Complete the following problem:
1 -An auditor compares 2002 revenues and expenses with those of the prior year and investigates all changes exceeding 10%. By this procedure the auditor would be most likely to learn that
A: An increase in property tax rates has not been recognized in the client's accrual.
B: The 2002 provision for uncollectible accounts is inadequate because of worsening economic conditions.
C: Fourth quarter payroll taxes were not paid.
D: The client changed its capitalization policy for small tools in 2002.
2 - Which of the following factors would least influence an auditor's consideration of the reliability of data for purposes of analytical procedures?
A: Whether the data were processed in a computerized system or in a manual accounting system.
B: Whether sources within the entity were independent of those who are responsible for the amount being audited.
C: Whether the data were subjected to audit testing in the current or prior year.
D: Whether the data were obtained from independent sources outside the entity or from sources within the entity.
3 - Which of the following analytical procedures should be applied to the income statement?
A: Select sales and expense items and trace amounts to related supporting documents.
B: Ascertain that the net income amount in the statement of cash flows agrees with the net income amount in the income statement.
C: Obtain from the proper client representatives, the beginning and ending inventory amounts that were used to determine costs of sales
D: Compare the actual revenues and expenses with the corresponding figures of the previous year and investigate significant differences.
4 - Analytical procedures used in planning an audit should focus on identifying
A: Material weaknesses in internal control.
B: The predictability of financial data from individual transactions.
C: The various assertions that are embodied in the financial statements.
D: Areas that may represent specific risks relevant to the audit.
5 -Which of the following is ordinarily designed to detect possible material dollar misstatements in the financial statements?
A: Tests of controls.
B: Analytical procedures.
C: Information technology controls.
D: Postaudit working paper review.
6 - An auditor's analytical procedures performed during the overall review stage indicated that the client's accounts receivable had doubled since the end of the prior year. However, the allowance for doubtful accounts as a percentage of accounts receivable remained about the same. Which of the following client explanations most likely would satisfy the auditor?
A: The client liberalized its credit standards in the current year and sold much more merchandise to customers with poor credit ratings.
B: Twice as many accounts receivable were written off in the prior year than in the current year.
C: A greater percentage of accounts receivable were currently listed in the "more than 90 days overdue" category than in the prior year.
D: The client opened a second retail outlet in the current year and its credit sales approximately equaled the older, established outlet.