ACCT
444 Week 1 to 5 Quizzes
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1. (TCO 3) Prior to the passage of the Sarbanes-Oxley Act,
which of the following was responsible for establishing auditing standards?
(Points: 3)
Public Company Accounting Oversight
Board
Securities and Exchange Commission
National Association of Accounting
Auditing Standards Board
Chapter 2
2. (TCO 1) Which one of the following is not one of the three
general standards? (Points: 3)
Proper planning and supervision
Due professional care
Adequate training and proficiency
Independence of mental attitude
Chapter 2
3. (TCO 1) An independent auditor must have which of the
following? (Points: 3)
A pre-existing and well-informed
point of view with respect to the audit
Technical training that is adequate
to meet the requirements of a professional
Experience in taxation that is
sufficient to comply with generally accepted auditing standards
A background in many different
disciplines
4. (TCO 1) Any service that requires a CPA firm to issue a
report about the reliability of an assertion that is made by another party is
a(n) _____ (Points: 3)
assurance service.
attestation service.
tax service.
accounting and bookkeeping service.
Chapter 1
5. (TCO 1) Which of the following statements is incorrect
regarding the SEC’s partner rotation rules? (Points: 3)
The lead and concurring partners are
subject to a 5-year time out period.
All audit partners must rotate off
the audit engagement after 5 years.
Other audit partners are subject to
a 2-year time out period.
Small firms may be exempted from the
partner rotation requirement.
6. (TCO 3) Burrow & Co., CPAs, have provided annual audit
and tax compliance services to Mare Corp. for several years. Mare has been
unable to pay Burrow in full for services Burrow rendered 19 months ago. Burrow
is ready to begin fieldwork for the current year’s audit. Under the ethical
standards of the profession, which of the following arrangements will permit
Burrow to begin the fieldwork on Mare’s audit? (Points: 3)
Mare engages another firm to perform
the fieldwork, and Burrow is limited to reviewing the workpapers and issuing
the audit report.
Mare sets up a 2-year payment plan
with Burrow to settle the unpaid fee balance.
Mare gives Burrow an 18-month note
payable for the full amount of the past due fees before Burrow begins the
audit.
Mare commits to pay the past due fee
in full before the audit report is issued.
Chapter 2
7. (TCO 3) Independence in auditing means (Points: 3)
remaining aloof from a client.
taking an unbaised and objective
viewpoint.
not being financially dependent on a
client.
being an advocate for a client.
Chapter 4
8. (TCO 3) The financial interests of which of the following
parties would not be included as a direct financial interest of the CPA?
(Points: 3)
Dependent child
Relative supported by the CPA
Spouse
Sibling living in the same city as
the CPA
Chapter 4
9. (TCO 1) The phrase U.S. generally accepted accounting
principles is an accounting term that (Points: 3)
encompasses the conventions, rules,
and procedures necessary to define U.S. accepted accounting practice at a
particular time.
provides a measure of conventions,
rules, and procedures governed by the AICPA.
is included in the audit report to
indicate that the audit has been conducted in accordance with generally
accepted auditing standards (GAAS).
includes broad guidelines of general
application but not detailed practices and procedures.
Chapter 1
10. (TCO 1) Which of the following statements best describes the
ethical standard of the profession pertaining to advertising and solicitation?
(Points: 3)
A CPA may advertise in any manner
that is not false, misleading, or deceptive.
There are no prohibitions regarding
the manner in which CPAs may solicit new business.
All forms of advertising and
solicitation are prohibited.
A CPA may only solicit new clients
through mass mailings.
1. (TCO 3) The Sarbanes-Oxley Act applies to which of the
following companies? (Points : 3)
Privately held companies
All companies
All public companies and privately
held companies with assets greater than $500 million
Public companies
Chapter 1
Question 4. 4. (TCO 1) An
operational audit has as one of its objectives to (Points : 3)
make recommendations for improving
performance.
determine whether the financial
statements fairly present the entity’s operations.
evaluate the feasibility of
attaining the entity’s operational objectives.
report on the entity’s relative
success in attaining profit maximization.
Chapter 1
Question 5. 5. (TCO 1) Which of the
following services do not need to be preapproved by the audit committee of an
issuer? (Points : 3)
Nonaudit services related to
internal control over financial reporting
Tax services
Nonaudit services that are less than
5 % of total revenues from the audit client
Services provided by the auditor on
a recurring basis
Question 8. 8. (TCO 3) Several months
after an unqualified audit report was issued, the auditor discovered the
financial statements were materially misstated. The client’s CEO agrees that
there are misstatements, but refuses to correct them. She claims that
confidentiality prevents the CPA from informing anyone. (Points : 3)
The CEO is incorrect, but because
the audit report has been issued, it is too late.
The CEO is correct and the auditor
must maintain confidentiality.
The CEO is correct, but to be
ethically correct the auditor should violate the confidentiality rule and
disclose the error.
The CEO is incorrect, and the
auditor has an obligation to issue a revised audit report, even if the CEO will
not correct the financial statements.
Chapter 4
Question 9. 9. (TCO 1) Which of the
following terms identifies a requirement for audit evidence? (Points : 3)
Adequate
Disconfirming
Reasonable
Appropriate
Chapter 1
Question 10. 10. (TCO 1) The auditor
of an issuer may provide which of the following tax services? (Points : 3)
Tax services for immediate family
members of corporate officers
Tax planning services
Tax services for officers of the
issuer
Services related to confidential tax
transactions
5. (TCO 1) Jackson & Company, CPAs, plan to audit the
financial statements of Perigee Technologies, an issuer as defined under the
Sarbanes-Oxley Act of 2002. Which of the following situations would impair
Jackson’s independence? (Points : 3)
Discovering that Lowe, the chief
financial officer of Perigee, started his accounting career 10 years earlier as
a staff accountant for Jackson & Company and continues to maintain ties
with current partners at the firm
Provision of personal tax services
to Johnson, the accounts payable manager of Perigee
Audit of Perigee’s internal control
is performed contemporaneously with the annual financial statement audit
Preparation of Perigee’s routine
annual tax return, where Jackson’s fee will be calculated as a percentage of
the tax refund obtained
ACCT
444 Week 2 Quiz
Week
2 : Auditor Legal Liability, Fraud, & Audit Objectives – Quiz
Question 1. 1. (TCO 4) To succeed in
an action against the auditor, the client must be able to show that (Points :
3)
the auditor was fraudulent.
the auditor was grossly negligent.
there was a written contract.
there is a close causal connection
between the auditor’s behavior and the damages suffered by the client.
Chapter 5, 6 & 7
1. (TCO 4) In connection with the audit of financial
statements, an independent auditor could be responsible for failure to detect a
material fraud if (Points : 3)
statistical sampling techniques were
not used on the audit engagement.
the auditor planned the audit in a
negligent manner.
accountants performing important
parts of the work failed to discover a close relationship between the treasurer
and the cashier.
the fraud was perpetrated by one
employee who circumvented the existing internal controls.
Question 2. 2. (TCO 4) The principal
issue to be resolved in cases involving alleged negligence is usually (Points :
3)
the amount of the damages suffered
by plaintiff.
whether to impose punitive damages
on the defendant.
the level of care exercised by the
CPA.
whether defendant was involved in
fraud.
Chapter 5, 6 & 7
2. (TCO 4) The principal issue to be resolved in cases
involving alleged negligence is usually (Points : 3)
the amount of the damages suffered
by plaintiff.
whether to impose punitive damages
on the defendant.
the level of care exercised by the
CPA.
whether defendant was involved in
fraud.
Question 3. 3. (TCO 4) While
performing services for their clients, professionals have a duty to provide a
level of care that is (Points : 3)
free from judgment errors.
superior.
greater than average.
reasonable.
Chapter 5
3. (TCO 4) A third-party beneficiary is one that (Points : 3)
has failed to establish legal
standing before the court.
does not have privity of contract
and is unknown to the contracting parties.
does not have privity of contract,
but is known to the contracting parties and intended to benefit under the
contract.
may establish legal standing before
the court after a contract has been consummated.
Chapter 5
Question 4. 4. (TCO 4) Tort actions
against CPAs are more common than breach of contract actions because (Points :
3)
there are more torts than contracts.
the burden of proof is on the
auditor rather than on the person suing.
the person suing need prove only
negligence.
the amounts recoverable are normally
larger.
Chapter 5
Question 5. 5. (TCO 4) The
responsibility for adopting sound accounting policies and maintaining adequate
internal control rests with the (Points : 3)
board of directors.
company management.
financial statement auditor.
company’s internal audit department.
Chapter 6
Question 6. 6. (TCO 3) Which of the
following is not one of the reasons that auditors provide only reasonable
assurance on the financial statements? (Points : 3)
The auditor commonly examines a
sample, rather than the entire population of transactions.
Accounting presentations contain
complex estimates, which involve uncertainty.
Fraudulently prepared financial
statements are often difficult to detect.
Auditors believe that reasonable
assurance is sufficient in the vast majority of cases.
Chapter 6
6. (TCO 3) Which of the following statements is most correct
regarding errors and fraud? (Points : 3)
An error is unintentional, whereas
fraud is intentional.
Frauds occur more often than errors
in financial statements.
Errors are always fraud and frauds
are always errors.
Auditors have more responsibility
for finding fraud than errors.
Question 7. 7. (TCO 3) Which of the
following is not one of the factors of the fraud triangle? (Points : 3)
Incentives/pressures
Attitudes/rationalization
Opportunities
Psychological make-up
Chapter 5 or 11
7. (TCO 3) In the fraud triangle, fraudulent financial
reporting and misappropriation of assets (Points : 3)
share little in common.
share most of the same risk factors.
share the same three conditions.
share most of the same conditions.
Chapter 11
Question 8. 8. (TCO 3) Fraudulent
financial reporting may be accomplished through the manipulation of (Points :
3)
assets.
liabilities.
revenues.
all of the above.
Chapter 11
8. (TCO 3) Because of the risk of material misstatements due to
fraud, an audit of financial statements in accordance with generally accepted
auditing standards should be performed with an attitude of (Points : 3)
objective judgment.
impartial conservatism.
independent integrity.
professional skepticism.
Chapter 11
Question 9. 9. (TCO 3) Which of the
following is a factor that relates to attitudes or rationalization to commit
fraudulent financial reporting? (Points : 3)
Significant accounting estimates
involving subjective judgments
Excessive pressure for management to
meet debt repayment requirements
Management’s practice of making
overly aggressive forecasts
High turnover of accounting,
internal audit and information technology staff
Chapter 11
Question 10. 10. (TCO 3) Auditor
responses to fraud risks include which of the following? (Points : 3)
Change the overall conduct of the
audit to respond to identified fraud risks.
Design and perform audit procedures
to address identified risks.
Perform procedures to address the
risk of management override of controls.
All of the above.
Chapter 11
10. (TCO 3) Which of the following characteristics is most
likely to heighten an auditor’s concern about the risk of material
misstatements, due to fraud in an entity’s financial statements? (Points : 3)
Employees who handle cash receipts
are not bonded.
The entity’s industry is
experiencing declining customer demand.
Internal auditors have direct access
to the board of directors and the entity’s management.
The board of directors is active in
overseeing the entity’s financial reporting policies.
Chapter 11
ACCT
444 Week 3 Quiz
Week 3 : Audit Evidence, Planning,
Risk, & Materiality – Quiz
1. (TCO 6) Physical examination is the inspection or count by
the auditor of items such as (Points : 3)
cash or inventory only.
cash, inventory, canceled checks,
and sales documents.
cash, inventory, canceled checks,
and tangible fixed assets.
cash, inventory, securities, notes
receivable, and tangible fixed assets.
Chapter 7
1. (TCO 6) The distinction between physical examination of
assets and examination of documents is dependent on the item being examined. If
the object being examined has no inherent value, the evidence is called (Points
: 3)
documentation.
physical examination.
confirmation.
none of the above.
Chapter 7
1. (TCO 6) Which of the following statements regarding
documentation is not correct? (Points : 3)
Documentation includes examining
client records, such as general ledgers and supporting journals.
Internal documents are documents
that are generated within the company and used to communicate with external
parties.
External documents are documents
that are generated outside of the company and are used to communicate the
results of a transaction.
All of the above are correct statements
Chapter 7
2. (TCO 6) Which of the following is not a purpose of
analytical procedures? (Points : 3)
Understand the client’s industry
Assess the client’s ability to
continue as a going concern
Identify misstatements
Reduce detailed audit tests
Chapter 7
2. (TCO 6) Analytical procedures are (Points : 3)
diagnostic tests of financial
information that may not be classified as evidential matter.
calculations of financial
information made by a computer.
substantive tests of financial
information made by a study and comparison of relationships among data.
statistical tests of financial
information designed to identify areas requiring intensive investigation.
Chapter 7
2. (TCO 6) When analytical procedures reveal no unusual
fluctuations, the implication is that (Points : 3)
there are no material errors or
irregularities.
there are no material errors.
there are no material
irregularities.
the possibility of a material error
or irregularity is lessened.
Chapter 7
3. (TCO 6) The Auditing Standards Board has concluded that
analytical procedures are so important that they are required during (Points :
3)
planning and testing phases.
planning and completion phases.
testing and completion phases.
planning, testing, and completion
phases.
Chapter 7
3. (TCO 6) The primary purpose of performing analytical
procedures in the testing phase of an audit is to (Points : 3)
help the auditor obtain an
understanding of the client’s industry and business.
assess the going concern assumption.
indicate possible misstatements.
reduce detailed tests.
Chapter 7
3. (TCO 6) Which of the following statements regarding
analytical procedures is not correct? (Points : 3)
The definition of analytical tests
emphasizes a comparison of client’s data to GAAP.
Analytical procedures are required on
all audits.
Analytical procedures can be used as
substantive tests.
For certain accounts with small
balances, analytical procedures alone may be sufficient evidence.
Chapter 7
4. (TCO 6) Which of the following statements about confirmation
is true? (Points : 3)
Confirmations are expensive and so
are often not used.
Confirmations may inconvenience
those asked to supply them, but they are widely used.
Confirmations are sometimes not
reliable and so auditors use them only as necessary.
None of the above statements are
true.
Chapter 7
4. (TCO 6) Three common types of confirmations used by auditors
are (1) negative confirmations where only a response is requested if the debtor
disagrees with the amount, (2) positive confirmations with a request for
information where the debtor is requested to respond and to include their
believed balance, and (3) positive confirmations with the information included
where the debtor is requested to respond and to confirm the balance we give
them. If they were placed in the order of their competence, from highest to
lowest, the sequence would be (Points : 3)
3, 1, 2.
1, 2, 3.
3, 2, 1.
2, 3, 1.
Chapter 7
4. (TCO 6) Traditionally, confirmations are used to verify
(Points : 3)
individual transactions between
organizations, such as sales transactions.
bank balances and accounts
receivables.
fixed asset additions.
All of the above
Chapter 7
5. (TCO 7) The major concern when using nonfinancial data in
analytical procedures is the (Points : 3)
accuracy of the nonfinancial data.
source of the nonfinancial data.
type of nonfinancial data.
presence of multiple sources of
nonfinancial data.
Chapter 8
5. (TCO 7) Analytical procedures used in planning an audit
should focus on identifying (Points : 3)
material weaknesses of internal
control.
the predictability of financial data
from individual transactions.
the various assertions that are
embodied in the financial statements.
areas that may represent specific
risks relevant to the audit.
Chapter 8
5. (TCO 7) Which of the following is correct with respect to
the use of analytical procedures? (Points : 3)
Analytical procedures may be used in
evaluating balances in the testing phase as long as the auditor also uses them
in assessing the going concern assumption.
Analytical procedures must be used
throughout the audit.
Analytical procedures used in the
testing phase of the audit are primarily used to direct an auditor’s attention
so that the auditor’s understanding of the business is improved.
None of the above
Chapter 8
6. (TCO 7) 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 (Points : 3)
inherent risk.
acceptable audit risk.
statistical risk.
financial risk.
Chapter 8
6. (TCO 7) When inherent risk is high, there will need to be
(Points : 3)
more evidence accumulated.
more experienced staff assigned to
the work.
either a or b, but not both.
both a and b.
Chapter 8
6. (TCO 7) 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 (Points : 3)
acceptable audit risk.
control risk.
inherent risk.
statistical risk.
Chapter 8
7. (TCO 7) What is the responsibility of a successor auditor
with respect to communicating with the predecessor auditor in connection with a
prospective new audit client? (Points : 3)
The successor auditor has no
responsibility to contact the predecessor auditor.
The successor auditor should obtain
permission from the prospective client to contact the predecessor auditor.
The successor auditor should contact
the predecessor regardless of whether the prospective client authorizes
contact.
The successor auditor need not
contact the predecessor if the successor is aware of all available relevant
facts.
Chapter 8
7. (TCO 7) A successor auditor may perform which of the
following for a new audit client? (Points : 3)
Speak to local attorneys, banks, and
other businesses regarding the company’s reputation
Speak to the predecessor auditor
about disagreements they had with management
Interview client personnel to better
understand the business and associated risks
All of the above
Chapter 8
7. (TCO 7) Which of the following is not correct regarding the
communications between successor and predecessor auditors? (Points : 3)
The burden of initiating the
communication rests with the predecessor auditor.
The burden of initiating the
communication rests with the successor auditor.
The predecessor auditor must receive
their former client’s permission prior to divulging information to the
successor auditor.
The predecessor auditor may choose
to provide a limited response to a successor auditor.
Chapter 8
8. (TCO 8) The FASB definition of materiality emphasizes what
class of financial statement users? (Points : 3)
Regulators
Informed investors
Reasonable persons
Potential investors
Chapter 9
8. (TCO 8) Auditors are responsible for determining whether
financial statements are materially misstated, so upon discovering a material
misstatement, they must bring it to the attention of (Points : 3)
regulators.
the audit firm’s managing partner.
no one in particular.
the client’s management.
Chapter 9
8. (TCO 8) The preliminary judgment about materiality is the
_____ amount by which the auditor believes the statements could be misstated
and still not affect the decisions of reasonable users. (Points : 3)
minimum
maximum
mean average
median average
Chapter 9
9. (TCO 8) In setting materiality guidelines for current
assets, the two standard setters, FASB and the AICPA, provide the following
guidelines to practitioners (Points : 3)
Both agree that materiality should
be set at an amount greater than 10% of current assets.
FASB’s guideline is greater than
10%, but the AICPA’s is greater than 5%.
Both agree that it should be greater
than 5%.
No specific materiality guidelines
are provided by either of them.
Chapter 9
9. (TCO 8) Auditors are _____ to decide on the combined amount
of misstatements in the financial statements that they would consider material
early in the audit. (Points : 3)
permitted
required
not allowed
strongly encouraged
Chapter 9
9. (TCO 8) When auditors allocate the preliminary judgment
about materiality to account balances, the materiality allocated to any given
account balance is referred to as (Points : 3)
the materiality range.
the error range.
tolerable materiality.
tolerable misstatement.
Chapter 9
10. (TCO 8) Which of the following is not a correct statement regarding
the allocation of the preliminary judgment about materiality to balance sheet
accounts? (Points : 3)
Auditors expect certain accounts to
have more misstatements than others.
The allocation has virtually no
effect on audit costs because the auditor must collect sufficient appropriate
audit evidence.
Auditors expect to identify
overstatements as well as understatements in the accounts.
Relative audit costs affect the
allocation.
Chapter 9
10. (TCO 8) Which of the following elements ultimately determines
the specific auditing procedures that are necessary in the circumstances to
afford a reasonable basis for an opinion? (Points : 3)
Inherent risk
Materiality
Auditor judgment
Reasonable assurance
Chapter 9
10. (TCO 8) Why do auditors establish a preliminary judgment
about materiality? (Points : 3)
To determine the appropriate level
of audit experience required for the work
So that the client can know what
records to make available to the auditor
To plan the appropriate audit
evidence to accumulate and develop an overall audit strategy
None of the above
Chapter 9
ACCT
444 Week 4 Quiz
1. (TCO 5) Which of the following is responsible for
establishing internal controls for a public company? (Points : 3)
Management
Financial statement auditors
Management and auditors
Committee of Sponsoring
Organizations
1. (TCO 5) Which of the following parties provides an
assessment of the effectiveness of internal control over financial reporting
for public companies? (Points : 3)
Management
Financial statement auditors
Management and the financial
statement auditors
Committee of Sponsoring
Organizations
1. (TCO 5) Which of the following is responsible for
establishing a private company’s internal control? (Points : 3)
Management
Auditors
Management and auditors
Committee of Sponsoring
Organizations
2. (TCO 5) Which section of the Sarbanes-Oxley Act requires
management to issue an internal control report? (Points : 3)
202
203
404
408
2. (TCO 5) Sarbanes-Oxley requires management to issue an
internal control report that includes two specific items. Which of the
following is one of these two requirements? (Points : 3)
A statement that management is
responsible for establishing and maintaining an adequate internal control
structure and procedures for financial reporting
A statement that management and the
board of directors are jointly responsible for establishing and maintaining an
adequate internal control structure and procedures for financial reporting
A statement that management, the
board of directors, and the external auditors are jointly responsible for
establishing and maintaining an adequate internal control structure and
procedures for financial reporting
None of the above
2. (TCO 5) Internal control reports issued by public companies
must identify the framework used to evaluate the effectiveness of internal
control. Which of the following is the most common framework in the U.S.?
(Points : 3)
Effective Internal Control
Framework-AICPA
Internal Control-Integrated
Framework-COSO
Enterprise Internal Control-COSO
There is no common framework used in
the U.S.
3. (TCO 5) Which of the following activities would be least
likely to strengthen a company’s internal control? (Points : 3)
Separating accounting from other
financial operations
Maintaining insurance for fire and
theft
Fixing responsibility for the
performance of employee duties
Carefully selecting and training
employees
3. (TCO 5) Management’s tests of operating effectiveness might
include which of the following types of procedures? (Points : 3)
Inspection of relevant documentation
Inquiries of personnel
Reperformance of the application of
controls
All of the above
3. (TCO 5) Which of management’s concerns with respect to
implementing internal controls is the auditor primarily concerned? (Points : 3)
Efficiency of operations
Reliability of financial reporting
Effectiveness of operations
Compliance with applicable laws and
regulations
4. (TCO 5) Internal controls can never be regarded as
completely effective. Even if company personnel could design an ideal system,
its effectiveness depends on the (Points : 3)
adequacy of the computer system.
proper implementation by management.
ability of the internal audit staff
to maintain it.
competency and dependability of the
people using it.
4. (TCO 5) Even with the most effectively designed internal
control, the auditor must obtain audit evidence, beyond testing the controls,
for every (Points : 3)
transaction.
financial statement account.
material financial statement
account.
financial statement account that
will be relied upon by third parties.
4. (TCO 5) The essence of an effectively controlled
organization lies in the (Points : 3)
effectiveness of its independent
auditor.
effectiveness of its internal
auditor.
attitude of its employers.
attitudes of its management.
5. (TCO 5) Which of the following is not one of the levels of
an absence of internal controls? (Points : 3)
Major deficiency
Material weakness
Significant deficiency
Control deficiency
5. (TCO 5) To determine if a significant internal control
deficiency or deficiencies are a material weakness, they must be evaluated on
their (Points : 3)
likelihood.
materiality or significance.
both A and B are correct.
neither A nor B is correct.
6. (TCO 10) Which of the following is not a benefit of using
IT-based controls? (Points : 3)
Ability to process large volumes of
transactions
Ability to replace manual controls
with computer-based controls
Reduction in misstatements due to
consistent processing of transactions
Over-reliance on computer-generated
reports
6. (TCO 10) Which of the following is not a risk to IT systems?
(Points : 3)
Need for IT experience
Separation of IT duties
Improved audit trail
Hardware and data vulnerability
6. (TCO 10) Which of the following is not a risk specific to IT
environments? (Points : 3)
Reliance on the functioning
capabilities of hardware and software
Increased human involvement
Loss of data due to insufficient
backup
Reduced segregation of duties
7. (TCO 10) Which of the following IT duties should be
separated from the others? (Points:3)
Systems development
Operations
Data control
All of the above
7. (TCO 10) The extent to which IT duties are separated in an
organization depends on (Points : 3)
the organization’s size.
the organization’s complexity.
both A and B.
neither A nor B.
7. (TCO 10) Programmers should do all but which of the
following? (Points : 3)
Test programs for proper performance
Evaluate legitimacy of transaction
data input
Develop flowcharts for new applications
Programmers should perform each of
the above
8. (TCO 10) Which of the following is a category of general
controls? (Points : 3)
Processing controls
Output controls
Physical and online security
Input controls
8. (TCO 10) General controls include all of the following
except (Points : 3)
systems development.
online security.
processing controls.
hardware controls.
8. (TCO 10) Which of the following is least likely to be used
in obtaining an understanding of client general controls? (Points : 3)
Examination of system documentation
Inquiry of client personnel (e.g.
key users)
Observation of transaction
processing
Reviews of questionnaires completed
by client IT personnel
9. (TCO 10) Controls that apply to a specific element of the
system are called (Points : 3)
user controls.
general controls.
systems controls.
application controls.
9. (TCO 10) A control that relates to all parts of the IT
system is called a(n) (Points : 3)
general control.
systems control.
universal control.
applications control.
9. (TCO 10) Auditors should evaluate the _____ before
evaluating application controls because of the potential for pervasive effects.
(Points : 3)
input controls
control environment
processing controls
general controls
10. (TCO 10) Which of the following is not an example of an
application control? (Points: 3)
An equipment failure causes system
downtime.
There is a preprocessing
authorization of the sales transactions.
There are reasonableness tests for
the unit selling price of a sale.
After processing, all sales
transactions are reviewed by the sales department.
10. (TCO 10) Which of the following is not a category of an
application control? (Points : 3)
Processing controls
Output controls
Hardware controls
Input controls
10. (TCO 10) Which of the following statements related to
application controls is correct? (Points : 3)
Application controls relate to
various aspects of the IT function, including software acquisition and the
processing of transactions.
Application controls relate to
various aspects of the IT function, including physical security and the
processing of transactions in various cycles.
Application controls relate to all
aspects of the IT function.
Application controls relate to the
processing of individual transactions.
ACCT
444 Week 5 Quiz
1. (TCO 6) The auditor looks for an indication on duplicate
sales invoices to see whether the invoices have been verified. This is an
example of (Points : 3)
a test of details of balances.
a test of control.
a substantive test of transactions.
both a test of control and a
substantive test of transactions.
1. (TCO 6) Tests of controls may include which of the following
types of evidence? (Points : 3)
Observation
Reperformance
Inquiries
All of the above
1. (TCO 6) For efficiency, tests of controls are frequently
done at the same time as (Points : 3)
analytical procedures.
compliance tests.
tests of transactions.
tests of details of balances.
2. (TCO 6) Analytical procedures are defined in the auditing
standards as (Points : 3)
compliance tests.
substantive tests.
tests of controls.
helpful procedures not possessing
the validity of other tests available to the auditor.
2. (TCO 6) Which of the following is not a direct result of
performing analytical procedures? (Points : 3)
Identify areas of potential misstatements.
Reduce detailed audit risk.
Understand the client’s business.
Identify specific errors in the
accounts.
2. (TCO 6) Analytical procedures may be classified as being
primarily (Points : 3)
tests of controls.
substantive tests.
tests of ratios.
tests of details of balances.
3. (TCO 6) Which of the following audit tests is usually the
least costly to perform? (Points : 3)
Analytical procedures
Tests of controls
Tests of balances
Substantive tests of transactions
3. (TCO 6) Which of the following audit tests is usually the
most costly to perform? (Points : 3)
Analytical procedures
Tests of controls
Tests of balances
Substantive tests of transactions
4. (TCO 6) Which of the following tests commonly occur
together? (Points : 3)
Substantive tests of transactions
and tests of controls
Substantive tests of transactions
and obtaining an understanding of internal controls
Analytical procedures and tests of
controls
All of the above
4. (TCO 6) Which of the following relationships between types
of tests and audit evidence is not correct? (Points : 3)
Tests of details and documentation
Tests of controls and observation
Tests of details and observation
Substantive tests of transactions
and reperformance
5. (TCO 6) The sequence of steps in gathering evidence as the
basis of the auditor’s opinion are (Points : 3)
substantive tests, initial
assessment of control risk, and tests of controls.
initial assessment of control risk,
substantive tests, and tests of controls.
initial assessment of control risk,
tests of controls, and substantive tests.
tests of controls, initial
assessment of control risk, and substantive tests.
5. (TCO 6) The purpose of tests of controls is to provide
reasonable assurance that the (Points : 3)
accounting treatment of transactions
and balances is valid and proper.
internal control procedures are
functioning as intended.
entity has complied with GAAP
disclosure requirements.
entity has complied with
requirements of quality control.
6. (TCO 9) It is important that sales be billed and recorded in
the journal as soon as possible after (Points : 3)
the order is received.
the order is received and credit is
approved.
credit is approved and it is
verified that there is enough inventory to fill the order.
the shipment takes place.
6. (TCO 9) The use of prenumbered sales invoices is meant to
prevent (Points : 3)
the failure to bill or record sales.
duplicate billings and recording of
sales.
both A and B are correct.
neither A nor B is correct.
6. (TCO 9) Prenumbered documents will only be useful for
control purposes if (Points : 3)
a different numerical sequence is
used for each company.
the sequence is accounted for
periodically.
employees do not have access to the
complete sequence.
All of the above
7. (TCO 9) Which one of the following is not an auditor’s
concern about a key authorization point in the sales or collection cycle?
(Points : 3)
The receiving room must have
authorization before releasing items to inventory control.
Credit must be authorized before the
sale.
Goods must be shipped after the
authorization.
Prices must be authorized.
7. (TCO 9) At which point in an ordinary sales transaction
would a lack of specific authorization be of least concern to the auditor?
(Points : 3)
Granting of credit
Shipment of goods
Determination of discounts
Selling of goods for cash
8. (TCO 9) The credit-granting functions should be separated
from which of the following? (Points : 3)
Purchasing functions
Manufacturing function
Sales function
None of the above
9. (TCO 9) When designing substantive tests of transactions for
sales, the auditor is concerned with the possibility of several types of
misstatements. Which of the following is not one of the types of these
misstatements? (Points : 3)
Sales being included in the journal for
which no shipment was made
Sales to related parties, such as
officers and subsidiaries
Sales recorded more than once
Shipments being made to nonexistent
customers and recorded as sales
10. (TCO 9) A key internal control in the sales and collection
cycle is the separation of duties between cash handling and record keeping. The
objective most directly associated with this control is to verify that (Points
: 3)
cash receipts recorded in the cash
receipts journal are reasonable.
cash receipts are properly classified.
recorded cash receipts result from
legitimate transactions.
existing cash receipts are recorded.
10. (TCO 9) Which one of the following would the auditor
consider to be an incompatible operation if the cashier receives remittances
from the mailroom? (Points : 3)
The cashier prepares the daily
deposit.
The cashier makes the deaily deposit
at a local bank.
The cashier posts the receipts to
the accounts receivable subsidiary ledger cards.
The cashier endorses the checks.
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