Chapter 4 Quiz Name: ___________________ Date: __________________ [1] Which of the following parties should an auditor notify first when discovering an immaterial fraud is committed by an accounting clerk? A. The audit committee. B. An appropriate level of management. C. The client’s legal counsel. D. The client’s internal auditor. [2] In a financial statement audit of a nonissuer, an auditor would consider a judgmental misstatement to be a misstatement that A. Involves an estimate. B. Exists because of nonstatistical sampling performed by the auditor. C. Arises from a flaw in the accounting system. D. Arises from a routine calculation. [3] For a given audit risk, the relationship between the risks of material misstatement and detection risk is A. Linear. B. Inverse. C. Independent. D. Equal. [4] Detection risk differs from both control risk and inherent risk in that detection risk A. Exists independently of the financial statement audit. B. Can be changed at the auditor’s discretion. C. Arises from risk factors relating to fraud. D. Should be assessed in nonquantitative terms. [5] The concepts of audit risk and materiality are interrelated and must be considered together by the auditor. Which of the following is true? A. Audit risk is the risk that the auditor may unknowingly express a modified opinion when, in fact, the financial statements are fairly stated. B. The phrase in the auditor’s report “present fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America” indicates the auditor’s belief that the financial statements as a whole are not materially misstated. C. If misstatements are not important individually but are important in the aggregate, the concept of materiality does not apply. D. Material fraud but not material errors cause financial statements to be materially misstated. 2020 Gleim Publications Inc. Chapter 4 Quiz 1 [6] The objective of performing analytical procedures in planning an audit is to identify the existence of A. Unusual transactions and events. B. Noncompliance with laws and regulations that went undetected because of internal control deficiency. C. Related party transactions. D. Recorded transactions that were not properly authorized. [7] Disclosure of possible fraud to parties other than the client’s senior management and those charged with governance ordinarily is not part of an auditor’s responsibility. However, to which of the following outside parties may a duty to disclose possible fraud exist? I. To the SEC when the client reports an auditor change II. To a successor auditor when the successor makes appropriate inquiries III. To a government funding agency from which the client receives financial assistance A. I and II. B. I and III. C. II and III. D. I, II, and III. [8] Which of the following types of risks most likely would increase if accounts receivable are confirmed 3 months before year end? A. Inherent. B. Control. C. Detection. D. Business. [9] As the acceptable level of detection risk decreases, an auditor may change the A. Timing of substantive tests by performing them at an interim date rather than at year-end. B. Nature of substantive procedures from a less effective to a more effective procedure. C. Timing of tests of controls by performing them at several dates rather than at one time. D. Assessed level of inherent risk to a higher amount. [10] In an audit of a nonissuer’s financial statements, projected misstatement is A. The likely amount of misstatement in the subsequent period’s financial statements if a control is not properly implemented. B. An auditor’s best estimate of misstatements in a population extrapolated from misstatements identified in an audit sample. C. The only amount that the auditor considers in evaluating materiality and fairness of the financial statements. D. An auditor’s best estimate, before performing audit procedures, of misstatements that the auditor expects to find during the audit. 2020 Gleim Publications Inc. Chapter 4 Quiz 2 [11] Which of the following circumstances most likely will cause an auditor to consider whether material misstatements due to fraud exist in an entity’s financial statements? A. Management places little emphasis on meeting earnings projections of external parties. B. The board of directors oversees the financial reporting process and internal control. C. Control deficiencies previously communicated to management are not corrected. D. Transactions selected for testing are not supported by proper documentation. [12] Which of the following is least likely to indicate the need to increase the assurance provided by substantive testing? A. A lower acceptable level of detection risk. B. An increase in the assessed control risk. C. A lower acceptable audit risk. D. A decrease in the assessed inherent risk. [13] Which of the following statements reflects an auditor’s responsibility for detecting fraud and errors? A. An auditor is responsible for detecting employee errors and simple fraud, but not for discovering fraudulent acts involving employee collusion or management override. B. An auditor should plan the audit to detect errors and fraud that are caused by departures from the applicable financial reporting framework. C. An auditor is not responsible for detecting fraud unless the application of GAAS would result in such detection. D. An auditor should design the audit to provide reasonable assurance of detecting fraud and errors that are material to the financial statements. [14] Which of the following auditor concerns most likely could be so serious that the auditor concludes that a financial statement audit cannot be performed? A. Management fails to modify prescribed internal controls for changes in information technology. B. Internal control activities requiring segregation of duties are rarely monitored by management. C. Management is dominated by one person who is also the majority shareholder. D. There is a substantial risk of intentional misapplication of accounting principles. [15] Audit risk at the assertion level consists of inherent risk, control risk, and detection risk. Which of the following statements is true? A. Cash has a greater inherent risk than an inventory of coal because it is more susceptible to theft. B. The risk that material misstatement will not be timely prevented or detected by internal control can be reduced to zero by effective controls. C. Detection risk is a function of the efficiency of an auditing procedure. D. The existing levels of inherent risk, control risk, and detection risk can be changed at the discretion of the auditor. 2020 Gleim Publications Inc. Chapter 4 Quiz 3

Chapter 4 Quiz Audit

Related Documents

Recommended Documents

Description

Related Documents

Almost There!

Free up your schedule!

Take 5 seconds to unlock