Auditing Review Questions
Course Introduction
Auditing is a course designed to provide students with a comprehensive understanding of the principles and practices involved in examining and evaluating financial statements and internal controls. The course covers various auditing standards, procedures, and techniques, emphasizing the ethical responsibilities and professional skepticism required of auditors. Students will learn about audit planning, risk assessment, evidence collection, sampling, and reporting, as well as the legal and regulatory environment in which audits are performed. Through practical examples and case studies, the course equips future professionals with the skills needed to ensure the accuracy, reliability, and integrity of financial information for stakeholders.
Recommended Textbook
Auditing The Art and Science of Assurance Engagements 13th Canadian Edition by Alvin A. Arens
Available Study Resources on Quizplus
20 Chapters
1385 Verified Questions
1385 Flashcards
Source URL: https://quizplus.com/study-set/1225 Page 2
Chapter 1: The Demand for Audit and Other Assurance Services
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/24207
Sample Questions
Q1) In Canada, publicly traded companies are
A) required to have audits.
B) strongly encouraged to have audits.
C) not required to have an audit if they have a review.
D) not required to have an audit.
Answer: A
Q2) Joe is recording sales transactions in the accounting system so that they can be summarized in a logical manner for the purpose of providing financial information for decision-making. Joe is performing
A) accounting.
B) auditing.
C) review.
D) management consulting.
Answer: A
Q3) The independent auditor's report is the
A) communication of the result of the audit to the users.
B) set of audited financial statements.
C) invoice of the auditor detailing the work they have performed.
D) report presented to management about the possible improvements.
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The Public Accounting Profession and Audit Quality
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/24208
Sample Questions
Q1) When conducting an audit, the auditor should look at Canadian Auditing Standards as
A) minimum standards of performance.
B) normal standards of performance.
C) ultimate standards of performance.
D) practical standards of performance.
Answer: A
Q2) During which phase(s) of the financial statement audit does the auditor "evaluate evidence" when using a risk assessment approach?
A) the risk assessment phase
B) the risk response phase
C) the reporting process phase
D) the risk assessment, risk response, and reporting phases
Answer: D
Q3) CPAB's purpose is to
A) develop auditing standards.
B) provide training and continuing education to auditors.
C) clarify and communicate the role of the auditor to the public.
D) improve the public's confidence in independent auditing.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Legal Liability
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/24209
Sample Questions
Q1) There are four major sources of auditors' legal liability. Briefly summarize the four sources.
Answer: The four sources of auditors' legal liability are: liability to clients under contract law (or common law) liability to third parties under common law and statute law liability under provincial securities acts criminal liability
Q2) Individuals who accept fees (or property) and know or are willfully blind to the fact that the property was obtained illegally can be charged with money laundering, a criminal offence. Which of the following techniques will help a PA prevent such charges?
A) Ensure that the financial statements are in accordance with an acceptable reporting framework.
B) Require that clients carefully document the sources of their funds.
C) Carefully assess management integrity.
D) Obtain a detailed letter of representation from management confirming the sources of their funds.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Professional Judgment and Ethics
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/24210
Sample Questions
Q1) An intimidation threat occurs when
A) it is difficult to believe the actions of management because there is a suspicion of irregular activity with respect to the recording of transaction activity.
B) the auditor suspects that fraud has occurred at the middle management level of the organization.
C) the auditor has been working on a client engagement for many years and has trouble believing that management would deceive the auditors.
D) a client threatens the firm or its staff with respect to the content of the financial statements or with respect to the conduct of the audit.
Q2) What are the qualities of professional skepticism?
Q3) For which of the following engagements is a contingent fee permitted?
A) an audit engagement of a large listed corporation
B) a tax consulting assignment assessing the excise tax payment processes
C) a review engagement of a small manufacturing corporation
D) an assurance engagement of leasehold payments for a rental agreement
Q4) Identify and describe each of the three parts to the Code of Professional Conduct. Also discuss which parts are officially enforceable and which are not.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Audit Responsibilities and Objectives
Available Study Resources on Quizplus for this Chatper
67 Verified Questions
67 Flashcards
Source URL: https://quizplus.com/quiz/24211
Sample Questions
Q1) The responsibility for adopting a sound and appropriate financial reporting framework and corresponding accounting policies, maintaining adequate internal controls, and making fair representations in the financial statements rests
A) with management.
B) with the auditor.
C) equally with management and the auditor.
D) with the internal audit department.
Q2) Which of the following statements is true regarding a difference between general audit objectives and specific audit objectives for an account balance?
A) The general audit objectives are applicable to every account balance on the financial statements.
B) The specific audit objectives are applicable to every account balance on the financial statements.
C) For any given account, usually only one audit objective must be met to conclude the transactions are properly accounted.
D) The general audit objectives are stated in terms tailored to the engagement.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Client Acceptance and Planning the Audit
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/24212
Sample Questions
Q1) One of the purposes of developing a client risk profile is to assist the auditor in
A) developing the pertinent audit procedures for tests of internal controls.
B) assessing the client's business risk.
C) locating related parties that need to be disclosed.
D) deciding whether fraud or illegal acts have taken place.
Q2) It is important that the policies, procedures, and key decisions of senior management, the board of directors, and the audit committee be considered when developing a client risk profile because
A) they have a pervasive effect on the company.
B) they influence the most important decisions for the company.
C) it is required by accounting and auditing standards.
D) they have the effect of increasing client business risks.
Q3) The auditor will obtain a copy of the client's articles of incorporation (if applicable) and retain a copy in the permanent file. Important information in the articles of incorporation includes
A) the interest rates currently being paid for bonds that have been issued.
B) voting rights of each class of shares issued by the company.
C) which shares have been redeemed by the company in the current year.
D) the interest rates that are being received on long-term notes invested.
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Materiality and Risk
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/24213
Sample Questions
Q1) If it is probable that the judgment of a reasonable person would have been changed or influenced by the omission or misstatement of information, then that information is considered to be
A) significant.
B) insignificant.
C) material.
D) relevant.
Q2) All other factors held constant, if the auditor decreases audit risk then
A) there will be less documentation in the audit file.
B) total audit evidence and audit costs will increase.
C) it will also be necessary to decrease either control risk or inherent risk.
D) less supervision of the audit team will be required.
Q3) Because control risk and inherent risk vary from cycle to cycle, account to account, or objective to objective,
A) audit risk must also change.
B) planned detection risk and required audit evidence will also vary.
C) planned detection risk will vary but audit evidence will remain constant.
D) planned detection risk will remain constant but audit evidence will vary.
Q4) A) Explain how auditors use the audit risk model when planning an audit.
B) Describe the audit risk model and each of its components.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Internal Controls and Control Risk
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/24214
Sample Questions
Q1) Management's objectives with respect to internal control include
A) having reasonable assurance that the financial statements are in accordance with IFRS or ASPE.
B) ensuring that all policies and procedures are clearly documented to reduce employee training costs.
C) preventing fraud and illegal activities at all costs.
D) providing reasonable assurance that the goals and objectives important to the entity have been met.
Q2) Internal controls can never be regarded as completely effective. Even if systems personnel could design an ideal system, its effectiveness depends on the
A) adequacy of the computer system.
B) proper implementation by management.
C) ability of the internal audit staff to maintain it.
D) competency and dependability of the people using it.
Q3) Management safeguards assets by
A) having the internal auditors conduct periodic counts of physical assets.
B) controlling access and by comparing physical items to records.
C) requiring the external auditors to do surprise audits.
D) having management sign a management representation letter.
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Audit Evidence
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/24215
Sample Questions
Q1) At the first day of work at a PA firm, staff are given their own laptop computer for use in working with clients and other data.
Required:
A) What is the typical structure of client working paper files?
B) How is client data protected from unauthorized change?
Q2) "The detailed instructions for the collection of a particular type of audit evidence" is the definition of a(n)
A) sampling plan.
B) audit procedure.
C) audit plan.
D) audit program.
Q3) For income statement accounts, evidence is more persuasive if there is a sample from
A) the entire period under audit.
B) the period closest to the end of the fiscal period.
C) at least three months of the fiscal year.
D) December, since this would include large holiday sales.
Q4) Identify and explain the three determinants of the persuasiveness of evidence.
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: Audit Strategy and Audit Program
Available Study Resources on Quizplus for this Chatper
67 Verified Questions
67 Flashcards
Source URL: https://quizplus.com/quiz/24216
Sample Questions
Q1) The auditor would like to design a test of control to test that unit selling prices are obtained from the price list master file of approved prices. Which of the following typical tests of controls would be suitable?
A) Compare prices used on sales invoices to the authorized customer purchase order.
B) Review changes to the price file throughout the year for proper authorizations and trace prices to copies of sales invoices.
C) Use analytical review to compare total sales last year to total sales this year.
D) Discuss the process used to authorize sales prices with the sales manager and the controller.
Q2) Choosing the appropriate analytical procedures requires the auditor to use A) the standards developed by the auditor's firm.
B) automated working paper software.
C) computer-assisted audit techniques.
D) professional judgment.
Q3) Discuss the purposes of tests of controls and tests of details of balances. Give an example of each.
To view all questions and flashcards with answers, click on the resource link above.
12
Chapter 11: Audit Sampling Concepts
Available Study Resources on Quizplus for this Chatper
67 Verified Questions
67 Flashcards
Source URL: https://quizplus.com/quiz/24217
Sample Questions
Q1) One of the causes of nonsampling error is
A) the use of inappropriate or ineffective audit procedures.
B) failure to draw a random sample.
C) failure to draw a representative sample.
D) the use of attribute sampling instead of variables sampling.
Q2) An advantage of using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods
A) afford greater assurance and clarity than a nonstatistical sample of equal size.
B) provide an objective basis for quantitatively evaluating sample risks.
C) can more easily convert the sample into a dual-purpose test useful for substantive testing.
D) eliminate the need to use judgment in determining appropriate sample sizes.
Q3) A) Discuss what is meant by "sampling risk."
B) Discuss what is meant by "nonsampling risk."
C) Discuss two causes of nonsampling risk. Also discuss ways the auditor can control nonsampling risk.
D) Discuss two ways the auditor can control sampling risk.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Audit of the Revenue Cycle
Available Study Resources on Quizplus for this Chatper
134 Verified Questions
134 Flashcards
Source URL: https://quizplus.com/quiz/24218
Sample Questions
Q1) Tests of details of balances relate to which part of the Audit Risk Model?
A) control risk
B) inherent risk
C) substantive risk
D) planned detection risk
Q2) To determine that sales are accurately charged, the unit prices on the duplicate sales invoices are normally compared with
A) the original invoices.
B) the amounts recorded in the sales journal for that transaction.
C) the amounts posted to the customer's account in the accounts receivable master file.
D) an approved item master file.
Q3) Which of the following documents and records is used to record the packages, weights, and sizes shipped using an external trucking company?
A) remittance advice
B) shipping advice containing shipment tracking number
C) returns receiving report
D) bill of lading
Q4) Outline the key areas that the auditor would review as part of general controls.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Audit of the Acquisition and Payment Cycle
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/24219
Sample Questions
Q1) Before a new supplier is added into the supplier master file (or the purchasing master file), the company should
A) conduct a credit check on the new supplier.
B) have the supplier detail matched against the invoice detail.
C) ask the purchasing manager to verify the authenticity of the supplier.
D) have the accounting department enter the necessary detail about the supplier.
Q2) When verifying current-year additions to manufacturing equipment, the two major objectives for this part of the audit are
A) accuracy and classification.
B) detail tie-in and cutoff.
C) disclosure and completeness.
D) rights and existence.
Q3) Comparing expenses to prior years is an effective analytical procedure for accounts payable because expenses from year to year are
A) relatively stable.
B) erratic.
C) variable.
D) dynamic.
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: Audit of the Inventory and Distribution Cycle
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/24220
Sample Questions
Q1) The test of details of balance procedure that requires the auditor to account for unused inventory tag numbers to make sure none have been omitted is an attempt to satisfy the objective of A) allocation.
B) existence.
C) completeness.
D) accuracy.
Q2) The auditor is determining which specific inventory items should be selected for pricing tests. The auditor has selected a representative sample, and those items that have a large dollar amount. In addition, the auditor should select those items that A) are prone to breakage or theft.
B) have wide fluctuations in price.
C) are stored in multiple locations.
D) are likely to have been miscounted during the inventory count.
Q3) Shipping of finished goods is an integral part of the A) acquisitions and payments cycle.
B) inventory and distribution cycle.
C) sales and collections cycle.
D) human resources and payroll cycle.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Audit of the Human Resources and Payroll Cycle
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/24221
Sample Questions
Q1) The careful and timely preparation of all payroll withholdings and employer's portion of withholdings is necessary to avoid heavy fines. The most important control in the timely preparation of these returns is
A) computerized preparation of income tax returns.
B) a well-defined set of policies that indicate when each form must be filed.
C) independent verification of computer output by a competent individual.
D) a Gantt chart.
Q2) The auditor should review the preparation of at least one of each type of payroll tax form the client is responsible for filing, as a part of the auditor's responsibility for
A) understanding internal controls.
B) doing tests of controls.
C) doing analytical procedures.
D) doing tests of balances.
Q3) Access rights management is important because it is the organization's method of
A) establishing data tables usage.
B) identifying master file data.
C) identifying transaction file data.
D) enforcing segregation of duties.
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Audit of the Capital Acquisition and Repayment Cycle
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/24222
Sample Questions
Q1) State the four audit concerns for capital stock and describe how the auditor typically verifies each of these areas.
Q2) Describe the three objectives of the auditor's examination of owners' equity.
Q3) Discuss the four characteristics of the capital acquisition and repayment cycle that make it unique from other cycles.
Q4) The auditor has reconciled the dividend payment amounts disbursed according to the cash disbursements journal to the dividend declared. Which audit assertions is this test associated with?
A) valuation and existence
B) accuracy and valuation
C) accuracy and completeness
D) valuation and understandability
Q5) Explain why the auditor's verification of owners' equity is more complex for publicly-held corporations than closely-held corporations.
Q6) Discuss the four key controls over notes payable.
Q7) Discuss the overall objectives of the audit of notes payable.
To view all questions and flashcards with answers, click on the resource link above. Page 18
Q8) Discuss the internal controls related to owners' equity that are of concern to the auditor.
Chapter 17: Audit of Cash Balances
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/24223
Sample Questions
Q1) If the auditor does not obtain a cutoff statement directly from the bank for testing, an alternative procedure that the auditor can use is to
A) account for a continuity of cheques that covers the year end.
B) reconcile cash paid to the cash disbursements journal for the last month of the year.
C) reconcile cash received to the cash receipts journal for the last month of the year.
D) prove the bank statement for the period after the year end.
Q2) Because cash is the most desirable asset for people to steal, it has a higher A) inherent risk.
B) control risk.
C) detection risk.
D) materiality.
Q3) A four-column proof of cash can be performed for
A) one or more interim months.
B) the entire year.
C) the last month of the year.
D) any specified time period for which bank statements are available and which the auditor chooses to designate.
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Completing the Audit
Available Study Resources on Quizplus for this Chatper
67 Verified Questions
67 Flashcards
Source URL: https://quizplus.com/quiz/24224
Sample Questions
Q1) An agreement that commits the firm to a set of fixed conditions in the future regardless of what happens to profits or the economy as a whole is a definition of a A) contingent liability.
B) potentially hazardous agreement.
C) commitment.
D) conditional contract.
Q2) There are often a large number of immaterial errors discovered that do not require an adjustment at the time they are found. How should these errors be dealt with by the auditor?
A) Since these items are individually immaterial, the auditor would not recommend adjusting entries to the client.
B) Since there are a large number of these, the auditor would recommend adjusting entries to the client.
C) The auditor must combine the individually immaterial errors and evaluate whether the combined amount is material.
D) The auditor would never combine these individually immaterial amounts because that would mix apples and oranges.
Q3) State the three conditions required for a contingent liability to exist.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Audit Reports on Financial Statements
Available Study Resources on Quizplus for this Chatper
67 Verified Questions
67 Flashcards
Source URL: https://quizplus.com/quiz/24225
Sample Questions
Q1) If the balance sheet of a company is dated December 31, 2015, the audit report is dated March 6, 2016, and both are released to the public on March 15, 2016, this indicates that the auditor has searched for material unrecorded transactions and events that occurred up to
A) December 31, 2015.
B) March 6, 2016.
C) March 15, 2016.
D) December 31, 2016.
Q2) The phrase "in our opinion" indicates that
A) the auditor performed the audit on a test basis.
B) the auditor's judgment can be relied upon.
C) the auditor relied on his or her knowledge to perform the audit.
D) there may be some information risk associated with the financial statements.
Q3) The new IAASB Auditors report, is effective for audits and will be mandatory for listed companies for audits with year ending
A) 31 December 2017.
B) 31 December 2016.
C) 31 December 2015.
D) 31 December 2014.
Q4) Discuss how materiality affects audit reporting decisions.
Page 21
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: Other Assurance and Nonassurance Services
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/24226
Sample Questions
Q1) Define "assurance engagements."
Q2) When would the public accountant conduct audit procedures during a review engagement?
A) When junior staff are assigned to the engagement.
B) When required to assess plausibility.
C) When it is a first-time review engagement.
D) When a higher level of assurance is required for the bank.
Q3) In addition to having modifications of wording for the financial statement audit opinion, other types of opinions can have modifications as well. Which of the following describes a situation where there would be a qualification or disclaimer of opinion for a direct reporting engagement?
A) The subject matter does not conform to the criteria.
B) The information is not presented fairly.
C) The practitioner conducted alternative procedures where there was a scope limitation.
D) The practitioner and management disagree about the content of the report.
Q4) Define "direct reporting engagements."
Q5) Define "attestation engagements."
Q6) Identify the reporting standards for compilation engagements.
Page 22
To view all questions and flashcards with answers, click on the resource link above.