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auditing assurance services

Questions and Answers of Auditing Assurance Services

Relative to general fraud and embezzlement, computer fraud and embezzlement seems to be:a. Unaffected by deterrent administrative controlsb. Smaller in sizec. Larger in sized. Easier to prosecute via
The evolution of technology needs to be controlled because:a. Using new technology always has undesirable consequences unless it is controlledb. It tends to increase the monopolistic power of those
From an information systems audit perspective, which of the following is the most valuable asset in an information systems facility:a. Hardwareb. Databasec. Personneld. Software
Which of the following information systems audit objectives requires that information systems auditors be concerned about the possibility of proprietary software being stolen:a. Achieving system
An effective data processing system:a. Satisfactorily accomplishes the objectives of its usersb. Maintains data integrity as its primary objectivec. Is the most efficient system that can be
In a computer-based information system, separation of duties:a. Can always be attained in the same way as in a manual systemb. Might have to be implemented in different forms compared with manual
Compared with a manual system, the consequences of error in a computer system often are more serious because:a. Errors in computer systems tend to be stochastic Cmanual areb. Computer systems process
Compared with a manual system, in a computer system:a. Basic internal control objectives changeb. The methodologies for implementing controls changec. Control objectives are more difficult to
Clear lines of authority and responsibility are sometimes difficult to achieve in a computer system because:a. Resources are shared and ownership is sometimes difficult to assignb. Duties constantly
Which of the following statements about information systems personnel is false:a. Historically, information systems personnel have been in short supplyb. Information systems personnel have lacked a
In a computer system, it is often difficult to evaluate the system of general authorizations because general authorizations have been:a. Dispersed to more usersb. Combined with specific
In a computer system, the audit trail is:a. Still always present in some type of hard-copy formb. Disappearing as more online, realtime update systems are usedc. Produced automatically by software
Compared with a manual system, the assets and records in a computer-based information system tend to be:a. More concentrated at a single locationb. Dispersed across many more locationsc. Concentrated
Compared with a manual system, supervision of employee activities in a computer-based information system is:a. Easier, because observation and inquiry of employee activities is easierb. Harder,
In a computer system, independent checks on performance are often unnecessary because a procedure is performed by a computer program. Similarly, computer programs rather than independent staff often
Which of the following has not been an effect of computer-based information systems on auditing:a. Evidence collection tends to be harder to carry outb. Understanding the control technology tends to
A major contribution of computer science to the discipline of information systems auditing has been:a. Insights into how generalized audit software should be developedb. An understanding of why
What persons and skills are normally assigned to a "full-service" audit team?
What is the primary benefit for auditors' preliminary assessment of materiality as a matter of audit planning?
What are the general characteristics of transactions that are typically computerized? Typically not computerized?
What are some other important differences between manual and computer accounting systems?
In addition to the planning matters considered in a manual accounting system, what additional ones should be considered when computer processing is involved?
What are computer assisted audit tools and techniques (CAATTS)?
What audit tasks can be accomplished with word processing software? Spreadsheet software?
Which of the following matchups of types of analytical procedures and sources of information makes the most sense? Type of Analytical Procedure a Comparison of current account balances with prior
How do these standards differ for (1) errors, (2) frauds, (3) direct-effect illegal acts, and (4) far-removed-effect illegal acts?
Two kinds of audit programs have been identified. What are they? What is the objective of each?
Are analytical procedures very effective for discovering errors and frauds?
Audit Programs on the Internet. Auditnet (www.auditnet.org) is a website that provides support for practicing internal and external auditors. One of its resources is Auditors Sharing Audit Programs
What conditions create demand for useful information?
What is an attest engagement?
What are the practice standards, and who issues them for independent auditors of financial statements? governmental auditors? internal auditors? fraud auditors? auditing firms? auditors in other
For what reasons does an auditor obtain an understanding of a client's internal control?
How does the source of evidence affect its competence?
What is the highest level of authoritative support for GAAP? the lowest level?
What is the purpose served by the attestation standards?
What are the major differences between the attestation standards and the generally accepted auditing standards?
Consider the following quality control policy and identify the quality control element to which it relates: "Designate individuals as specialists to serve as authoritative resources; provide
What roles are played by the Public Company Accounting Oversight Board (PCAOB) in connec- tion with the monitoring and regulation of CPA firms?
Which of the following is one of the four standards of reporting included in GAAS?a. Due professional care is to be exercised in the performance of the audit and the preparation of the report.b. The
To exercise due professional care, a CPA shoulda. Take continuing professional education classes.b. Report whether the financial statements are in accordance with GAAP.c. Gather enough audit evidence
Auditors' reports on financial statements contain an opinion on the conformity of the statements with generally accepted accounting principles (GAAP). An audit decision on GAAP includes the
Nancy Drew is the president of Mystery Capital Management, Inc. Mystery manages \($1.2\) billion in two mutual funds, one a stock fund and the other a bond fund. Competition for investors' money is
Quality Control Standards. Each of the following quality control policies and procedures are typical of ones that can be found in CPA firms' quality control documents. Identify each of them with one
Discuss the auditors’ reporting requirements (as outlined in SAS 600 (ISA 700)) after completing the audit fieldwork for an entity.
What does an unqualified audit opinion mean?
What are the three different types of qualified audit opinion? Discuss the circumstances that may cause these qualifications.
What is the effect of a fundamental uncertainty on the auditors’ report?
What are the principal effects of The Companies Act 1985 on the auditors’ report?
What are the audit requirements for reporting on consolidated financial statements?
Discuss the work that an auditor performing an initial engagement needs to perform on opening balances.
What is an auditor required to state on completion of the audit?(a) A statement of fact in relation to whether the financial statements represent a ‘true and fair’ view.(b) A detailed analysis of
If the auditor believes that management should disclose further information about directors’ remuneration but management does not agree to do this, what should the auditor do?(a) Report the breach
Consider the following scenario. Restrictions imposed by the client prohibit the observation of stock-take, which accounts for about 40 per cent of all assets.Alternative audit procedures cannot be
In reviewing subsequent events, the auditor reviewed a number of sales transactions that raised serious concerns in relation to the recorded value of stocks. The auditor believes that stock should be
The auditor has serious concerns about the going concern of the company. The company’s going concern is dependent on obtaining a large sales contract that is still under negotiation at the time of
The auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. If the auditor concludes that the
You have accepted an appointment to audit the financial statements of Hippo Ltd for the year ended 31 December 20X1. The financial statements of the company for the year ended 31 December 20X0 were
Assume that the following separate circumstances could be sufficiently material to require the expression of a qualified opinion.1. The company sacked its computer systems controller during the year.
Fly-By-Night Ltd is a listed public company that manufactures highly sophisticated navigation equipment for defence force aircraft and Navy ships. The company has a 30 June 20X0 year-end, and the
You are an audit partner currently finalising your 30 June 20X0 audits. The following independent and material matters have come to your attention:1. Food Fund (FF) is an unincorporated charity. As
Cornwall Ltd engaged Jane Thompson to perform its audit for the year ended 31 December 20X2. The financial statements for the previous year were audited by Frank Bassett who expressed an unqualified
An experienced (albeit elderly) audit partner was heard to make the following statement:‘I do not know why all this fuss is being made about audit trails when clients are implementing a new system.
Environmental auditing is becoming a more important issue in financial reporting and also in relation to auditing requirements. The British Standards Institution have developed a standard (BS 7750)
Your client is BigC Ltd, a large private firm with offices in all major cities of the UK. BigC specialises in selling concentrated fruit juices to UK and overseas buyers. This is the first year your
The accounts receivable — confirmation statistics working paper (index B-3) that appears over was prepared by an Audit Assistant Peter Porter, during the 20XI year audit of Western Water Ltd, a
State the main audit objectives for (1) purchases and payroll transactions and (2)creditors balances.
What is the sequence of functions normally associated with processing of purchase transactions? For each function, identify one control.
What are the major files and printed outputs of computer activities for processing purchase transactions?
For both of the functions pertaining to cash payment transactions, indicate two questions that may be used in preparing an internal control questionnaire for this transaction class.
For each of the six functions associated with processing payroll, identify one control.
What are some inherent risk factors that may affect purchase and payroll assertions?
Discuss why the principal risk associated with the audit of purchases and creditors is understatement.
What do you think are the three main assertions in the audit of creditors? Indicate the primary substantive procedures for those assertions.
Which of the following controls would be most effective in assuring that recorded purchases are free of material misstatements?(a) Purchase orders, goods received notes and suppliers’ invoices are
When goods are received, the receiving clerk should match the goods with the:(a) purchase order and the requisition form.(b) supplier’s invoice and the goods received note.(c) supplier’s shipping
Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the:(a) accounting department.(b) purchasing officer.(c) receiving
An auditor wants to perform tests of control on an entity’s cash payment procedures.If the control procedures leave no audit trail of documentary evidence, the auditor will most likely test the
To ensure the completeness of purchases made during the year, the auditor should:(a) select a sample of transactions from the purchase ledger and vouch to related invoices.(b) perform a bank
Which of the following auditing procedures is best for identifying unrecorded trade creditors?(a) Investigating creditors recorded just before and after the balance sheet date to determine whether
The sampling unit in a test of controls pertaining to the existence of payroll transactions ordinarily is:(a) aclockcard.(b) agroup certificate.(c) the employee’s personnel record.(d) a payroll
The partner in charge of the audit of Sinfin Wholesale Ltd is concerned about the controls in the company’s computerised purchases system. In the purchases system, invoices and credit notes are
You are the audit senior for the audit of GG’s Ltd and have been given the audit file to review by your assistant. The balance date is 30 June 20X1 and the materiality for the client has been set
In 20X1, Giles Ltd purchased over £10 million of office equipment under its ‘special’ordering system, with individual orders ranging from £5,000 to £30,000. ‘Special’ orders entail
You are the audit manager performing the audit of Retry Ltd, a large manufacturer of retread tyres. You are currently performing a review of some of the work performed by the audit senior, Tim
State the audit objectives for stock account balances and related transactions.
What is the sequence of functions normally associated with control over the stock function? For each function, identify one control.
What are the inherent risk factors that may affect stock assertions?
What factors are involved in determining the acceptable level of detection risk for stock balances?
List the main procedures involved in the performance of a stock-take. Describe three of the most important controls over a stock-take.
State the tests that relate to both the existence and valuation assertions stocks.
For the auditor’s observation at a stock-taking, what steps should be performed?Why should the auditor take test counts?
What are the audit objectives for fixed asset transactions and balances?
Why does the audit of fixed assets generally take less time than the audit of current assets? Why is it audited using a predominantly substantive approach?
Discuss the procedures that would be useful in ensuring that all disposals of fixed assets have been recorded.
Your client runs a store selling beer and wine, and theft has been an ongoing problem.What is the key assertion that you would be concerned about?(a) Existence.(b) Valuation.(c) Completeness.(d)
The primary objective of an auditor’s observation of an entity’s stock-taking is to:(a) allow the auditor to supervise the conduct of the count to obtain assurance that stock quantities are
An entity maintains perpetual stock records in both quantities and value. If the assessed level of control risk is high, an auditor would probably:(a) insist that the entity performs physical counts
Which of the following procedures would not be appropriate for an auditor in discharging his or her responsibilities concerning the existence of the entity’s stock?(a) Obtaining written
If the client maintains perpetual stock records and performs cyclical counts of stock rather than one major stock-take at the end of the year, what should the auditor do?(a) Suggest to the client

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