Question details

ACC 403 Final Exam Part 1
$ 18.00

Question 1

When taken together, the concepts of risk and materiality in auditing:

Answer

measure the uncertainty of amounts of a given magnitude.

measure uncertainty only.

measure magnitude only.

measure inherent risk.

Question 2

Auditing standards ________ that the basis used to determine the preliminary judgment about materiality be documented in the audit files.

Answer

Permit

do not allow

require

strongly encourage

Question 3

Auditors are ________ to document the known and likely misstatements in the financial statements under audit.

Answer

Permitted

Required

not allowed

strongly encouraged

Question 4

________ misstatements are those where the auditor can determine the amount of the misstatement in the account.

Answer

Potential

Likely

Known

Projected

Question 5

Inherent risk is ________ related to detection risk and ________ related to the amount of audit evidence.

Answer

directly, inversely

directly, directly

inversely, inversely

inversely, directly

Question 6

Management must disclose material weaknesses in internal control in its audit report: Answer

whenever the weakness is deemed significant to a single class of transactions.

whenever the weakness is significant to overall financial reporting objectives.

if the weakness exists at the end of the year.

only if the auditor identifies the weakness as significant.

Question 7

Which of the following deficiency exists if a necessary control is missing or not properly formulated?

Answer

Control

Significant

Design

Operating

Question 8

An act of two or more employees to steal assets and cover their theft by misstating the accounting records would be referred to as:

Answer

collusion

a material weakness

a control deficiency

a significant deficiency

Question 9

Sarbanes-Oxley requires management to issue an internal control report that includes two specific items. Which of the following is one of these two requirements?

Answer

A statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

A statement that management and the board of directors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

A statement that management, the board of directors, and the external auditors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

A statement that the external auditors are solely responsible

Question 10

Which of the following components of the control environment define the existing lines of responsibility and authority?

Answer

Organizational structure

Management philosophy and operating style

Human resource policies and practices

Management integrity and ethical values

Question 11

Which of the following would the auditor be most concerned about regarding a heightened risk of intentional misstatement?

Answer

Senior management emphasizes that it is very important to beat analyst estimates of earnings every reporting period.

Senior management emphasizes that budgeted amounts for expenses are to be achieved for each reporting period or explained in the variance analysis report.

Senior management emphasizes that job rotation is a worthwhile corporate objective.

Senior management emphasizes that job evaluations are based on performance.

Question 12

Companies may intentionally understate earnings when income is high to create ________ that may be used in future years to increase earnings.

Answer

income smoothing

cookie jar reserves

cash

sales

Question 13

Company management is often under pressure to increase revenue and/or net income. One approach is to use a “bill and hold” arrangement. This is an example of which of the following?

Answer

Significant accounting estimates

Fictitious revenue recorded

Premature revenue recognized

Alteration of cutoff documents

Question 14

Who is most likely to perpetrate fraudulent financial reporting?

Answer

Members of the board of directors

Production employees

Management of the company

The internal auditors

Question 15

Fraud awareness training should be:

Answer

broad and all-encompassing.

extensive and include details for all functional areas.

specifically related to the employee’s job responsibility.

focused on employees understanding the importance of ethics.

Question 16

Controls which are designed to assure that the information processed by the computer is authorized, complete, and accurate are called:

Answer

input controls.

processing controls.

output controls.

general controls.

Question 17

The approach to auditing where the auditor does not test automated controls to reduce assessed control risk is called:

Answer

the single-stage audit.

the test deck approach.

auditing around the computer.

generalized audit software (GAS).

Question 18

A ________ is responsible for controlling the use of computer programs, transaction files and other computer records and documentation and releases them to the operators only when authorized.

Answer

software engineer

chief computer operator

librarian

data control operator

Question 19

A ________ total represents the summary total of codes from all records in a batch that do not represent a meaningful total.

Answer

Record

Hash

output

financial

Question 20

One of the unique risks of protecting hardware and data is:

Answer

lack of traditional authorization.

the decreased risk of loss or destruction of data files if data is stored in a centralized location.

the ease at which the IT system can be installed and maintained.

the unauthorized access to the IT system resulting in improper changes in software programs and master files.

Question 21

Analytical procedures:

Answer

involve comparisons of recorded amounts to expectations developed by management.

are only performed during the planning stage of the audit.

are required to be performed when auditing an account balance.

provide substantive evidence

Question 22

If tests of controls support the control risk assessment, then ________ in the audit risk model is increased.

Answer

planned detection risk.

planned inherent risk.

planned fraud risk.

planned assurance risk.

Question 23

Tests of controls are directed toward the control’s:

Answer

efficiency.

effectiveness.

cost and effectiveness.

cost benefit ratio.

Question 24

Transaction related audit objectives would most likely be performed in which phase of the audit process?

Answer

Plan and design audit approach

Perform audit tests for controls and transactions

Perform analytical procedures and tests of balances

Complete the audit and issue the audit report

Question 25

An increased extent of tests of controls is most likely to occur when:

Answer

it is a first-year audit.

the auditor is doing a “fraud audit.”

controls are effective and the preliminary control risk assessment is low.

controls are ineffective and the preliminary control risk assessment is high.
 

 

Available solutions
  • ACC 403 Final Exam Part 1
    $18.00

    Question 1 When taken together, the concepts of risk and materiality in auditing: Answer measure the uncertainty of amounts of a given magnitude. measure uncertainty only. measure magnitude only. measure inherent risk. Question 2 Auditing standards ________ that the basis used to determine the preliminary judgment about materiality be documente

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