TRUE-FALSE QUESTIONS

1. The auditor might believe a heightened risk of fraud exists if the preliminary analytical procedures indicate increases in revenue and net income, but negative cash flow from operations.

2. When performing preliminary analytical procedures, the auditor could perform trend analysis with ratios, but not with account balances.

3. In responding to identified risks of material misstatement in the revenue cycle, the auditor would never perform tests of controls, as only substantive procedures would be required.

4. In responding to identified risks of material misstatement related to the completeness of revenue cycle, the auditor will always perform a significant amount of tests of details.

5. In testing controls over whether sales are properly valued, the auditor could take a sample of recorded sales invoices and agree the price on the invoice to an authorized price list.

6. When testing a client’s reconciliation between the sales subledger and the general ledger, the auditor is required to reperform the control.

7. The quality of evidence obtained from positive and negative confirmations is about the same.

8. To obtain evidence on the completeness assertion for revenue, the auditor would select a sample of shipping documents and trace them to the sales journal.