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Question
There is an increasing demand for assurance about computer controls surrounding financial information transacted electronically and the security of the information related to the transaction. This is in large part due to
A) the increasing presence of internet sales in many businesses.
B) the use of computer assisted auditing tools.
C) the many transactions and information shared online and in real time by companies.
D) client's uncertainty about the proper functioning of their computer system.
Answer
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Related questions
Q:
A) Explain how auditors use the audit risk model when planning an audit.
B) Describe the audit risk model and each of its components.
Q:
The human resources and payroll cycle is the transaction cycle that begins with
A) processing the payment to the employees.
B) the creation of the employee profile in the payroll master file.
C) the employee performing work for the company.
D) hiring of personnel.
Q:
Petty cash tests can ordinarily be performed at any time during the year, but as a matter of convenience they are typically done
A) on the balance sheet date.
B) near the end of the field work.
C) at the same time as the observation of inventory, since both auditor and client must be present at that time.
D) on any interim date.
Q:
What is the purpose of an extended test of the bank reconciliation? To
A) verify whether all transactions included in the journals for the last month of the year were correctly allocated to the bank reconciliation.
B) compensate for material weaknesses in internal control with respect to segregation of duties.
C) increase detection risk for the audit of cash.
D) verify whether specific transactions that flowed through the cash account were correctly recorded.
Q:
An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to
A) verify the cash balance reported on the bank confirmation inquiry form.
B) verify reconciling items on the client's bank reconciliation.
C) detect lapping.
D) detect kiting.
Q:
13.1 Identify and describe the risk-based process for designing tests of details of balances for accounts receivable
Q:
Which of the following control procedures may prevent the failure to bill customers for some shipments?
A) Each shipment should be supported by a prenumbered sales invoice that is accounted for.
B) Each sales order should be approved by authorized personnel.
C) Sales journal entries should be reconciled to daily sales summaries.
D) Each sales invoice should be supported by a shipping document.
Q:
Tamra is performing a test of control consisting of looking at the numerical sequence of credit memos issued by the company. Tamra is performing a block test by looking for any missing number in the sequence. This test will provide evidence of
A) completeness.
B) occurrence, completeness.
C) occurrence and accuracy.
D) accuracy and completeness.
Q:
To test for recorded sales for which there were no actual shipments, the auditor traces from the
A) bill of lading to the sales journal.
B) sales journal to the shipping documents.
C) sales journal to the accounts receivable subsidiary ledger.
D) bill of lading to the supporting customer order and sales order.
Q:
When there are problems with program change procedures or with access controls the auditor may choose to
A) rely less upon manual controls since control risk has been increased.
B) not rely on programmed or interdependent application controls.
C) reduce control risk, which reduces the level of substantive testing.
D) use an information technology audit specialist to assess programmed application controls.
Q:
The tests of details of balances procedure which requires the auditor to examine corporate minutes for loan approval would satisfy the audit objective of
A) classification.
B) existence.
C) completeness.
D) accuracy.
Q:
The audit objective to determine that notes payable in the schedule exist is verified by the tests of balances procedure to
A) foot the notes payable list.
B) confirm notes payable.
C) recalculate interest expense.
D) examine the balance sheet for proper disclosure of noncurrent portions.
Q:
The most important balance-related and presentation and disclosure-related audit objectives for notes payable are
A) accuracy, existence, completeness.
B) existence, completeness, valuation.
C) accuracy, completeness, understandability.
D) accuracy, completeness, valuation.
Q:
During the course of an audit, a public accountant observes that the recorded interest expense seems to be excessive in relation to the balance in the long-term debt account. This observation could lead the auditor to suspect that
A) long-term debt is understated.
B) discount on bonds payable is overstated.
C) long-term debt is overstated.
D) premium on bonds payable is understated.
Q:
Which of the following internal controls over notes payable address risks associated with the accuracy, allocation and completeness audit assertions?
A) renewals or new notes should be approved by the Board of Directors (as evidenced in the minutes) or by senior management
B) authorized employees should perform independent recalculations of interest and reconciliation of the notes payable balance to the general ledger
C) subsidiary records should be maintained for each note, and there should be control over blank and paid notes
D) paid notes should be cancelled and retained under the custody of an authorized official
Q:
Whenever subsequent events are used to evaluate the amounts included in the statements, care must be taken to distinguish between conditions that existed at the balance sheet date and those that come into being after the end of the year. The subsequent information should not be incorporated directly into the statements if the conditions causing the change in valuation
A) did not take place until after year-end.
B) did take place before year-end.
C) occurred both before and after year-end.
D) are reimbursable through insurance policies.
Q:
The auditor has sent inquiry letters to all of the client's law firms. Two law firms stated that the client was unlikely to win the lawsuits in question, whereas the client had said the opposite. What action should the auditor take?
A) ask management for invoices supporting the omitted lawsuits
B) request a meeting with management and the respective law firms
C) ask the law firms to provide additional details with respect to the lawsuits
D) change control risk to maximum and increase substantive testing
Q:
What action will a lawyer likely take if they have information about a law suit that was not mentioned by the client?
A) in the legal letter, tell the auditor the number of suits, and request the auditor to contact the client
B) request the client to notify the auditor about the lawsuit
C) they will not mention the lawsuits, they are confidential
D) the law firm will refuse to answer the legal letter, since it is incorrect
Q:
The auditor's responsibility with regards to contingent liabilities is to
A) identify the appropriate accounting treatment.
B) decide on the appropriate accounting treatment.
C) prepare note disclosure.
D) evaluate the accounting treatment of known contingent liabilities.
Q:
If a potential loss on a contingent liability is unlikely and the event will not likely have a significant adverse financial effect, the liability should be
A) accrued and indicated in the body of the financial statements.
B) disclosed in footnotes, but not accrued.
C) neither accrued nor disclosed in footnotes.
D) disclosed in the auditor's report but not disclosed on the financial statements.
Q:
When the auditor examines the minutes of board of directors' meetings for the amount of the dividend per share and the dividend date, the auditor is checking for
A) completeness.
B) valuation.
C) understandability.
D) existence.
Q:
The emphasis in the audit of dividends is on
A) ending equity balance.
B) transactions.
C) opening dividends payable balance.
D) confirming the number of shares outstanding.
Q:
Thermos Inc. is having its financial statements audited by Pilott & Levy, a PA firm. Leon Levy is the auditor in charge of the audit. The accountable party in this assurance engagement is
A) Leon Levy.
B) Pilott & Levy.
C) management of Thermos Inc.
D) the board of directors of Thermos Inc.
Q:
You have just signed off the audit report on the financial statements of your client. What type of engagement did you complete?
A) Review
B) Direct reporting
C) Attest and assurance
D) Operational
Q:
Auditing, 12e (Arens)
21.1 Describe how assurance engagement general standards are different from and similar to audit standards
Q:
Management has several responsibilities that are important to the auditor. One of these is that management is responsible for
A) internal controls that prevent material misstatements either due to fraud or error.
B) maintaining control of evidence (such as confirmations) until assessed by the auditor.
C) evaluating evidence against acceptable criteria.
D) providing reasonable assurance that the financial statements are fairly stated.
Q:
Under the Canadian Auditing Standards, the introductory paragraph of the independent auditor's report indicates that the auditor has audited the balance sheet, the income statement, the cash flow, a summary of accounting policies and notes and
A) the statements of retained earnings.
B) the statement of changes in equity.
C) management's discussion and analysis letter.
D) the internal controls of the company.
Q:
As part of the conduct of a review engagement, which of the following procedures would be appropriate for assessing the ending value of accounts payable?
A) sending zero balance confirmations to frequently used suppliers
B) use of negative confirmations to suppliers with material balances
C) comparison of the accounts payable balances by supplier to the prior year
D) examination of invoices received after the year end to ensure that they were recorded in the proper period
Q:
As part of the review engagement for a small manufacturing company, which of the following would be a typical review procedure for the sales cycle?
A) review of internal controls over the granting of credit
B) examination of sales documents to ensure credit approval is documented
C) recalculation of the taxes and extensions on a sample of invoices
D) comparison of sales and gross profit to the prior year
Q:
A review engagement includes
A) obtaining an understanding of the internal controls.
B) tests of controls or transactions.
C) inquiry, analytical procedures and discussion.
D) independent confirmation or physical examination.