13- Audit Strategies

7/23/2019 13- Audit Strategies

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Auditing and Assurance Services, 15e (Arens)

Chapter 13 Overall Audit Strategy and Audit Program

Learning Objective 13-1

1) Shown below (1 through 5) are the five types of tests which auditors use to deterine whether financial stateents are fairly stated! "hich three are substantive tests#

1! $is% assessent procedures

&! 'ests of controls3! 'ests of transactions

! Substantive analytical procedures

5! 'ests of details of balances

) 1* &* and 3!+) 3* * and 5!

,) &* 3* and 5!

) &* 3* and !

nswer. +'ers. 'hree types of substantive tests which auditors use

iff. /asyObjective. LO 13-1

,S+. $eflective thin%ing s%ills

&) ,ollectively* procedures perfored to obtain an understanding of the entity and its

environent* including internal controls* represent the auditor0s.

) audit strategy!

+) tests of controls!,) ris% assessent procedures!

) tests of transactions!nswer. ,'ers. rocedures perfored to obtain understanding of entity and environent* including

internal controls



3) "hich of the following would not be considered further audit procedures#) 'ests of controls

+) nalytical procedures

,) 'ests of details of balances) $is% assessent procedures

nswer.

'ers. 2ot considered a further audit procedureiff. /asy

Objective. LO 13-1


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) "hich of the following procedures would ost li%ely be perfored in response to the

auditor0s assessent of the ris% of onetary isstateents in the financial stateents#

) $atio analysis+) 'ests of controls

,) 'ests of details of balances

) $is% assessent proceduresnswer. ,

'ers. rocedure perfored in response to auditor0s assessent of ris% of onetary

isstateentiff. /asy

Objective. LO 13-1


5) "hich of the following further audit procedures are used to deterine whether all si6

transaction-related audit objectives have been achieved for each class of transactions#

) 'ests of controls

+) $is% assessent procedures,) Substantive tests of transactions

) reliinary analytical proceduresnswer. ,

'ers. 7urther audit procedures to deterine whether all si6 transaction related audit objectives

have been achievediff. /asy

Objective. LO 13-1


8) 9ou are auditing $odgers and ,opany! fter perforing substantive analytical procedures

you conclude that* for the accounts tested* the client0s balance appears reasonable! 'his ay

indicate that.) details test of balances can be eliinated for those accounts!

+) certain tests of details of balances ay be eliinated for those accounts!

,) control tests ay be eliinated for those accounts!) control tests ay be reduced for those accounts!

nswer. +

'ers. fter perforing substantive analytic procedures



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:) 'he purpose of tests of controls is to provide reasonable assurance that the.

) accounting treatent of transactions and balances is valid and proper!

+) internal control procedures are functioning as intended!,) entity has coplied with ; disclosure re<uireents!

) entity has coplied with re<uireents of <uality control!

nswer. +'ers. urpose of tests of controls

iff. /asy

Objective. LO 13-1,S+. $eflective thin%ing s%ills

=) n the conte6t of an audit of financial stateents* substantive tests are audit procedures that.) ay be eliinated under certain conditions!

+) are designed to discover significant subse<uent events!

,) are designed to test for dollar isstateents!) will increase proportionately with the auditor0s reliance on internal control!

nswer. ,

'ers. Substantive tests are audit proceduresiff. /asy

Objective. LO 13-1


>) "hich of the following is true#

) 'ests of details of balances focus on the ending general ledger balances for both balance sheet

and incoe stateent accounts!+) 'ests of details of balances focus on the transactions during the period for both balance sheet

and incoe stateent accounts!

,) 'ests of details of balances focus on the auditor0s understanding of internal controls!) 'ests of details of balances focus on coparisons of recorded aounts to e6pectations

developed by the auditor!

nswer. 'ers. 'ests of details of balances focus on

iff. /asy

Objective. LO 13-1


14) syste wal%through is priarily used to help the auditor.

) test the ending account balances!+) test the details of transactions!

,) deterine whether internal controls are in place!

) deterine whether the audit engageent should be accepted!nswer. ,

'ers. Syste wal%through

iff. /asy





11) $is% assessent procedures are perfored by auditors during an audit in order to.

) deterine the ris% of aterial isstateent in the financial stateents!

+) deterine the aount of testing of internal control!,) deterine the e6tent of testing of details of balances!

) deterine the e6tent of testing of transactions!

nswer. 'ers. $is% assessent procedures

iff. ?oderate


'opic. ublic

1&) 'ests of controls are directed toward the control0s.

) efficiency!

+) effectiveness!,) cost and effectiveness!

) cost benefit ratio!

nswer. +'ers. 'ests of controls directed toward

iff. ?oderate

Objective. LO 13-1


13) procedure designed to test for onetary isstateents directly affecting the correctness of

financial stateent balances is a.) test of controls!

+) substantive test!

,) test of attributes!) onetary-unit sapling test!

nswer. +

'ers. rocedure designed to test for onetary isstateents directly affecting correctness offinancial stateents

iff. /asy

Objective. LO 13-1


1) nalytical procedures.

) involve coparisons of recorded aounts to e6pectations developed by anageent!+) are only perfored during the planning stage of the audit!

,) are re<uired to be perfored when auditing an account balance!

) provide substantive evidence!nswer.

'ers. nalytical procedures

iff. ?oderate


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15) 'he priary ephasis in ost tests of details of balances is on the.

) balance sheet accounts!

+) revenue accounts!,) cash flow stateent accounts!

) e6pense accounts!

nswer. 'ers. riary ephasis in ost tests of details of balances

iff. ?oderate


18) "hich of the following stateents is not true#) nalytical procedures ephasi@e the overall reasonableness of transactions and balances!

+) 'ests of controls are concerned with evaluating whether controls are sufficiently effective to

justify reducing control ris% and thereby reducing analytical review procedures!,) Substantive tests of transactions ephasi@e the verification of transactions recorded in the

journals and then posted in the general ledger!

) 'ests of details of balances ephasi@e the ending balances in the general ledger!nswer. +

'ers. 'ests of controls

iff. ?oderate


1:) ?any auditors perfor e6tensive analytical procedures on audits because.) they are re<uired by ;S!

+) they pinpoint errors in accounts!

,) they indicate areas of potential ris% and isstateent!) they are re<uired for tests of controls!

nswer. ,

'ers. uditors perfor e6tensive analytical proceduresiff. ?oderate

Objective. LO 13-1


1=) "hen controls are deeed ineffective and assessed control ris% is at the a6iu for a

private copany* which of the following would norally be true#

) 2o ephasis is placed on the controls!+) $elatively little ephasis is placed on the controls!

,) ?oderate ephasis is placed on the controls!

) Aeavy ephasis is placed on the controls!nswer.

'ers. ,ontrols deeed ineffective and assessed control ris% is at a6iu

iff. ,hallenging





1>) "hich of the following is ordinarily designed to detect aterial dollar errors on the financial

stateents#

) 'ests of controls+) nalytical review procedures

,) ,oputer controls

) 'ests of details of balancesnswer.

'ers. esigned to detect aterial dollar errors on the financial stateents

iff. ?oderateObjective. LO 13-1


&4) List each of the five types of audit tests and give at least two types of evidence that ay be

obtained fro each type of test!

nswer.B $is% assessent procedures - docuentation* observation* in<uiries of the client* and

reperforance

B 'ests of controls - docuentation* observation* in<uiries of the client* and reperforanceB Substantive tests of transactions - docuentation* in<uiries of the client* and reperforance

B nalytical procedures - in<uiries of the client and analytical procedures

B 'ests of details of balances - physical e6aination* confiration* docuentation* in<uiries of

the client* and reperforance'ers. udit tests and types of evidence

iff. ?oderate


&1) escribe the five types of audit tests! dentify which of the five types are substantive tests*and which are used to reduce assessed control ris%!

nswer. 'he five types of audit tests used to deterine whether financial stateents are fairly

stated are. ris% assessent procedures* tests of controls* substantive tests of transactions*analytical procedures* and tests of details of balances! Substantive tests of transactions* analytical

procedures* and tests of details of balances are substantive tests* whereas procedures to obtain an

understanding of internal control and tests of controls are used to reduce assessed control ris%!

'ers. 'ypes of audit testsC Substantive tests which reduce assessed control ris% iff. ?oderate

Objective. LO 13-1





&&) iscuss the purposes of (1) substantive tests of transactions* (&) tests of controls* and (3) tests

of details of balances! ;ive an e6aple of each!

nswer. 'he purpose of substantive tests of transactions is to deterine whether all si6transaction-related audit objectives have been satisfied for each class of transactions! 7or

e6aple* as part of the auditor0s test of the accuracy objective for sales* the auditor would

copare the aount recorded in the sales journal for a saple of sales transactions with the totalon the corresponding sales invoices!

'he purpose of tests of controls is to deterine the effectiveness of both the design and

operations of specific internal controls! 7or e6aple* the auditor ight observe for a onthwhether stateents are ailed to all custoers!

'he purpose of tests of details of balances is to deterine the onetary correctness of the

accounts to which they relate! 'he confiration of accounts receivable is an e6aple!

'ers. Substantive tests of transactions* tests of controls and tests of details of balancesiff. ?oderate

Objective. LO 13-1


&3) 'here are three stages of the audit in which analytical procedures are perfored! dentifyeach of these three stages and* for each stage* discuss the purpose of perforing analytical

procedures in that stage! lso indicate in which stage(s) analytical procedures are re<uired by

current professional auditing standards!

nswer. nalytical procedures are perfored in the audit planning stage to help the auditordecide the other evidence needed to satisfy sufficient copetent evidence re<uireents!

nalytical procedures can also be perfored as substantive tests in the testing phase of the audit!

nalytical procedures are perfored in the audit copletion phase as a final test ofreasonableness! uditing standards re<uire that analytical procedures be perfored in the

planning and copletion phases of every audit!

'ers. nalytical procedures in stages of auditiff. ?oderate

Objective. LO 13-1


&) 'here are eight types of audit evidence. physical e6aination* confiration* inspection*

observation* in<uiries of the client* reperforance* analytical procedures* and recalculation! 7or

each of the following types of audit tests* indicate the type(s) of evidence that can be obtainedthrough the test. (1) tests of controls* (&) substantive tests of transactions* (3) analytical

procedures* and () tests of details of balances!

nswer.1! Tests of controls. nspection* observation* in<uiries of the client* reperforance

&! Substantive tests of transactions. nspection* in<uiries of the client* reperforance*

recalculation3! Analytical procedures. n<uiries of the client* analytical procedures

! Tests of details of balances! hysical e6aination* confiration* inspection* in<uiries of the

client* reperforance* recalculation

'ers. $elationship of audit tests and types of audit evidenceiff. ,hallenging

Objective. LO 13-1

,S+. $eflective thin%ing s%ills:

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&5) rocedures to obtain an understanding of internal control generally provide sufficient

appropriate evidence that a a control is operating effectively!) 'rue

+) 7alse

nswer. +'ers. nternal controls

iff. /asy


&8) Substantive tests are procedures designed to test for dollar isstateents that directly affect

the correctness of financial stateent balances!) 'rue

+) 7alse

nswer.

'ers. /6ception in substantive test of transactionsiff. /asy


&:) ajor part of the auditor0s ris% assessent procedures is done to obtain an understanding of internal control!

) 'rue

+) 7alsenswer.

'ers. $is% assessent procedures



&=) 'ests of controls should be perfored after substantive tests of transactions!

) 'rue

+) 7alse

nswer. +'ers. 'ests of controls and substantive tests of transactions

iff. ?oderate


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&>) uditors use analytical procedures and tests of details of balances to satisfy planned

detection ris%!

) 'rue+) 7alse

nswer.

'ers. etection ris% iff. ?oderate

Objective. LO 13-1


34) uditors ust perfor tests of controls separately fro substantive tests of transactions!

) 'rue

+) 7alsenswer. +

'ers. 'ests of controls and substantive tests of transactions

iff. ?oderate


31) nalytical procedures are norally designed at the account level* whereas tests of controls

and substantive tests of transactions are norally designed at the transaction-related objective

level!) 'rue

+) 7alse

nswer.

'ers. nalytical procedures designed at the account leveliff. ,hallenging

Objective. LO 13-1


3&) 'ests of controls are perfored to support a reduced assessent of detection ris%!) 'rue

+) 7alse

nswer. +

'ers. rocedures to obtain an understanding of internal controliff. ,hallenging

Objective. LO 13-1


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Learning Objective 13-&

1) n order to proote audit efficiency the auditor considers cost in selecting audit tests to perfor! "hich of the following audit tests would be the ost costly#

) nalytical procedures

+) $is% assessent procedures,) 'ests of controls

) 'ests of details of balances

nswer. 'ers. ?ost costly audit test

iff. ?oderate

Objective. LO 13-&


&) n e6ception or deficiency found in a test of controls.

) indicates a financial stateent isstateent!

+) indicates the li%elihood of a isstateent!,) indicates that the financial stateents are fairly stated!

) indicates that an adverse opinion is warranted on the audit of internal control!nswer. +

'ers. /6ception or deficiency in test of controls

iff. ?oderateObjective. LO 13-&


3) f no aterial differences are found using analytical procedures and the auditor concludes thatisstateents are not li%ely to have occurred.

) other substantive tests ay be reduced!

+) it will be necessary to increase the tests of balances!,) it will not be necessary to perfor tests of balances!

) it will be necessary to increase the tests of transactions!

nswer. 'ers. f no aterial differences are found using analytical procedures

iff. ?oderate

Objective. LO 13-&


) "hich of the following audit tests is usually the least costly to perfor#) nalytical procedures

+) 'ests of controls

,) 'ests of balances) Substantive tests of transactions

nswer.

'ers. Least costly audit test






5) n increased e6tent of tests of controls is ost li%ely to occur when.

) it is a first-year audit!

+) the auditor is doing a Dfraud audit!D,) controls are effective and the preliinary control ris% assessent is low!

) controls are ineffective and the preliinary control ris% assessent is high!

nswer. ,'ers. ncreased e6tent of tests of controls ost li%ely to occur

iff. ?oderate

Objective. LO 13-&,S+. $eflective thin%ing s%ills

8) "hen an auditor believes that analytical procedures indicate a reasonable possibility of

isstateent* the auditor usually would.)

erfor additional tests of controls ecide to odify tests of details of balances

9es 9es

+)


2o 2o

,)


9es 2o

)


2o 9es

nswer.

'ers. nalytical procedures indicate reasonable possibility of isstateent

iff. ?oderate


:) f tests of controls support the control ris% assessent* then EEEEEEEE in the audit ris% odel

is increased!

) planned detection ris%!

+) planned inherent ris%!,) planned fraud ris%!

) planned assurance ris%!

nswer. 'ers. $esults of tests of controls* substantive tests of transactions* and analytical procedures

iff. ?oderate





=) 'he auditor would design which of the following audit tests to detect possible onetary errors

in the financial stateents#

) ,ontrol tests+) nalytical procedures

,) $is% assessent procedures

) 'ests of operating effectiveness of controls over revenue and cashnswer. +

'ers. udit tests to detect possible onetary errors in the financial stateents



>) 'he reliance the auditor places on substantive tests in relation to the reliance placed oninternal control varies in a relationship that is ordinarily.

) parallel!

+) inverse!

,) direct!) e<ual!

nswer. +'ers. $eliance auditor places on substantive tests and internal controls

iff. ?oderate


14) deficiency uncovered in the audit of internal control is e6plained by which of the

following in relation to a financial stateent isstateent#) 'he aount of the isstateent

+) 'he li%elihood of the isstateent

,) 'he aount* li%elihood* and classification of the isstateent) 'he aount and the classification of the isstateent

nswer. +

'ers. eficiency uncovered in audit of internal controliff. ,hallenging

Objective. LO 13-&


11) "hich of the following is not a valid basis for oitting an audit test in foring an opinion

on the clients financial stateents#) 'he difficulty and e6pense involved in testing a particular ite

+) 'he relative ris% involved

,) 'he degree of reliance on the relevant internal controls) 'he relationship between the cost of obtaining evidence and its usefulness

nswer.

'ers. 2ot a valid basis for oitting an audit test in foring an opinion

iff. ,hallengingObjective. LO 13-&


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1&) 'hree factors the auditor considers when assessing control ris% are. the auditor0s belief

concerning the effectiveness of internal controls* the results of tests of controls* and the cost-

effectiveness of a reduced assessed control ris%! dentify the cobination of conditions for thesethree factors that is re<uired before a reduction in substantive testing is peritted!

nswer. reduction in substantive testing is peritted when (1) the auditor identifies specific

controls he or she believes have been operating effectively during the period under audit* (&) theauditor believes it will be cost-effective to test those controls* and (3) the results of tests of

controls indicate that the controls have indeed been operating effectively!

'ers. 'hree factors auditor considers when assessing control ris% and conditions beforereduction in substantive testing

iff. /asy

Objective. LO 13-&


13) 'ests of controls are generally ore costly to perfor than analytical procedures!

) 'rue

+) 7alsenswer.

'ers. ,ost of tests of controls vs! analytical proceduresiff. /asy

Objective. LO 13-&


1) Only tests of details of balances involve physical e6aination and confiration!

) 'rue

+) 7alsenswer.

'ers. Substantive tests of details of balances cost

iff. /asyObjective. LO 13-&


15) nalytical procedures are the least costly type of audit test!

) 'rue

+) 7alse

nswer. 'ers. nalytical procedures cost

iff. /asy





18) f inherent ris% is increased to ediu fro low* tests of details of balances can be reduced!

) 'rue

+) 7alsenswer. +

'ers. nherent ris%C etails of balances



1:) 'he e6tent of tests of details of balances cannot be reduced when transaction-related audit

objectives have been satisfied by tests of controls or substantive tests of transactions!

) 'rue

+) 7alsenswer. +

'ers. /6tent of details of balancesC 'ransaction-related audit objectivesC 'ests of controls and

substantive tests of transactions



1=) +ecause of the high cost of tests of details of balances* auditors do not perfor this type fo

testing unless fraud is suspected!) 'rue

+) 7alse

nswer. +

'ers. 'est of details of balancesiff. ?oderate

Objective. LO 13-&


1>) 'he auditor0s understanding of internal control perfored as part of ris% assessent

procedures provides the basis for the auditor0s initial assessent of control ris%!) 'rue

+) 7alse

nswer.

'ers. Fariation in audit evidence in cyclesiff. /asy

Objective. LO 13-&





&4) nalytical procedures are the ost e6pensive type of audit test to perfor because of the

e6pertise and training re<uired to properly use the!

) 'rue+) 7alse

nswer. +

'ers. nalytical procedures costiff. ?oderate

Objective. LO 13-&


&1) 'he results of tests of controls and substantive tests of transactions affect the design of tests

of details of balances!) 'rue

+) 7alse

nswer. 'ers. $esults of tests of controls affect design of tests of details of balances

iff. ?oderate


&&) f internal controls are tested and are considered effective* the auditor generally will increase

both substantive tests of transactions and tests of details of balances!) 'rue

+) 7alse

nswer. +'ers. uditor0s preliinary assessent of control ris%

iff. ?oderate


&3) 'ests of controls provide evidence about the li%elihood for isstateents in a client0sfinancial stateents!

) 'rue

+) 7alse

nswer. 'ers. 'ests of controlsC ?isstateents in client0s financial stateents

iff. /asy





&) n e6ception in a test of control provides only an indication of the li%elihood of onetary

isstateents in the financial stateents because tests of controls do not reveal whether

onetary isstateents have actually occurred!) 'rue

+) 7alse

nswer. 'ers. /6ception in test of controlC ndication of li%elihood of onetary isstateents

iff. /asy



1) uditors who test anual controls that rely on '-generated reports ust consider.

) the effectiveness of anageent0s review!

+) autoated controls over the accuracy of inforation in the report!

,) both and +) neither or +!

nswer. ,'ers. 'est anual controls that rely on '-generated reports

iff. ?oderate


&) uditing standards recogni@e that in instances where a significant aount of audit evidence isin electronic for* it ay not be possible to reduce detection ris% to an acceptable level by

perforing only substantive tests!

) 'rue+) 7alse

nswer.

'ers. uditing standardsC /vidence in electronic for reduces detection ris% iff. ?oderate

Objective. LO 13-3


3) n the audit of a public copany* autoated controls ust be tested if they are considered to

be %ey controls for reducing the li%elihood of aterial isstateents in the financial stateents!

) 'rue+) 7alse

nswer.

'ers. udit of public copany testing of coputer controlsiff. ,hallenging

Objective. LO 13-3


'opic. ublic




) Once auditors deterine an autoated control is functioning properly* they can focus

subse<uent tests on assessing whether any changes have occurred that will liit the effectiveness

of the control!) 'rue

+) 7alse

nswer. 'ers. utoated coputer controls

iff. /asy


Learning Objective 13-

1) "hich of the following is generally not included in the Devidence i6D#

) 'ests of controls

+) Substantive tests of transactions

,) $is% assessent procedures) 'ests of details of balances

nswer. ,'ers. /vidence i6

iff. ,hallenging

Objective. LO 13-,S+. $eflective thin%ing s%ills

&) 'he evidence i6 includes ris% assessent procedures!) 'rue

+) 7alse

nswer. +'ers. /vidence i6 and ris% assessent procedures

iff. ?oderate


3) 'he choice of which types of tests to use and how e6tensively they need to be perfored ust

be the sae for all audits!) 'rue

+) 7alse

nswer. +'ers. /vidence i6 and ris% assessent procedures

iff. ?oderate


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1) 'he docuent that details the specific audit procedures for each type of test is the.) audit strategy!

+) audit progra!

,) audit procedure!) audit ris% odel!

nswer. +

'ers. udit prograiff. /asy

Objective. LO 13-5


&) uditors follow a four step approach to reduce assessed control ris%! "hich of the following is

not one of the four#

) pply transaction related audit objectives to a class of transactions!

+) dentify accounts that have high inherent ris%!,) dentify %ey controls that reduce control ris%!

) 7or potential isstateents* design appropriate substantive tests of transactions!nswer. +

'ers. pproach to reduce assessed control ris%



3) "hen designing the audit progra and the particular audit tests* the auditor should %eep in

ind that.

) the audit progra is bro%en down into two parts-the ris% assessent procedures and the testsof details of balances!

+) the tests of controls will not vary depending on assessed control ris%!

,) analytical procedures perfored during substantive testing are generally ore focused andore e6tensive than those done as part of planning!

) auditing standards re<uire that the tests contained in the audit progra ust be approved by

the ,O+!

nswer. ,'ers. portant consideration in developing the audit progra

iff. ?oderate


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) "hen designing tests of controls and substantive tests an auditor is gathering evidence to

satisfy the transaction related audit objectives! "hat are the four steps the auditor would

norally follow to reduce assessed control ris%#nswer.

1! pply the transaction-related audit objectives to the class of transactions being tested!

&! dentify %ey controls that should reduce control ris% for each transaction- related auditobjective!

3! evelop appropriate tests of controls for all internal controls that are used to reduce the

preliinary assessent of control ris% below a6iu!! 7or potential types of isstateents related to each transaction-related audit objective*

design appropriate substantive tests of transactions* considering deficiencies in internal control

and e6pected results of the tests of controls!

'ers. 7our-step approach to reduce assessed control ris% iff. ?oderate

Objective. LO 13-5


5) iscuss the relationship of each of the following to the e6tent of planned tests of details of

balances. (1) tolerable isstateent* (&) inherent ris%* (3) control ris%* and () acceptable auditris%!

nswer. nherent ris% and control ris% are directly related to the e6tent of planned tests of details

of balancesC that is* as inherent ris% andGor control ris% increases* the e6tent of planned tests ofdetails of balances also increases! 'olerable isstateent and acceptable audit ris% are inversely

related to the e6tent of planned tests of details of balancesC that is* as tolerable isstateent

andGor acceptable audit ris% increases* the e6tent of planned tests of details of balances decreases!

'ers. $elationship of e6tent of planned tests of details of balances and tolerable isstateent*inherent ris%* control ris%* and acceptable audit ris%

iff. ,hallenging


8) uditing standards re<uire a written audit progra!

) 'rue

+) 7alse

nswer. 'ers. uditing standardsC udit progra

iff. /asy


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:) "hen designing an audit progra for tests of details of balances* the auditor should a%e

assuptions about inherent ris% and control ris%* and predictions concerning the outcoe of tests

of controls* substantive tests of transactions* and analytical procedures!) 'rue

+) 7alse

nswer. 'ers. esigning audit prograC nherent ris% and control ris%C 'ests of controls* substantive

tests of transactions* and analytical procedures



=) "hen testing details of balances* ost audit procedures satisfy only one balance-relatedobjective* but ore than one audit procedure should be used to test each objective!

) 'rue

+) 7alse

nswer. +'ers. 'esting details of balances and audit procedures



>) Substantive tests of transactions and control tests are often conducted siultaneously!

) 'rue

+) 7alse

nswer. 'ers. Substantive tests of transactions and control tests

iff. ?oderate


14) uditors ust use considerable professional judgent to deterine any change in audit procedures that can be ade when the level of inherent ris% is increased or decreased!

) 'rue

+) 7alse

nswer. 'ers. udit progra

iff. ?oderate


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1) "hich of the following types of procedures will be perfored in an audit of internal controlover financial reporting#

)

rocedures to obtain an understanding of internal control $atio analysis

9es 9es

+)

rocedures to obtain an understanding of

internal control $atio analysis

2o 2o

,)


internal control $atio analysis9es 2o

)


internal control $atio analysis

2o 9es

nswer. ,

'ers. 'ypes of procedures perfored in an audit of internal controliff. ?oderate

Objective. LO 13-8,S+. $eflective thin%ing s%ills'opic. ublic

&) "hat type of test is used to obtain the ost types of evidence#

) Substantive tests of transactions+) 'ests of controls

,) $is% assessent tests

) 'ests of details of balancesnswer.

'ers. 'ype of test used to obtain ore types of evidence

iff. ,hallengingObjective. LO 13-8





3) "hich audit tests involve physical e6aination and confiration#

) 'ests of controls

+) 'ests of transactions,) 'ests of balances

) nalytical procedures

nswer. ,'ers. udit tests that involve physical e6aination and confiration

iff. ,hallenging


) "hich of the following types of evidence is not available when using substantive tests oftransactions#

) nspection

+) ,onfiration,) n<uiries of the client

) $eperforance

nswer. +'ers. 'ypes of evidence not available when using substantive tests of transactions

iff. ,hallenging

Objective. LO 13-8


5) f all transaction-related audit objectives are et* the auditor does not need to perfor

substantive tests of balances to deterine reali@able value!) 'rue

+) 7alse

nswer. +'ers. 'ransaction-related audit objectives

iff. ?oderate


Learning Objective 13-:

1) resentation and disclosure related audit objectives would be perfored in which phase of the

audit process#

) lan and design audit approach+) erfor audit tests for controls and transactions

,) erfor analytical procedures and tests of balances

) ,oplete the audit and issue the audit reportnswer.

'ers. resentation and disclosure related audit objective perfored in what phase of audit

process

iff. ?oderateObjective. LO 13-:


&&,opyright &41 earson /ducation* nc!



&) 'ransaction related audit objectives would ost li%ely be perfored in which phase of the

audit process#

) lan and design audit approach+) erfor audit tests for controls and transactions

,) erfor analytical procedures and tests of balances

) ,oplete the audit and issue the audit reportnswer. +

'ers. 'ransaction related audit objectives perfored in what phase of audit process



3) nalytical procedures ust be perfored in.

) the planning and test of control stages!

+) conjunction with tests of transactions and tests of details of balances!,) the planning and copletion stages!

) the planning* test of control* and copletion stages!

nswer. ,'ers. nalytical procedures ust be perfored

iff. ?oderate

Objective. LO 13-:


) "hich of the following tests coonly occur together#

) Substantive tests of transactions and tests of controls+) Substantive tests of transactions and obtaining an understanding of internal controls

,) nalytical procedures and tests of controls

) 'ests of controls and tests of details of balancesnswer.

'ers. 'ests that occur together



5) 'ests of controls and substantive tests of transactions are an iportant deterinant of thee6tent of the auditor0s use of tests of details of balances! "hich of the following is true#

) 'hey are li%ely to be perfored prior to the clients end of the fiscal year!

+) 'hey are li%ely to eliinate the need for tests of details of balances!,) 'hey are li%ely to have no ipact on the planned tests of details of balances!

) 'hey are li%ely to be used only in the audit of internal control!

nswer. 'ers. 'ests of controls and substantive tests of transactions

iff. ?oderate

Objective. LO 13-:





8) "hen the auditor has copleted the tests of details of balances and enters phase of the audit

process* she ust still perfor audit procedures for which of the following#

) ,ontingent liabilities and eployee copensation+) ,ontingent liabilities and subse<uent events

,) Subse<uent events and contractual coitents

) Subse<uent events and unrecorded liabilitiesnswer. +

'ers. udit procedures perfored in phase of audit process



:) "hich of the following audit tests would be regarded as a test of controls#

) ,oparison of the inventory pricing to vendors0 invoices

+) 'ests of the signatures on canceled chec%s to board of directors0 authori@ations,) 'ests of the additions to property* plant* and e<uipent by physical inspections

) $eview of the specific ites a%ing up the balance in a given general ledger account

nswer. +'ers. 'ests of controls audit tests

iff. ?oderate

Objective. LO 13-:

,S+. nalytic s%ills

=) "hich of the following audit tests for the basis for an auditor0s report on internal control

over financial reporting#) nalytical procedures

+) 'ests of transactions

,) 'ests of controls) 'ests of details of balances

nswer. ,

'ers. udit tests that for basis for auditor0s report on internal controliff. ?oderate

Objective. LO 13-:


'opic. ublic

>) ?anageent ipleents internal controls to ensure that all re<uired footnote disclosures are

accurate! uditors tests those controls to provide evidence supporting the EEEEEEEE presentation!) copleteness and valuation

+) copleteness and accuracy

,) rights and obligations and e6istence) occurrence and accuracy

nswer. +

'ers. hase of audit



&,opyright &41 earson /ducation* nc!



14) t what point in the audit process are tests of details ost appropriately designed#

) lan and design audit approach

+) erfor audit tests for controls and transactions,) erfor analytical procedures and tests of balances

) ,oplete the audit and issue the audit report

nswer. ,'ers. udit process and test of details

iff. ?oderate

Objective. LO 13-:,S+. $eflective thin%ing s%ills

11) "hich of the following isGare perfored in an audit of internal control over financialreporting#

)

rocedures to obtain an

understanding of internalcontrol 'est of details of balances nalytical rocedures

9es 9es 2o

+)

rocedures to obtain anunderstanding of internal

control 'est of details of balances nalytical rocedures

9es 2o 2o

,)


understanding of internalcontrol 'est of details of balances nalytical rocedures

2o 9es 9es

)


understanding of internal

control 'est of details of balances nalytical rocedures

2o 2o 9es

nswer. +

'ers. udit of internal control over financial reportingiff. ?oderate

Objective. LO 13-:

,S+. $eflective thin%ing s%ills'opic. ublic




1&) "hich of the following ultiately deterines the specific audit procedures necessary to

provide an independent auditor with a reasonable basis for the e6pression of an opinion#

) 'he audit progra+) 'he auditor0s judgent

,) ;enerally accepted auditing standards

) 'he auditor0s wor%ing papersnswer. +

'ers. eterines specific audit procedures

iff. ,hallengingObjective. LO 13-:


13) n phase of the audit* coplete the audit and issue an audit report* there are five activitiesre<uired! List below the activities!

nswer.

1! erfor additional tests for presentation and disclosure

&! ccuulate final evidence3! /valuate results

! ssue audit report5! ,ounicate with audit coittee and anageent

'ers. hase of audit



1) n accuulating final evidence upon which to base an audit opinion* the auditor should

perfor four activities! List the activities below!

nswer.1! erfor final analytical procedures

&! /valuate the going concern assuption

3! Obtain a client representation letter ! $ead inforation in the annual report to ensure that it is consistent with the financial

stateents

'ers. ccuulating final evidence and final activities






15) iscuss the ajor activities and procedures perfored by the auditor in the plan and design

of the audit approach!

nswer. 'he ajor activities perfored in the planning and design phase (hase ) are.B ccept client and perfor initial planning

B Hnderstand the clients business and industry

B ssess client business ris% B erfor preliinary analytical procedures

B Set ateriality and assess acceptable audit ris% and inherent ris%

B Hnderstand internal control and assess control ris% B ;ather inforation to assess fraud ris%s

B evelop overall audit plan and audit progra

'ers. ?ajor activities and procedures perfored by auditor in the plan and design of the audit

approachiff. ,hallenging

Objective. LO 13-:


18) 'he auditor ust counicate significant deficiencies in internal control only after the

entire audit is coplete to ensure the auditor has a sufficient understanding of the circustancessurrounding the deficiency!

) 'rue

+) 7alsenswer. +

'ers. uditor counicate significant deficiencies in internal control

iff. ?oderate

Objective. LO 13-:,S+. $eflective thin%ing s%ills

13- Audit Strategies

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