1.

Which of the following statements is most correct regarding the primary purpose of audit
procedures?
a. To detect all errors or fraudulent activities as well as illegal activities
b. To comply with the SEC
c. To gather corroborative evidence
d. To determine the amount of errors in the balance sheet accounts in order to adjust the
accounts to actual

2. A procedure designed to test for monetary misstatement directly affecting the validity of the
financial statement balances is a:
a. test of controls
b. substantive test
c. test of attributes
d. monetary-unit sampling test

3.Below are the five types of tests which auditors use to determine whether financial
statements are fairly stated. Which three are substantive tests?
1. risk assessment procedures
2. tests of controls
3. tests of transactions
4. analytical procedures
5. tests of details of balances
a. 1, 2, and 3.
b. 3, 4, and 5
c. 2, 3, and 5.
d. 2, 3, and 4.
4. Which of the following is true?
a. tests of details of balances focus on the ending balances of accounts in the client's
trial balance
b. tests of details of balances focus on the transactions during the period
c. test of details of balances focus on the auditor’s understanding of internal controls
d. tests of details of balances focus on comparisons of recorded amounts to expectations
developed by the auditor

5. In the context of an audit of financial statements, substantive tests are audit procedures
that
a. May be eliminated under certain conditions.
b. Are designed to discover significant subsequent events.
c. May be either tests of transactions, direct test of financial balances, or analytical test
d. Will increase proportionately with the auditor's assessment of control risk.

6. The primary emphasis in most test of details of balances is on the

a. Balance sheet accounts
b. Revenue accounts
c. Cash flow statement accounts
d. Expense accounts

7. Evidence is usual more persuasive for balance sheet accounts when it is obtained:
a. as close to the balance sheet date as possible
b. only from transactions occurring on the balance sheet date
c. from various times throughout the client's year.
d. from the time period when transactions in that account were most numerous during
the fiscal period
8. Auditors try to identify predictable relationships when using analytical procedures.
Relationships involving transactions from which of the following accounts most likely would
yield the highest level of evidence?
a. Accounts payable
b. Accounts receivable
c. Advertising expense
d. Interest expense

9. Auditors sometimes use comparison of ratios as audit evidence. For example, an

unexplained decrease in the ratio of gross profit to sales may suggest which of the following
possibilities?
a. Unrecorded purchases
b. Unrecorded sales
c. Merchandise purchases being charged to operating expense
d. Fictitious sales

10. Which result of an analytical procedure suggests the existence of obsolete merchandise?
a. Decrease in the inventory turnover rate
b. Decrease in the ratio of gross profit to sales
c. Decrease in the ratio of inventory to accounts payable
d. Decrease in the ratio of inventory to accounts receivable

11. If accounts receivable turned over 8 times in 2014 as compared to only 6 times in 2015, it
is possible that there were
a. Unrecorded credit sales in 2015
b. Unrecorded cash receipts in 2014
c. More thorough credit investigations made by the company late in 2014
d. Fictitious sales in 2015
12. Which of the following would not be classified as an analytical procedure?
a. Benchmarking the company's profitability ratios against others in the industry.
b. Variance analysis of actual versus budgeted amounts for production.
c. Reperforming the client’s depreciation expense using the client’s accounting policies
for capital expenditures made during the year.
d. Reconciling fixed asset dispositions with the fixed asset ledger.

13. Confirmations would almost always be used, assuming all the accounts below are material
for:
a. individual transactions between organizations, such as sales transactions.
b. bank balances and accounts receivable.
c. fixed asset additions.
d. payroll expenses.

14. You are auditing the company's purchasing process for goods and services. You are
primarily concerned with the company not recording all purchase transactions. Which audit
procedure below would be the most effective audit procedure in this case?
a. Vouching from the accounts payable account to the vendor invoices.
b. Tracing vendor invoices to recorded amounts in the accounts payable account.
c. Confirmation accounts payable recorded amounts.
d. Reconciling the accounts payable subsidiary ledger to the accounts payable account.
15. The practice of auditing firms to spread work throughout the year by carrying out as many
auditing procedures as practicable before the balance sheet date, in order to minimize the
load during the peak period. This is called
a. Test of recorded transactions
b. Confirmation of receivable and payables
c. Observation and test check of inventories
d. Interim work

16. Which of the following statements is not true?

a. Tests of transactions are often performed several months prior to the balance sheet
date.
b. It is common to use analytical procedures at any time during the audit
c. When controls are not considered effective, or when control deviations are discovered,
substantive tests will be eliminated.
d. Tests of details of balances are normally done last.

17. Which of the following statements about audit evidence is correct?

a. Appropriateness is the measure of the quantity of audit evidence.
b. Sufficiency is the measure of the quality of audit evidence and its relevance to a
particular assertion and its reliability.
c. Audit evidence is more persuasive when items of evidence from different sources or
of different nature are consistent.
d. There should be a one-to-one relationship between audit objective and audit
procedure.
18. Evidence is generally considered appropriate when:
a. it has been obtained by random selection.
b. there is enough of it to afford a reasonable basis for an opinion on financial statements.
c. it has the qualities of being relevant, objective, and free from known bias.
d. it consists of written statements made by managers of the enterprise under audit.

19. Evidence is generally considered sufficient when

a. It is appropriate
b. There is enough of it to afford a reasonable basis for an opinion on financial
statements.
c. It has the qualities of being relevant, objective and free from unknown bias.
d. It has been obtained random selection.

20. Appropriateness of evidence is a measure of the:

a. quantity of evidence.
b. quality of evidence.
c. sufficiency of evidence.
d. meaning of evidence.

21. Theoretically, which of the following would not have an effect on the amount of audit
evidence by the auditor?
a. The type of opinion to be issued
b. The auditor's evaluation of internal control.
c. The type of audit evidence available to the auditor.
d. Whether or not the client reports to the Securities and Exchange Commission
22. It refers to the material (working papers) prepared by and for, or obtained and retained by
the auditor in connection with the performance of the audit.
a. Documentation
b. Accounting data
c. Audit report
d. Corroborative evidence

23. Which of the following best describes audit documentation?

a. Defend against claims of a deficient audit.
b. Provide a principal support for the income tax return;
c. Provide documentation that the audit was conducted in accordance with auditing
standards.
d. Provide additional support of recorded amounts to the client.

24. Which one of the following is not one of the primary purposes of audit documentation
prepared by the audit team?
a. A basis for planning the audit.
b. A record of the evidence accumulated and the results of the tests.
c. A basis for review by supervisors and partners.
d. A basis for determining work deficiencies by peer review teams.

25.Which of the following statements is incorrect about the working papers prepared by the
auditor?
a. The auditor should record in the working papers information on planning the audit
work, the nature, timing and extent of the audit procedures performed, the results
thereof, and the conclusions reached from the audit evidence obtained.
b. The extent of working paper documentation is a matter of professional judgment
c. Working papers should be in the form of data stored on paper.
d. Working papers should be designed and organized to meet the circumstances and the
auditor's need for each individual audit.