a) Testing the effectiveness of the entity’s internal controls over financial reporting
b) Comparing current year financial data to prior year financial data
c) Confirming accounts payable balances with third parties
d) Examining the entity’s inventory valuation methods
Answer: d) Examining the entity’s inventory valuation methods
a) Documentary evidence obtained from an independent source outside the entity
b) Oral representations obtained from the entity’s management
c) The entity’s accounting records
d) The auditor’s own internal records
Answer: a) Documentary evidence obtained from an independent source outside the entity
a) Confirming accounts payable balances with third parties
b) Testing the effectiveness of the entity’s internal controls over financial reporting
c) Comparing current year financial data to prior year financial data
d) Analyzing the entity’s key financial ratios over time
Answer: d) Analyzing the entity’s key financial ratios over time
a) Observing the entity’s inventory counting procedures
b) Testing the effectiveness of the entity’s internal controls over financial reporting
c) Reconciling bank statements to the entity’s accounting records
d) Examining supporting documentation for recorded transactions
Answer: d) Examining supporting documentation for recorded transactions
a) Segregating the duties of employees who handle cash receipts and cash disbursements
b) Confirming accounts payable balances with third parties
c) Reviewing the entity’s accounting policies and procedures
d) Performing substantive procedures to test account balances and transactions
Answer: a) Segregating the duties of employees who handle cash receipts and cash disbursements
a) The need for the auditor to rely on the entity’s internal controls over financial reporting
b) The need for the auditor to obtain sufficient and appropriate audit evidence
c) The need for the auditor to maintain an attitude of professional skepticism
d) The need for the auditor to have adequate knowledge of the entity’s industry
Answer: a) The need for the auditor to rely on the entity’s internal controls over financial reporting
a) Recording a transaction in the wrong accounting period
b) Misinterpreting accounting guidance
c) Recording a liability at an incorrect amount
d) Recording fictitious revenue
Answer: d) Recording fictitious revenue
a) Confirming accounts payable balances with third parties
b) Testing the effectiveness of the entity’s internal controls over financial reporting
c) Comparing current year financial data to industry averages
d) Reviewing the entity’s accounting policies and procedures
Answer: c) Comparing current year financial data to industry averages
a) The risk that the auditor will not detect a material misstatement in the financial statements
b) The risk that the sample of transactions tested is not representative of the population as a whole
c) The risk that the auditor will not be able to rely on the entity’s internal controls over financial reporting
d) The risk that the auditor will not be independent in mental attitude
Answer: b) The risk that the sample of transactions tested is not representative of the population as a whole
a) Analyzing the entity’s key financial ratios over time
b) Confirming accounts payable balances with third parties
c) Performing substantive procedures to test account balances and transactions
d) Reviewing the entity’s accounting policies and procedures
Answer: c) Performing substantive procedures to test account balances and transactions
