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20 Auditing Multiple Choice Questions

I have a multiple choice practice test/study guide for my auditing class below. Please help with the answers for this study guide.

1. The definition of auditing states that the auditor
A. objectively obtains evidence
B. is independent
C. must evaluate internal control
D. none of the above

2. Financial statements are the representations of
A. the auditor
B. the board of directors
C. the AICPA
D. management

3. Proper supervision is
A. a general standard
B. a standard of fieldwork
C. a standard of reporting
D. both A & C

4. The audit report should be dated
A. the same date the engagement letter is dated
B. the date the report is prepared
C. the date the fieldwork is completed
D. none of the above

5. If an auditor is not independent, he should issue a
A. disclaimer
B. unqualified report with explanatory paragraph
C. qualified report
D. representation letter

6. The concept of materiality is recognized in the auditor's report
A. in the introductory paragraph
B. in an explanatory paragraph
C. in the scope paragraph
D. materiality is not recognized in the auditor's report

7. The auditor considers materiality from
A. an AICPA perspective
B. a state board perspective
C. independence perspective
D. reasonable user perspective

8. The risk that the auditor will not detect a material misstatement is
A. control risk
B. inherent risk
C. expected misstatement
D. none of the above

9. Evidence is considered competent when it
A. is relevant to the audit objective being tested
B. contains no material misstatement
C. signals the true state of an assertion
D. both A & C

10. Audit documentation is the property of
A. the client
B. the auditor
C. both the client and the auditor
D. the audit committee

11. The objective of the audit plan is
A. to conduct the audit in accordance with GAAS
B. reduce the risk of material misstatements to an acceptably low level
C. prepare an unqualified report
D. Both A & B

12. Substantive tests consist of
A. analytical procedures
B. tests of the design of the internal control system
C. tests of the implementation of the internal control system
D. all of the above

13. A more detailed understanding of internal control is required when using a
A. substantive strategy
B. reliance strategy
C. sampling strategy
D. test-basis strategy

14. The concept of _________ recognizes that the cost of an entity's internal control system should not exceed the benefits that are expected to be derived
A. materiality
B. substantive testing
C. reasonable assurance
D. control risk

15. Which is not true concerning information technology?
A. audit objectives change when using information technology
B. duties may be difficult to segregate
C. internal control usually becomes more reliable as the complexity of the system increases
D. hard copies of source documents may not exist

16. Personal computers may be used for
A. trial balance preparation
B. audit documentation
C. analytical procedures
D. all of the above

17. The correct sequence of steps in planning an attribute sampling application is
A. randomly select sample items, perform audit procedures, perform error analysis
B. determine the tolerable deviation rate, consider the effect of population size, randomly select the sample items
C. determine the test objective, define the control deviation conditions, define the population
D. define the sampling unit, define the period covered by the test, randomly select the sample items

18. Which of the following represents a deviation
A. unused or inapplicable documents
B. inability to examine a sample item
C. voided documents
D. Both A & B

19. The amount of the preliminary judgment about materiality that is allocated to a financial statement account is referred to as
A. sampling risk
B. risk of incorrect rejection
C. upper limit on misstatement
D. tolerable misstatement

20. Sampling may be used for substantive testing to
A. develop an estimate of some amount
B. consider the variation within the population
C. apply judgment
D. determine an acceptable level of risk

Solution Summary

The solution contains 20 Mutiple choice questions with correct answers. Subject matter includes the definiton of auditing, the concept of materiality, evidence, substantive tests, audit documentation, internal control, reasonable assurance, information technology, personal computers, attribute sampling application, and deviation. Where appropriate additional comments have been made.