Question

QUESTION 5

1. All of the following statements are true except for?

   	a.	Audit hours incurred for an integrated audit of public filer is significantly greater than the extent of testing solely to express an opinion on the financial statements.
   	b.	To express an opinion on internal controls for a large public company, the auditor obtains an understanding of and performs tests of controls for all significant account balances.
   	c.	To express an opinion on internal controls for a large public company, the auditor obtains an understanding of and performs tests of controls for the highest risk account balances.
   	d.	While inquiry and observation may also be performed to evaluate control activities, auditors frequently inspect documentation that demonstrates a control activity was performed.

1 points   

QUESTION 6

1. A financial auditor is testing several key internal controls over the significant and material account balance associated with revenue. The auditor concludes that there are no additional compensating controls to address the risk, and likelihood or material misstatement is more than reasonably possible. In evaluating the significance of controls deficiency the mostappropriate conclusion would be?

   	a.	A significant deficiency exists because one or more control deficiencies exist that are less severe than a material weakness.
   	b.	A material weakness exists as there are a combination of multiple significant deficiencies.
   	c.	Auditor should express an adverse opinion on the effectiveness of internal controls over revenue due to material weakness detected.
   	d.	More controls testing is warranted because the integrated audit requires highest risk and significant accounts to be tested for controls.

1 points   

QUESTION 7

1. True or False - If performance materiality is low, and inherent risk and control risk are low, planned tests of details of balances that the auditor must perform will be high. And at the same time an increase in performance materiality or a reduction of either inherent risk or control risk will lead to a reduction in the planned tests of details of balances.

   	a.	True
   	b.	False

2 points   

QUESTION 8

1. A financial auditor has been tasked with testing the key internal controls over a publicly traded company. The following are examples of test of controls except for?

   	a.	Examination of journal entries for proper preparer and approver.
   	b.	Inspection of bank reconciliations for proper preparation and dates.
   	c.	Examination of employee payroll records and agreeing amounts to the subsidiary ledger.
   	d.	Examination of vendor invoice for evidence that managers are comparing it to receiving reports, purchase orders and verifying payment approvals.

2 points   

QUESTION 9

1. An auditor has been assigned the audit objective to determine appropriateness of wage rates used in calculation of company personnel earnings. Which of the following would be the most appropriate audit procedure to achieve the audit objective?

   	a.	Review and validate the wage rate authorization forms the company maintains.
   	b.	Obtain a sample of actual pay stub prepared by payroll. Compare calculated rate paid to what was on the wage form.
   	c.	Inspect the most recent wage rate authorization form and verify authorization by appropriate management personnel.
   	d.	All of the above.

2 points   

QUESTION 10

1. An auditor is employing substantive analytical procedures to determine appropriateness of sales and accounts receivable balances. While performing these procedures, the auditor found variances between what she found and what was expected. What is the most appropriate next steps should the auditor take?

   	a.	Determine the cause of the variance and ensure audit workpapers state this cause and rely on the ratio analysis results.
   	b.	Auditor should extend the testing to confirmation of accounts receivable and cutoff tests.
   	c.	Due to material nature of sales and accounts receivables, sufficient evidence exist for a finding based on analytical procedures performed.
   	d.	Determine the cause of variance, document audit workpapers and test key controls related to accounts receivable and sales.

2 points   

QUESTION 11

1. Select the most appropriate statement related to cost associated with test procedures that an auditor employs.

   	a.	Test of details of balances is the most costly due to volume of samples and auditor requirement to agree amounts.
   	b.	Test of details of balances is the most costly due to volume of data within the accounting system and complexities associated with the understanding the general ledger.
   	c.	Substantive test of transactions is the most costly due to volume of samples and agreeing amounts.
   	d.	Substantive analytical procedures is the most costly due to costs associated with generalized audit software (GAS) and time needed for training auditors.

Answer 1

Question 1:-

All of the following statements are true except for?

The correct answer is Option C - To express an opinion on internal controls for a large public company, the auditor obtains an understanding of and performs tests of controls for the highest risk account balances. When an auditor is undertaking to express an opinion on internal controls for a large public company, in addition to obtaining an understanding of and performing test of controls on all the significant balances related to the audit. While it is true that high risk balances are also significant, there might balances for which the level of risk is moderate or low but still are significant to the company. Hence, this option is the correct answer because it is not true.

Option A is incorrect. An integrated audit of the company includes the auditors opining on the effectiveness of internal controls and also the financial statement balances. As such, the audit hours incurred are significantly higher than the testing that is aimed solely at expressing opinion on the financial statements. This statement is true and hence is incorrect.

Option B is incorrect. It is true that to express an opinion on internal controls for a large public company, the auditor obtains an understanding of and performs tests of controls for all significant account balances. The public company audit requires careful examination of the processes involved and the test of controls to obtain comfort over the numbers reported on the financial statements. It becomes pivotal for the auditor to perform and test operating effectiveness of controls for all significant account balances. This sentence is true and hence is incorrect.

Option D is incorrect. The auditors would in all probability, in addition to inquiry and observation, inspect the documentation to ensure that a particular control activity was performed. This gives comfort for the auditor about the effectiveness of controls. This statement is true and is hence, incorrect.

Kindly requesting you to raise the other questions separately so that we can answer them as well. All the best and please do let me know if you have any question