Question 1

Which of the following ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion?
A) the audit program
B) the auditor's judgment
C) generally accepted auditing standards
D) the auditor's working papers

Accepted Answer

Although the audit program, generally accepted auditing standards, and working papers are all important in determining audit procedures, it is ultimately the auditor's judgment that determines the specific procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion. This judgment is based on the auditor's assessment of the risks of material misstatement, the nature and extent of the audit evidence needed to address those risks, and other relevant factors.

Question 2

After finishing the review phase of the study and evaluation of internal control in an audit, the auditor should perform tests of controls on:
A) those controls that the auditor wants and plans to rely upon.
B) those controls in which material weaknesses were identified.
C) those controls that have a material effect upon the financial statement balances.
D) a random sample of the controls that were reviewed.

Accepted Answer

The primary objective of performing tests of controls is to evaluate the operating effectiveness of those controls that the auditor wants and plans to rely upon in order to provide reasonable assurance that the financial statements are free from material misstatement. Therefore, the auditor should only perform tests of controls on those controls that are relevant to the audit, which are the controls that the auditor plans to rely upon for the purposes of the audit.

Question 3

Which of the following audit tests form the basis for an auditor's report on internal control over financial reporting?
A) Analytical procedures
B) Tests of transactions
C) Tests of controls
D) Tests of details of balances

Accepted Answer

Tests of controls are the basis for an auditor's report on internal control over financial reporting. These tests evaluate the effectiveness of the company's internal control system in preventing or detecting material misstatements in the financial statements. Analytical procedures, tests of transactions, and tests of details of balances are all substantive tests that are used to gather evidence about the accuracy and completeness of the financial statements themselves, rather than the company's internal control system.

Question 4

When the auditor has completed the tests of details of balances and enters phase 4 of the audit process, she must still perform audit procedures for which of the following?
A) contingent liabilities and employee compensation
B) contingent liabilities and subsequent events
C) subsequent events and contractual commitments
D) subsequent events and unrecorded liabilities

Accepted Answer

Phase 4 of the audit process involves the overall review of the financial statements and ensuring all necessary disclosures have been made. This includes addressing any potential subsequent events (events occurring after the balance sheet date) and contingent liabilities (potential liabilities that may arise from past events) that may impact the financial statements. Therefore, option B, which includes both subsequent events and contingent liabilities, is the correct choice.

Question 5

At what point in the audit process are tests of details most appropriately designed?
A) plan and design audit approach
B) perform audit tests for controls and transactions
C) perform analytical procedures and tests of balances
D) complete the audit and issue the audit report

Accepted Answer

Tests of details are most appropriately designed during the phase where analytical procedures and tests of balances are performed, as this is when auditors gather substantive evidence to support the financial statement assertions.

Question 6

In phase 4 of the audit, complete the audit and issue an audit report, there are five activities required. List below the activities.

Accepted Answer

The answer of In phase 4 of the audit, complete...

Question 7

The auditor must communicate significant deficiencies in internal control only after the entire audit is complete to ensure the auditor has a sufficient understanding of the circumstances surrounding the deficiency.

Accepted Answer

The auditor is required to communicate significant deficiencies in internal control as soon as they are identified, even if the audit is not yet complete. This is in accordance with auditing standards.

Question 8

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) tests of controls and tests of details of balances

Accepted Answer

Substantive tests of transactions and tests of controls commonly occur together. Substantive tests of transactions are designed to test for completeness, accuracy, and validity of individual transactions, while tests of controls are designed to test the effectiveness of the entity's internal controls over the financial reporting process. These two types of tests are usually performed together in order to obtain sufficient evidence to support the auditor's opinion on the financial statements.

Question 9

Discuss the major activities and procedures performed by the auditor in the plan and design of the audit approach.

Accepted Answer

The answer of Discuss the major activities and procedures performed...

Question 10

Tests of controls and substantive tests of transactions are an important determinant of the extent of the auditor's use of tests of details of balances. Which of the following is true?
A) They are likely to be performed prior to the clients end of the fiscal year.
B) They are likely to eliminate the need for tests of details of balances.
C) They are likely to have no impact on the planned tests of details of balances.
D) They are likely to be used only in the audit of internal control.

Accepted Answer

Tests of controls and substantive tests of transactions are typically performed prior to the end of the client's fiscal year in order to provide the auditor with evidence to support their opinions on the financial statements. While these tests can reduce the extent of testing required for tests of details of balances, they are unlikely to eliminate the need for such testing entirely. Furthermore, tests of controls and substantive tests of transactions are used in both the audit of internal control and the audit of financial statements.

Question 11

Which of the following is/are performed in an audit of internal control over financial reporting?
A) 
B) 
C) 
D)

Accepted Answer

The answer of Which of the following is/are performed in...

Question 12

Which of the following audit tests would be regarded as a test of controls?
A) Comparison of the inventory pricing to vendors' invoices.
B) Tests of the signatures on canceled checks to board of directors' authorizations.
C) Tests of the additions to property, plant, and equipment by physical inspections.
D) Review of the specific items making up the balance in a given general ledger account.

Accepted Answer

Tests of signatures on canceled checks to board of directors' authorizations are testing controls to ensure that checks are properly authorized before being issued. Choices A, C, and D are all substantive tests, as they focus on the pricing of inventory, physical inspections, and specific items in the general ledger, respectively.

Question 13

Analytical procedures must be performed in:
A) the planning and test of control stages.
B) conjunction with tests of transactions and tests of details of balances.
C) the planning and completion stages.
D) the planning, test of control, and completion stages.

Accepted Answer

The answer of Analytical procedures must be performed in:
A) the...

Question 14

In accumulating final evidence upon which to base an audit opinion, the auditor should perform four activities. List the activities below.

Accepted Answer

The answer of In accumulating final evidence upon which to...

Quiz 13: Overall Audit Plan and Audit Program

Which of the following ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion?

After finishing the review phase of the study and evaluation of internal control in an audit, the auditor should perform tests of controls on:

Which of the following audit tests form the basis for an auditor's report on internal control over financial reporting?

When the auditor has completed the tests of details of balances and enters phase 4 of the audit process, she must still perform audit procedures for which of the following?

At what point in the audit process are tests of details most appropriately designed?

In phase 4 of the audit, complete the audit and issue an audit report, there are five activities required. List below the activities.

The auditor must communicate significant deficiencies in internal control only after the entire audit is complete to ensure the auditor has a sufficient understanding of the circumstances surrounding the deficiency.

Which of the following tests commonly occur together?

Discuss the major activities and procedures performed by the auditor in the plan and design of the audit approach.

Tests of controls and substantive tests of transactions are an important determinant of the extent of the auditor's use of tests of details of balances. Which of the following is true?

Which of the following is/are performed in an audit of internal control over financial reporting?

Which of the following audit tests would be regarded as a test of controls?

Analytical procedures must be performed in:

In accumulating final evidence upon which to base an audit opinion, the auditor should perform four activities. List the activities below.