounts receivable; therefore, the ratios of the two financial statements will not be misleading.
d. it doesn't matter if income is understated because the savings on income tax offsets the reduced revenue and net income is correct.
8) Before releasing the audit report, the auditor should
Select one:
a. perform analytical procedures.
b. estimate the subsequent client fee for services.
c. give subsequent contingency disclosure.
d. issue a management letter.
9) If the auditor of a financial report understands internal control and assesses control risk as low, it is assumed that internal control:
Select one:
a. is considered relatively weak and will not be tested
b. has been assessed erroneously by the auditor
c. is not required to be tested as it is considered strong
d. may be tested in an attempt to support the assessment
10) The auditor considers internal control by 4 steps. What is the order for these steps:
i. Obtain an understanding of internal control.
ii. Assess control risk.
iii. Perform tests of controls.
iv. Decide on planned detection risk and substantive testing
Select one:
a. 1, 2, 3, 4
b. 2, 1, 3, 4
c. 1, 3, 2, 4
d. 4, 1, 2, 3