fluctuations. What is the audit purpose most directly served by obtaining
this understanding?
a.
To assist the auditor to accurately interpret information obtained
during an audit.
b.
To allow the auditor to more accurately perform tests of controls.
c.
To decide whether it will be necessary to perform analytical
procedures.
d.
To enable the auditor to accurately identify significant deficiencies.
Explanation
Choice "a" is correct. As part of audit planning, the auditor should obtain
an understanding of the entity's business. This understanding enables
the auditor to better understand events, transactions, and practices that
may affect the financial statements, to plan and perform appropriate
audit tests, and to properly understand and evaluate the results of those
tests.
Choice "d" is incorrect. Obtaining an understanding of the entity's
business would not be particularly helpful in identifying significant
deficiencies. Significant deficiencies in internal control are typically
identified during the fieldwork stage of the audit.
Choice "b" is incorrect. Obtaining an understanding of the entity's
business would not result in a more accurate performance of tests of
controls. Accurate performance of audit tests is dependent upon factors
such as existence of an appropriate audit trail, client cooperation,
training and supervision of audit staff, etc.
Choice "c" is incorrect. Analytical procedures are always required in an
audit during the planning and overall review stages.
Page 1 of 2
Becker Professional Education
Registered to: Dominique DAntonio
Question CPA-03405
Initially the nominal interest rate is 8 percent and the inflation rate is 6
percent. One year later, the nominal interest rate rises to 12 percent
while the inflation rate rises to 10 percent. It follows that the real rate of
interest:
a.
Insufficient information given for an answer.
b.
Has risen.
c.
Has remained the same.
d.
Has fallen.
Explanation
Choice "c" is correct. The real interest rate equals the nominal interest
rate minus the inflation rate. Thus, the real interest rate in the first year
is: real interest rate = 8%
−
6% = 2% and the real interest rate in the
next year is: real interest rate = 12%
−
10% = 2%.
Page 1 of 2
Becker Professional Education
Registered to: Dominique DAntonio
Question CPA-03489
Under monopoly, strategic plans focus on:
a.
Profitability from production levels that maximize profits.
b.
Maintaining the market share and being responsive to market
conditions related to sales price.
c.
Maintaining the market share, ensuring product differentiation, and
adapting to price changes or required changes in production
volume.
d.
Maintaining the market share and planning for enhanced product
differentiation.
Explanation
Choice "a" is correct. Under monopoly, strategic plans ignore market
share and focus on profitability from production levels that will maximize
profits.
