Auditing Theory Q&a

Topics: Auditing, Internal control, Financial statements Pages: 18 (2059 words) Published: December 7, 2012
Auditing Theory

1. A control which relates to all parts of the EDP system is called a(n)

a. Systems controlc. Applications control

b. General controld. Universal control

2. Which of the following is not an output control?

a. Proper authorization of transaction

b. Control totals

c. Check digits

d. Adequate documents

3. Should the auditor feel, after obtaining an understanding of the EDP internal control structure, that control risk cannot be reduced, he or she will

a. Issue a disclaimer

b. Issue an adverse opinion

c. Increase the sample size for tests of controls

d. Expand the substantive testing portion of the audit

4. The real-time feature normally would be least useful when applied to accounting for a firm’s

a. Bank-account balances

b. Property and depreciation

c. Customer accounts receivable

d. Merchandise inventory

5. A sample in which the characteristics in the sample are the same as those of the population is a

a. Random samplec. Attributes sample

b. Variables sampled. Representative sample

6. Establishing a route through the random number table

a. Is an arbitrary decision

b. Needs to be done in advance of choosing the numbers

c. Is essential and the route must be followed consistently

d. Requires that all three of the above is true

7. When an auditor goes through a population and selects items for the sample without regard to their size, source, or other distinguishing characteristics, it is called

a. Block selection

b. Haphazard selection

c. Systematic selection

d. Statistical selection

8. Which of the following may be used to reduce the risk of non sampling errors?

a. Increasing the size of audit samples

b. Stratifying audit samples

c. Adequately planning audit samples

d. Using statistical sampling techniques

9. A number of factors influences the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to larger sample size?

a. Greater reliance on internal control


c. Smaller reliance o analytical procedures

d. Smaller measures of tolerable misstatement

10. Fraudulent financial reporting is often called

a. Management fraudc. Defalcation

b. Theft of assetsd. Employee fraud

11. The most important general ledger account included in and affecting several cycles is the

a. General cash accountc. Income tax expense ad liability accounts

b. Inventory accountsd. Retained earnings account

12. In testing for cut-off , the objective is to determine

a. Whether all of the current period’s transactions are recorded

b. That no transactions from the prior period are included in the current period’s balances

c. That no transactions of the curret period have been delayed and recorded in the future period.

d. Whether transactions are recorded in the proper period.

13. The primary difference between an audit of the balance sheet and an audit of the income statement lies in the fact that the audit of the income statement deals with the verification of

a. Transactionsc. Costs

b. Authorizationd. Cutoffs

14. Documentation is a form of evidence

a. Used in every financial statement audit

b. Used in most financial statement audit

c. Used o the rate occasions when it is both readily available ad less costly than other procedures

d. Used when nothing is available that is more competent

15. The current file of the auditor’s working papers generally should include

a. a flowchart of internal controls

b. organization charts...
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