2011 Becker CPA PassMaster A3 5

2011 Becker CPA PassMaster A3 5 - Becker Professional...

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Unformatted text preview: Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Quest ion CPA-02421 The audit plan usually cannot be finalized until the: a. Consideration of the entity‘s internal control has been completed. b. Representation letter has been signed by the client. c. Significant deficiencies in internal control have been communicated to those charged with governance. d. Search for unrecorded liabilities has been performed and documented. Explanation Choice a is correct. The auditor should obtain a sufficient understanding of the entity and its environment, including its internal control, to plan the audit of the entity‘s financial statements. Choice "b" is incorrect. The representation letter is not obtained until the end of the audit. Choice o Is incorrect. Informing those charged with governance of significant deficiencies in internal control generally occurs during or at the completion of the audit. It is not required before completion of the audit plan. Choice "d" is incorrect. The search for unrecorded liabilities typically takes places after year—end, while the audit plan is prepared during planning. Information obtained from the search is not needed to finalize the audit plan. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.‘viivid Book.org VividBookNet@Gmail.com Question CPA-02425 The primary objective of procedures performed to obtain an understanding of the entity and its environment is to provide an auditor with: a. Knowledge necessary for risk assessment and audit planning. b. Audit evidence to use in assessing inherent risk. c. A basis for issuing an opinion on the financial statements. d. An evaluation of the consistency of application of management's policies. Explanation Choice a is correct. The auditor should obtain an understanding of the entity and its environment sufficient to assess the risk of material misstatement and to design and perform further audit procedures. Choice "b" is incorrect. Assessing inherent risk is not the primary objective of obtaining an understanding of the entity and its environment. Choice "c" is incorrect. Obtaining an understanding of the entity and its environment is not a sufficient basis for issuing an audit opinion. Choice "d" is incorrect. Procedures performed to gain an understanding of the entity and its environment would not ordinarily test the consistency of the application of management's policies. lfthe auditor intends to rely on a control, its consistency in application would then be tested. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.‘vlivid Book.org VividBookNet@Gmail.com Question CPA-02679 Of the following nonfinancial information, what would an auditor most likely consider in performing analytical procedures during the planning phase of an audit? a. Turnover of personnel in the accounting department. b. Objectivity of audit committee members. c. Square footage of selling space. d. Management's plans to repurchase stock. Explanation Choice o Is correct. When performing analytical procedures, the auditor considers relevant nonfinancial information, which generally is related to financial data in some way. For example, a relationship might exist between the square footage of selling space and the level of sales. Choice "a" is incorrect. The auditor would consider the turnover of accounting personnel when assessing control risk and the risk of fraud, not when performing analytical procedures during planning. Choice "b" is incorrect. The auditor would consider the integrity of members of the audit committee when deciding whether to accept the engagement and when assessing control risk and the risk of fraud, not when performing analytical procedures during planning. Choice "d" is incorrect. The auditor would consider management's plans to repurchase stock when assessing control risk and when considering appropriate disclosure, not when performing analytical procedures during planning. 2011 Edition. Distributed by DeVryi'Becker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-02705 Which of the following procedures would an auditor most likely perform in planning a financial statement audd? a. Inquiring of the client's legal counsel concerning pending litigation. b. Comparing the financial statements to anticipated results. c. Examining computer generated exception reports to verify the effectiveness of internal controls. d. Searching for unauthorized transactions that may aid in detecting unrecorded liabilities. Explanation Choice "b" is correct. A requirement during planning is to perform analytical procedures, which involve comparisons of recorded amounts to expectations. Choice "a" is incorrect. Inquiry of the client's legal counsel is typically performed near the end of fieldwork. Choice "c" is incorrect. Tests of controls are performed after audit planning is complete. Choice "d" is incorrect. The search for unrecorded liabilities is generally performed at or after year-end. 2011 Edition. Distributed by DeVryl'Becker Educational Development Corp. Copyright ?2010 DeVryz‘Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-02710 Analytical procedures used in planning an audit should focus on: a. Reducing the scope of tests of controls and substantive tests. b. Providing assurance that potential material misstatements will be identified. c. Enhancing the auditor's understanding of the client's business. d. Assessing the adequacy of the available audit evidence. Explanation Choice c Is correct. Analytical procedures used in planning the audit should focus on enhancing the auditor's understanding of the client's business and the transactions and events that have occurred since the last audit date. Choice "a" is incorrect. Analytical procedures used in planning do not reduce tests of controls or substantive tests. Choice "b" is incorrect. Analytical procedures used in planning are not designed to identify material misstatements. Choice "d" is incorrect. Audit evidence has not yet been gathered during the planning process, so its adequacy cannot be assessed. 2011 Edition. Distributed by DeVryi'Becker Educational Development Corp. Copyright ?2010 DeVryz‘Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-02799 The objective of performing analytical procedures in planning an audit is to identify the existence of: a. Unusual transactions and events. b. Illegal acts that went undetected because of internal control weaknesses. c. Related party transactions. d. Recorded transactions that were not properly authorized. Explanation Choice a Is correct. The objective of performing analytical procedures during planning is to discover unusual transactions or events that may have an impact on the planning of the financial statement audit. Choice "b" is incorrect. Analytical procedures are not effective in identifying illegal acts that went undetected due to internal control weaknesses. Choice "c" is incorrect. Analytical procedures are not effective in identifying related party transactions. Choice "d" is incorrect. Analytical procedures are not effective as tests of controls to identify unauthorized transactions. 2011 Edition. Distributed by DeVryi'Becker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-02813 Analytical procedures used in planning an audit should focus on: a. Evaluating the adequacy of evidence gathered concerning unusual balances. b. Testing individual account balances that depend on accounting estimates. c. Enhancing the auditor's understanding of the client's business. d. Identifying material weaknesses in internal control. Explanation Choice c Is correct. The purpose of applying analytical procedures in planning the audit is to assist in planning the nature, timing, and extent of auditing procedures that will be used to obtain audit evidence for specific account balances or classes of transactions. To accomplish this, the analytical procedures used in planning the audit should focus on (a) enhancing the auditor's understanding of the client's business and the transactions and events that have occurred since the last audit date, and (b) identifying areas that may represent specific risks relevant to the audit. Choice a Is incorrect. Analytical procedures to assess the adequacy of evidence would be used in the final review stage. Choice "b" is incorrect. Testing individual account balances that depend on accounting estimates would be a substantive application of analytical procedures and would not be used in the planning stages ofan audit. Choice "d" is incorrect. Analytical procedures are generally not useful in detecting material weaknesses in the client's internal control. 2011 Edition. Distributed by DeVryi'Becker Educational Development Corp. Copyright ?2010 DeVryz‘Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.‘vlivid Book.org VividBookNet@Gmail.com Question CPA-05489 Which of the following is an analytical procedure that an auditor most liker would perform when planning an audd? a. Confirming bank balances with the financial institutions. b. Scanning accounts receivable for amounts over credit limits. c. Recalculating inventory extensions of physical inventory counts. d. Comparing the current-year account balances for conformity with predictable patterns. Explanation Choice "d" is correct. During planning, analytical procedures consist of a review of data aggregated at a high level, with an objective of enhancing the auditor‘s understanding of the client. Comparing the current-year account balances for conformity with predictable patterns would fulfill this purpose. Choice "a" is incorrect. Confirmation of bank balances is a substantive audit procedure (not an analytical procedure) that would be performed during the fieldwork stage of the audit. Choice "b" is incorrect. Scanning accounts receivable for amounts over credit limits is a detailed procedure related to one specific account, and it would be performed during the fieldwork stage of the audit. Choice c Is incorrect. Recalculating inventory extensions of physical inventory counts is a detailed procedure related to one specific account, and it would be performed during the fieldwork stage of the audit. 2011 Edition. Distributed by DeVryl'Becker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.‘vlivid Book.org VividBookNet@Gmail.com Question CPA-05505 Which of the following procedures would a CPA most likely perform in the planning stage of a financial statement audit? a. Obtain representations from management regarding the availability of all financial records. b. Communicate with those charged with governance concerning the prior year's audit adjustments. c. Make inquiries of the client's attorney regarding pending and threatened litigation and assessments. d. Compare recorded financial information with anticipated results from budgets and forecasts. Explanation Choice "d" is correct. The planning process should include application of analytical procedures, such as comparison of the financial statements with budgeted or anticipated results. Choice "a" is incorrect. Management representations are typically obtained at the end of the audit, not during the planning stage. Choice "b" is incorrect. Assuming all of those charged with governance are not also involved with managing the entity, the auditor is required to communicate with those charged with governance concerning adjustments arising from the current year's audit, not adjustments from the previous year. Choice c Is incorrect. Inquiries are typically made of the client's attorney during the fieldwork stage of the audit, not during the planning stage. 2011 Edition. Distributed by DeVryl'Becker Educational Development Corp. Copyright ?2010 DeVryz‘Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.‘viivid Book.org VividBookNet@Gmail.com Question CPA-05711 When performing analytical procedures in the planning stage, the auditor most likely would develop expectations by reviewing which of the following sources of information? a. Unaudited information from internal quarterly reports. b. Various account assertions in the planning memorandum. c. Comments in the prior—year's management letter. d. The control risk assessment relating to specific financial assertions. Explanation Choice a Is correct. Analytical procedures involve comparison of recorded amounts to independent expectations developed by the auditor. During the planning stage, analytical procedures generally use financial data, such as unaudited information from internal quarterly reports. Choice "b" is incorrect. Analytical procedures involve comparison of recorded amounts to independent expectations developed by the auditor. Various account assertions in a planning memorandum would not necessarily be helpful in developing expectations. Choice o Is incorrect. Analytical procedures involve comparison of recorded amounts to independent expectations developed by the auditor. Comments from the prior year's management letter would not necessarily provide a basis for developing expectations. Choice "d" is incorrect. Analytical procedures involve comparison of recorded amounts to independent expectations developed by the auditor. The control risk assessment would not be useful in developing expectations. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryz‘Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-05727 Analytical procedures used in the planning phase of an audit should focus on: Documenting the risk factors relating to the susceptibility of assets to misappropriation. Identifying the internal control activities that could reduce the assessed level of control risk. Discovering uncorrected misstatements that should be communicated to the audit committee. Enhancing the auditor's understanding of the transactions and events that have occurred since the last audit. ant-rs Explanation Choice "d" is correct. Analytical procedures used in the planning phase of an audit should focus on enhancing the auditor's understanding of the transactions and events that have occurred since the last audit. Choice a is incorrect. Documenting the risk factors relating to the susceptibility of assets to misappropriation is an important planning procedure, but it is not related to the performance of analytical procedures. Choice "b" is incorrect. Identifying the internal control activities that could reduce the assessed level of control risk is part of assessing risk, but it is not related to the performance of analytical procedures. Choice c Is incorrect. Discovering uncorrected misstatements that should be communicated to the audit committee may be a result of performing analytical procedures or other substantive tests, but this would not be the focus of analytical procedures used in the planning phase of an audit. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: www.Vivid Book.org VividBookNet@Gmail.com Question CPA-05747 Which of the following is an analytical procedure that an auditor most liker would perform when planning an audd? a. Confirming a sample of accounts payable. b. Scanning payroll files for terminated employees. c. Comparing current—year balances to budgeted balances. d. Recalculating interest expense based on notes payable balances. Explanation Choice c is correct. During planning, analytical procedures consist of a review of data aggregated at a high level, such as comparing financial statement amounts to budgeted amounts. Choice a is incorrect. Confirmation of accounts payable is a test of details, not an analytical procedure. Choice "b" is incorrect. Scanning payroll files for terminated employees is a test of details, not an analytical procedure. Choice "d" is incorrect. Recalculating interest expense based on notes payable balances is a test of details, not an analytical procedure. 2011 Edition. Distributed by DeVrnyecker Educational Development Corp. Copyright ?2010 DeVryi'Becker Educational Development Corp. All rights reserved. ...
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2011 Becker CPA PassMaster A3 5 - Becker Professional...

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