1. Which one of the following assertions is not made by management in placing an item in the financial statements?
a.existence or occurrence
c.rights and obligations
d.presentation and disclosure
2. If reported sales for 20X0 erroneously include sales that occurred in 20X1, the assertion violated on the 20X0 statements would be:
a.existence or occurrence
c.valuation or allocation.
d.presentation and disclosure
e.rights and obligations
3. The completeness assertion would be violated if:
a.fictitious sales transactions were included in accounts receivable.
b.the allowance for doubtful accounts was understated.
c.unbilled shipments had occurred during the period.
d.disclosure in the statements of pledged receivables was inadequate.
e.the balance of accounts payable was overstated.
4. The rights and obligations assertion applies to:
a.current liability items only.
b.revenue and expense items only.
c.both income statement and balance sheet items.
d.assets that are not owned by the company.
e.balance sheet items only.
5. Determining whether amounts are in conformity with GAAP addresses the proper measurement of assets, liabilities, revenues, and expenses which includes all of the following except:
a.the reasonableness of management’s accounting estimates.
b.proper application of valuation principles such as cost, net reliable value, market value, and present value.
c.consistency in the application of accounting principles.
d.the reasonableness of management’s accounting policies.
e.proper application of the matching principle.
6. Which one of the following is among the three components of audit risk?
7.Inherent risk is defined in terms of:
a.a total absence of controls.
b.an ideal set of controls.
c.the existing controls.
d.the standard controls for the client’s industry.
e.a full set of controls.
8. For a particular assertion, control risk is the risk that:
a.a material misstatement will occur in the accounting process.
b.controls will not detect a material misstatement that occurs.
c.audit procedures will fail to detect a weak control system.
d.the prescribed control procedures will not be applied uniformly.
e.an immaterial misstatement will occur in the accounting process.
9.Which of the following would not be an important factor in understanding an entity’s industry, regulatory environment and other external factors?
a.The competitive environment.
b.The political environment.
c.Relevant accounting pronouncements.
e.The nature of the entity.
10. Choices about audit evidence are influenced by all of the following except:
a. the auditor’s understanding of the business and industry.
b. decisions about inherent risk and control risk.
c. comparisons of the auditor’s expectations of the financial statements with the client’s books and records.
d. decisions about immaterial risk factors.
e. decisions about assertions that are material to the financial statements.
11. Which of the following would not be considered an analytical procedure?
a. calculate the gross profit ratio and compare it to the industry figure
b. compare current year’s operating expenses to prior year’s
c. compare current year’s working capital to prior year’s
d. divide sales commissions by sales and compare the results to the established
e. compare the per unit price on a sales invoice to the master price list
12. Accounting records generally include:
b. minutes of meetings.
c. internal control manuals.
d. confirmations from third parties.
e. Analysts’ reports
13. When planning the audit, the auditor must make the following important decisions except the:
a. assignment of staff to perform audit tests.
b. nature of tests to be performed.
c. characteristics of tests to be performed.
d. extent of tests to be performed.
e. timing of tests to be performed.
14. The five management assertions outlined in generally accepted auditing standards include all of the following except:
a. rights and obligations.
c. existence and occurrence.
d. presentation and disclosure.
e. valuation or allocation.
15. With respect to audit objectives, the term validity relates to which of the assertions below?
a. existence and occurrence
c. valuation or allocation
d. presentation and disclosure
e. rights and obligations
16. Specific audit objectives are normally:
a. the same as the categories of management’s financial statement assertions.
b. developed for each item in the financial statements and derived from the categories of management’s financial statement assertions.
c. derived from the categories of management’s financial statement assertions.
d. developed for each item in the financial statements.
e. developed for material items in the financial statements.
17. Which of the following would not be considered underlying accounting data?
a. sales invoices
b. the general ledger
c. books of original entry
d. accounting manuals
e. accounts receivable ledger
18. Which of the following would not be considered corroborating information?
a. canceled checks held by the client
b. confirmation from vendors
c. oral evidence obtained from client personnel
d. the accountant’s work sheet
e. other information obtained by the auditor
19. Generally accepted auditing standards recognize two categories of evidential matter: underlying accounting data and corroborating information. In making an audit in
accordance with GAAS:
a. corroborating information is always required, while underlying accounting data may be gathered under certain circumstances.
b. underlying accounting data must always be gathered, while corroborating information need only be obtained when the accounting records are not reliable.
c. both categories are required.
d. the auditor may choose the category to use, and omit the other.
e. neither category is required.