Audit Chapter 13 Arens

Front 1

What type of evidence should be gathered in testing controls?

Back 1

Personal inquiries, Re-performing of client procedures, Review of documents

Front 2

Which of the following is a type of substantive test:

Back 2

Substantive tests of transactions

Front 3

Comparing auditors expectations with recorded amounts is an example of:

Back 3

Analytical procedures

Front 4

Rank the following evidences in terms of lowest cost to the highest cost:

Back 4

Analytical procedures, Test of controls, and Substantive tests of transaction

Front 5

As internal controls become more effective, the level of substantive tests:

Back 5

Decrease

Front 6

Auditing standard__________ provides guidance for auditors of entities that transmit processes, maintain, or access significant information electronically.

Back 6

AU 326, AU 101

Front 7

When designing tests of details of balances for accounts receivable, an auditor should:

Back 7

Perform analytical procedures, Indentify business risk, Assess control risk

Front 8

Presentation and disclosure related audit objectives are conducted in ____________ of the audit process.

Back 8

Phase IV

Front 9

Phase IV of the audit process includes:

Back 9

Evaluate results

Front 10

A combination of different types of audit evidence in response to different levels of risk refers to:

Back 10

Evidence mix

Front 11

T/F
It is not necessary for an auditor to understand the entity or its environment if the entity's internal controls are adequate.

Back 11

False

Front 12

T/F
When testing for dollar misstatements, the auditor uses substantive tests.

Back 12

True

Front 13

T/F
The primary accounts associated with tests of details of balances are the revenue and expense accounts.

Back 13

False

Front 14

T/F
Different evidence has different costs of acquiring.

Back 14

True

Front 15

T/F
Analytical procedures provide direct evidence that there are material misstatements in the financial statements.

Back 15

False

Front 16

T/F
Auditors must rely more on test of controls when a substantial amount of audit evidence exists in electronic form.

Back 16

True

Front 17

T/F
The same audit tests should be used for every audit.

Back 17

False

Front 18

T/F
Different types of audit procedures are combined to perform an audit program.

Back 18

True

Front 19

T/F
There are ten phases to the audit process.

Back 19

False

Front 20

T/F
An auditor should evaluate results during Phase IV of the audit process.

Back 20

True

Front 21

Tests of controls
+ Substantive tests of Transactions
+ Analytical Procedures
+Tests of Detail Balances
_____________________
Sufficient appropriate evidence

Back 21

Farther Audit Procedures

relates to the Audit Risk Model
AAR/(IR*CR)=PDR

Front 22

make inquiries of appropriate personnel
Examine documents, records and reports
Observe control-related activities
Reperform client procedures
Are all examples of which type of test?

Back 22

Tests of controls

Front 23

What does additional evidence required for tests of controls depend on?

Back 23

-the extent of the evidence obtained in gaining the understanding of internal control
-the planned reduction in control risk

Front 24

Substantive tests are procedures designed to test what?

Back 24

Dollar misstatements or monetary misstatements

Front 25

Name 3 types of substantive tests

Back 25

substantive tests of transactions, substantive analytical procedures, and tests of details of balance

Front 26

name 6 transaction related audit objectives

Back 26

recorded sales transactions exist
(occurrence)
existing sales transactions are recorded
(completeness)
(accuracy)
(classification)
(timing)

Front 27

What is an analytical procedure?
Name an example

Back 27

comparison of recorded amounts to expectations developed by the auditor.
i.e. the A/R balance is a debit balance

Front 28

Name the 2 most important purposes of analytical procedures in the audit of account balances

Back 28

-indicate possible misstatements in the financial statements
-provide substantive evidence

Front 29

What do tests of details of balances focus on?

Back 29

the ending ledger balances for both the balance sheet and income statement

Front 30

The auditor looks for indication on duplicate sales invoices to see whether the invoices have been verified. This is an example of

Back 30

a test of controls

Front 31

Analytical procedures may be classified as primarily which kind of test?

Back 31

Substantive test

Front 32

The auditor faces a risk that the audit will not detect material misstatements that occur in the accounting process. To minimize this risk, the auditor relies primarily on what kind of test?

Back 32

substantive tests

Front 33

What order are these steps performed?
1) Determining the internal controls that should prevent or detect errors and fraud.
2) Identifying control deficiencies to determine their effect on the nature, timing, or extent of auditing procedures to be applied and suggestions to be made to the client.
3.) Determining whether the necessary internal control procedures are prescribed and are being followed. satisfactorily.
4) Considering the types of errors and fraud that can occur.

Back 33

Considering the types of errors and fraud that can occur.
Determining the internal controls that should prevent or detect errors and fraud.
Determining whether the necessary internal control procedures are prescribed and are being followed.
Identifying control deficiencies to determine their effect on the nature, timing, or extent of auditing procedures to be applied and suggestions to be made to the client.
4,1,3,2

Front 34

T/F
Tests of controls include observations of the proper segregation of duties

Back 34

True

Front 35

To support the auditors initial assessment of control risk below maximum, the auditor performs procedures to determine that the internal controls are operating effectively. what type of the audit procedure is the auditor performing?

Back 35

Tests of controls

Front 36

T/F
The primary objective of performing tests of controls is to obtain a reasonable degree of assurance that the client's internal controls are operating effectively on a consistent basis throughout the year.

Back 36

True

Front 37

Examining checks is which type of control audit procedure?

Back 37

Test of control

Front 38

Documentation, observation, inquires of the client and re-performance are all types of which audit procedure?

Back 38

Tests of controls

Front 39

Documentation, inquires of the client, re-performance and rec-calculation are all types of which audit procedure?

Back 39

Substantive tests of transactions

Front 40

Inquires of the client, and analytical procedures are all which type of audit procedure?

Back 40

Analytical procedures

Front 41

Physical Examination, Confirmation, Documentation, Inquires of the client, re-performance and re-calculation are all types of which audit procedure?

Back 41

Tests of details of balances

Front 42

T/F
One difference between procedures used to obtain an understanding of internal control and procedures used to test controls is that tests of controls are more extensive.

Back 42

True

Front 43

Which of the following is ordinarily designed to detect possible material dollar errors on the financial statements?
a. Tests of controls.
b. Analytical review procedures.
c. Computer controls.
d. None of the above

Back 43

Analytical review procedures.

Front 44

T/F
An exception in a test of control provides only an indication of the likelihood of monetary misstatements in the financial statements because tests of controls do not reveal whether monetary misstatements have actually occurred.

Back 44

True

Front 45

4) Which of the following ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion?
a. The audit program.
b. The auditor’s judgment.
c. Generally accepted auditing standards.
d. The auditor’s working papers.

Back 45

The auditor’s judgment.

Front 46

T/F
Under normal circumstances, there should be no variation in the audit evidence mix from cycle to cycle for a given audit engagement

Back 46

False

Front 47

Only _______ involve physical examination and confirmation.
a. tests of controls
b. tests of transactions
c. tests of balances
d. analytical procedures

Back 47

tests of balances

Front 48

T/F
The extent of tests of details of balances can be reduced when transaction-related audit objectives have been satisfied by tests of controls or substantive tests of transactions.

Back 48

True

Front 49

Which of the following is not a valid basis for omitting an audit test?
a. the difficulty and expense involved in testing a particular item.
b. the relative risk involved.
c. the degree of reliance on the relevant internal controls.
d. the relationship between the cost of obtaining evidence and its usefulness

Back 49

the difficulty and expense involved in testing a particular item

Front 50

T/F
If inherent risk is decreased from medium to low, tests of details of balances can be reduced.

Back 50

True

Front 51

Which of the following tests commonly occur together?
a. Substantive tests of transactions and tests of controls.
b. Substantive tests of transactions and obtaining an understanding of internal controls.
c. Analytical procedures and tests of controls.
d. Tests of controls and tests of details of balances.

Back 51

Substantive tests of transactions and tests of controls

Front 52

T/F
Analytical procedures are the least expensive type of audit test

Back 52

True