Finman Quiz - 121540

1.Which of the following statements is most correct regarding the primary purpose of audit procedures?
a.To detect all error or fraudulent activities as well as illegal activities
b.To comply with the SEC
c To gather correlative audit evidence about management’s assertion regarding the client’s Financial
statements
d.To determine the amount of errors in the balance sheet accounts in order to adjust the accounts to
actual
7. A procedure designed to test for monetary misstatements directly affecting the validity of the
Financial statement balance is a:
a. Test of controls.
b. Substantive test
c. Test of attributes.
d. Monetary-unit sampling test.
9. More types of evidence are obtained by using what type of test than any other?
a. Substantive test of transactions
b. Test of accounts
c. Analytical procedures
d. Test of details of balance
11. Which of the following tests commonly occur together?
a. Substantive tests of transactions and tests of controls
b. Substantive tests of transactions and obtaining an understanding of internal controls
c. Analytical procedures and tests of controls
d. All of the above commonly occur together
13. An auditor may compensate for a weakness in internal control by Increasing the
a. Level of detection risk.

b. B. Extent of tests of controls.
c. C Preliminary judgment about audit risk.
d. d. Extent of analytical procedures
14. Below are the five types of tests which auditors use to determine whether financial statements are
fairly stated. Which three are Substantive tests?
1. Risk assessment procedures
2 Tests of controls
3. Tests of details of transactions
4 Analytical procedures.
5. Tests of details of balances
a. 1, 2, and 3.
b. B. 3, 4, and 5.
c. 2, and 5
d. d 23, and 4
16. The objective of tests of details of transactions performed as test of control is to
a. Comply with generally accepted auditing standards.
B. Attain assurance about the effectiveness and efficiency of client’s Operations
C. Detect material misstatements in the financial statements
d Evaluate whether internal control policies and procedures Operated effectively.
19. Evidence is usually more persuasive for statement of financial position Accounts when it is obtained
a. As close to the financial statement date as possible.
b. Only from transactions occurring on the financial statement date.
C From various times throughout the client’s year.
D From the time period when transactions in that account were most Numerous during the fiscal
period.
28. Of the following procedures, which does not produce analytical evidence?
a. Compare revenue, cost of sales, and gross profit with the prior Year and investigate
significant variations.
b.Examine monthly performance reports and investigate significant Revenue and expense
variances
c. Confirm customers’ accounts receivable and clear all material exceptions
d. Compare sales trends and profit margins with industry averages And investigate significant
differences
29. Which of the following comparisons is most useful to an auditor in evaluating the results of
an entity’s operations?
a. Prior year accounts payable to current year accounts payable
b. Prior year payroll expense to budgeted current year payroll expense
c. Current year revenue to budgeted current year revenue.
d. D. Current year warranty expense to current year contingent abilities
33.The auditor will most likely to perform extensive tests for possible understatement of
a.Revenues
b.Assets
c.Liabilities
d.Capital
34.Auditors try to identify predictable relationships when using analytical procedures.

Relationships involving transactions from which of the following accounts most likely would yield
the highest level of evidence?
a.Accounts Payable
b.Advertising Expense
c.Accounts Receivable
d.Interest Expense
35.Auditors sometimes use comparison of ratios as audit evidence. For example, an

unexplained decrease in the ratio of gross profit to sales may suggest which of the following
possibilities?
a.Unrecorded purchases
b.Unrecorded sales
c.Merchandise purchases being charged to operating expense
d.Fictitious sales
38.Which of the following would not be classified as an analytical procedure?
a.Benchmarking the company’s profitability ratios against the industry
b.Variance analysis of actual versus budgeted amounts for production
c.Comparing current year’s depreciation expense with that of the prior year
d.Reconciling fixed assets dispositions with the fixed assets ledger
43.Confirmations would almost always be used, assuming all the accounts below are material,
for:
a.Individual transactions between organizations, such as sales transactions
b.Bank balances and accounts receivable
c.Fixed asset additions
d.Payroll expenses
47.In order to promote audit efficiency the auditor considers cost in selecting audit tests to
perform. Which of the following would be the most costly?
a.Analytical procedures
b.Risk assessment procedures
c.Tests of controls
d.Test of details
51.The objective of tests of details of transactions performed as substantive tests is to

a.Monitor the design and the use of entity documents such as prenumbered shipping form
b.Determine whether controls have been placed in operation
c.Detect material misstatements in the account balances of the financial statements
d.Evaluate whether controls operated effectively
63.Appropriateness of evidence is a measure of the:

a.Quantity of evidence
b.Quality of evidence
c.Sufficiency of evidence
d.Meaning of evidence
69.An example of a document the auditor receives from the client, but which was prepared by
someone outside the client’s organization, is a:
a.Confirmation
b.Sales invoice
c.Vendor invoice
d.Bank reconciliation
71.Which of the following statements is generally correct about the appropriateness of

evidence?
a.The auditor’s direct personal knowledge, obtained through observation and inspection, is
more persuasive than information obtained indirectly from outside sources
b.To be appropriate, evidence must be either reliable or relevant, but need not be both
c.Accounting data alone may be considered sufficient appropriate evidence to issue an
unqualified opinion of financial statements
d.Appropriateness of evidence refers to the amount of corroborative evidence to be obtained

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1.Which of the following statements is most correct regarding the primary purpose of audit procedures?

a.To detect all error or fraudulent activities as well as illegal activities

b.To comply with the SEC

d. Monetary-unit sampling test.

a. Substantive test of transactions

d. Test of details of balance

11. Which of the following tests commonly occur together?

a. Substantive tests of transactions and tests of controls

b. Substantive tests of transactions and obtaining an understanding of internal controls

c. Analytical procedures and tests of controls

d. All of the above commonly occur together

a. Level of detection risk.

1. Risk assessment procedures

3. Tests of details of transactions

5. Tests of details of balances

16. The objective of tests of details of transactions performed as test of control is to

a. Comply with generally accepted auditing standards.

B. Attain assurance about the effectiveness and efficiency of client’s Operations

C. Detect material misstatements in the financial statements

d Evaluate whether internal control policies and procedures Operated effectively.

a. As close to the financial statement date as possible.

b. Only from transactions occurring on the financial statement date.

C From various times throughout the client’s year.

34.Auditors try to identify predictable relationships when using analytical procedures.

35.Auditors sometimes use comparison of ratios as audit evidence. For example, an

51.The objective of tests of details of transactions performed as substantive tests is to

63.Appropriateness of evidence is a measure of the:

71.Which of the following statements is generally correct about the appropriateness of

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