A true b false 96 medium b audits are expected to

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Unformatted text preview: ndustry. a. True b. False 1-110 101. medium a The audit objective of posting and summarization is associated with the management assertion of accuracy. a. True b. False 102. medium b Balance-related audit objectives are usually applied to the ending balance in income statement accounts; transaction-related audit objectives are usually applied to transactions reflected in balance sheet accounts. a. True b. False 103. medium a The transaction-related audit objective of timing is related to the assertion of cutoff. a. True b. False 104. medium a The effect of a violation of the existence transaction-related audit objective for the sales account would be an overstatement of that account. a. True b. False 105. medium b The effect of a violation of the completeness transaction-related audit objective for cash disbursements transactions would be an overstatement of cash disbursements. a. True b. False 106. medium b The transaction-related audit objective that deals with whether recorded transactions have actually occurred is the completeness objective. a. True b. False 107. medium a The general balance-related audit objective that deals with determining that details in the account balance agree with related master file amounts, foot to the total in the account balance, and agree with the total in the general ledger is the detail tie-in objective. a. True b. False 108. medium a The cutoff objective, “transactions near the balance sheet date are recorded in the proper period,” is a balance-related audit objective. a. True b. False 109. medium b For a private company audit, tests of controls are normally performed only on those internal controls the auditor believes have not been operating effectively during the period under audit. a. True b. False 110. medium a An audit generally provides no assurance that indirect-effect illegal acts will be detected. a. True b. False 111. medium a When an auditor believes there is a moderate or high risk of management fraud, the auditor will normally do less audit work at interim dates instead of at year-end. a. True b. False 1-111 112. challenging b An auditor must inform a client’s audit committee of an illegal act discovered during an audit in writing. a. True b. False 113. challenging b The objective of the audit of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately represent the company’s financial position and results of operations. a. True b. False 114. challenging a The auditor’s responsibility for uncovering direct-effect illegal acts is the same as for fraud. a. True b. False Chapter 7 Multiple-Choice Questions 1. Easy c Auditors must make decisions regarding what evidence to gather and how much to accumulate. Which of the following is a decision that must be made by auditors related to evidence? a. b. c. d. 2. Easy a Sample size Yes No Yes No Timing of audit procedures Yes No No Yes Audit procedures may be performed: a. b. c. d. Prior to the fiscal year-end of the client Yes No Yes No Subsequent to the fiscal year-end of the client Yes No No Yes 3. easy b Which of the following forms of evidence is most reliable? a. General ledger account balances. b. Confirmation of accounts receivable balance received from a customer. c. Internal memo explaining the issuance of a credit memo. d. Copy of month-end adjusting entries. 4. easy b Which of the following is not a characteristic of the reliability of evidence? a. Effectiveness of client internal controls. b. Education of auditor. c. Independence of information provider. d. Timeliness. 5. easy c Which of the following is not a characteristic of the reliability of evidence? a. Qualification of individual providing information. b. Auditor’s direct knowledge. c. Degree of subjectivity. 1-112 d. Degree of objectivity. 6. easy b Calculating the gross margin as a percent of sales and comparing it with previous periods is what type of evidence? a. Physical examination. b. Analytical procedures. c. Observation. d. Inquiry 7. easy a Audit evidence obtained directly by the auditor will not be reliable if: a. the auditor lacks the qualifications to evaluate the evidence. b. it is provided by the client’s attorney. c. the client denies its veracity. d. it is impossible for the auditor to obtain additional corroboratory evidence. 8. easy b Appropriateness of evidence is a measure of the: a. quantity of evidence. b. quality of evidence. c. sufficiency of evidence. d. meaning of evidence. 9. easy a Which of the following statements regarding the relevance of evidence is correct? a. To be relevant, evidence must pertain to the audit objective of the evidence. b. To be relevant, evidence must be persuasive. c. To be relevant, evidence must relate to multiple audit objectives. d. To be relevant, evidence must be derived from a system including effective internal controls. 10. easy c Two determinants of the persuasiveness of evidence are: a. competence and sufficiency. b...
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This note was uploaded on 02/04/2014 for the course ACCOUNTING 211 taught by Professor Alikapur during the Fall '13 term at American University of Sharjah.

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