Wiley CPA Excel Exam Review Study Guide Auditing And Attestation 2015 14th Edition O. Ray Whittington - Solutions

According to the ethical standards for the profession, which of the following would impair the independence of an auditor in providing an audit for First State Bank, a nonpublic financial institution?a. The accountant has an automobile loan with the bank collateralized by the automobile.b. The
All corporate capital stock transactions should ultimately be traced to thea. Minutes of the Board of Directors.b. Cash receipts journal.c. Cash disbursements journal.d. Numbered stock certificates.
The auditor’s audit plan for the examination of long-term debt should include steps that require thea. Verification of the existence of the bondholders.b. Examination of any bond trust indenture.c. Inspection of the accounts payable subsidiary ledger.d. Investigation of credits to the bond
If the objective of a test of details is to detect overstatements of sales, the auditor should trace transactions from thea. Cash receipts journal to the sales journal.b. Sales journal to the cash receipts journal.c. Source documents to the accounting records.d. Accounting records to the source
Morgan, CPA, is the group engagement partner (principal auditor) for the audit of a nonpublic corporation. Jones, CPA, has audited and reported on the financial statements of a significant subsidiary of the corporation. Morgan is satisfied with the independence and professional reputation of Jones,
What body has the responsibility for issuing auditing standards for auditors of issuer (public) companies?a. The AICPA’s Auditing Standards Board.b. The Chief Accountant of the Securities and Exchange Commission.c. The Public Company Accounting Oversight Board.d. The Financial Accounting
Which of the following situations would most likely require special audit planning by the auditor?a. Some items of factory and office equipment do not bear identification numbers.b. Depreciation methods used on the client’s tax return differ from those used on the books.c. Assets costing less
Before applying substantive tests to the details of asset and liability accounts at an interim date, the auditor shoulda. Assess the difficulty in controlling incremental audit risk.b. Investigate significant uctuations that have occurred in the asset and liability accounts since the previous
The accounts payable department receives the purchase order form to accomplish all of the following except:a. Compare invoice price to purchase order price.b. Ensure the purchase had been properly authorized.c. Ensure the goods had been received by the party requesting the goods.d. Compare quantity
Which of the following is a control weakness for a company whose inventory of supplies consists of a large number of individual items?a. Supplies of relatively little value are expensed when purchased.b. The cycle basis is used for physical counts.c. The storekeeper is responsible for maintenance
Which of the following controls may prevent the failure to bill customers for some shipments?a. Each shipment should be supported by a prenumbered sales invoice that is accounted for.b. Each sales order should be approved by authorized personnel.c. Sales journal entries should be reconciled to
Under the ethical standards of the profession, which of the following situations involving independent members of an auditor’s family is most likely to impair the auditor’s independence?a. A parent’s immaterial investment in a client.b. A first cousin’s loan from a client.c. A spouse’s
On the audit of a nonissuer (nonpublic) company, the purpose of performing risk assessment procedures is toa. Obtain an understanding of the entity and its environment.b. Reduce detection risk.c. Evaluate management ability.d. Determine the operating effectiveness of controls.
A difference of opinion concerning accounting and auditing matters relative to a particular phase of the audit arises between an assistant auditor and the auditor responsible for the engagement. After appropriate consultation, the assistant auditor asks to be disassociated from the resolution of
When one auditor succeeds another, the successor auditor should request thea. Client to instruct its attorney to send a letter of audit inquiry concerning the status of the prior year’s litigation, claims, and assessments.b. Predecessor auditor to submit a list of internal control weaknesses that
Which of the following is least likely to be a test of a control?a. Inquiries of appropriate personnel.b. Inspection of management’s engagement letter.c. Observation of the application of a policy.d. Reperformance of the application of a policy.
When performing a review of an issuer company, which is least likely to be included in the CPA’s inquires of management members with responsibility for financial and accounting matters?a. Subsequent events.b. Significant journal entries and other adjustments.c. Communications with related
A CPA who is not independent may perform which of the following services for a nonissuer company?Compilation Reviewa. Yes Yesb. Yes Noc. No Yesd. No No
If information is for management’s use only, which of the following forms of CPA association with financial information is most likely to result in no report being issued?a. An agreed-upon procedures engagement.b. An audit.c. A compilation.d. A review.
Which of the following is not typically performed when accountants are performing a review of the financial statements of a nonissuer?a. Analytical procedures applied to financial data.b. Inquiries about significant subsequent events.c. Inquiries of the client’s attorney about legal matters.d.
Which of the following is always present in an attestation engagement?a. Assertion about the subject matter.b. Generally accepted assurance principles.c. Subject matter.d. An examination report.
Confirmations of accounts receivable address which assertion most directly?a. Completeness.b. Existence.c. Valuation.d. Classification.
Which is least likely to be a response when an auditor has obtained evidence indicating a risk of material misstatement in the area of inventory?a. Discuss questions of inventory valuation with any other auditors involved with the audit.b. Make oral inquiries of major suppliers in addition to
Accounting control procedures within computer processing may leave no visible evidence indicating that the procedures were performed. In such instances, the auditor should test these controls bya. Making corroborative inquiries.b. Observing the separation of duties of personnel.c. Reviewing
Which of the following is not a covered member for purposes of application of the independence requirements of the AICPA Code of Professional Conduct?a. A staff person on the attest team.b. A staff person that performs tax services for the attest client.c. The partner in charge of the firm office
When an auditor reissues in 20X7 the auditor’s report on the 20X5 financial statements at the request of the client without revising the 20X5 wording, the auditor shoulda. Use the date of the original report.b. Use the date of the client’s request.c. Use the date of the current period report.d.
A company has changed its method of inventory valuation from an unacceptable one to one in conformity with generally accepted accounting principles. The auditor’s report on the financial statements of the year of the change should includea. No reference to consistency.b. A reference to a prior
A note to the financial statements of the First Security Bank indicates that all of the records relating to the bank’s business operations are stored on magnetic disks, and that there are no emergency back-up systems or duplicate disks stored since the First Security Bank and their auditors
Burrow & Co., CPAs, have provided annual audit and tax compliance services to Mare Corp. for several years. Mare has been unable to pay Burrow in full for services Burrow rendered nineteen months ago. Burrow is ready to begin fieldwork for the current year’s audit. Under the ethical standards of
Which of the following statements concerning audit evidence is correct?a. Appropriate evidence supporting management’s assertions should be convincing rather than merely persuasive.b. Effective internal control contributes little to the reliability of the evidence created within the entity.c. The
An auditor who uses the work of a specialist may refer to and identify the specialist in the auditor’s report if thea. Specialist is also considered to be a related party.b. Auditor indicates a division of responsibility related to the work of the specialist.c. Specialist’s work provides the
When auditing merchandise inventory at year-end, the auditor performs a purchase cutoff test to obtain evidence thata. All goods purchased before year-end are received before the physical inventory count.b. No goods held on consignment for customers are included in the inventory balance.c. No goods
An abnormal uctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use ofa. Tests of transactions and balances.b. A preliminary review of internal control.c. Specialized
Which of the following matters is an auditor required to communicate to an entity’s audit committee?Significant audit adjustments Changes in significant accounting policiesa. Yes Yesb. Yes Noc. No Yesd. No No
Which is least likely to be a question asked of client personnel during a walk-through in an audit of the internal control of an issuer (public) company?a. What do you do when you find an error?b. Who is most likely to commit fraud among your coworkers?c. What kind of errors have you found?d. Have
Which of the following statements best describes the ethical standard of the profession pertaining to advertising and solicitation?a. All forms of advertising and solicitation are prohibited.b. There are no prohibitions regarding the manner in which CPAs may solicit new business.c. A CPA may
Further audit procedures consist of which of the following?Risk assessment procedures Substantive procedures Test of controlsa. Yes No Nob. Yes Yes Noc. No Yes Nod. No Yes Yes
In obtaining an understanding of a manufacturing entity’s internal control over inventory balances, an auditor most likely woulda. Review the entity’s descriptions of inventory policies and procedures.b. Perform test counts of inventory during the entity’s physical count.c. Analyze inventory
The independent auditor selects several transactions in each functional area and traces them through the entire system, paying special attention to evidence about whether or not the controls are in operation. This is an example of a(n)a. Application test.b. Test of a controls.c. Substantive test.d.
The auditors of a nonissuer (nonpublic) company must perform a test of the operating effectiveness of a significant controla. In all audits.b. When the control relates to a significant asset.c. When substantive procedures alone will not provide sufficient evidence about the related assertion.d.
One reason that an auditor only obtains reasonable, and not absolute, assurance that financial statements are free from material misstatement isa. Comprehensive basis reporting.b. Employee collusion.c. Material misstatements.d. Professional skepticism.
Which of the following is correct concerning allowing additions and deletions to audit documentation after the documentation completion date under requirements of the Public Company Accounting Oversight Board?Additions Deletionsa. Allowed Allowedb. Allowed Not allowedc. Not allowed Allowedd. Not
Which of the following should an auditor obtain from the predecessor auditor prior to accepting an audit engagement?a. Analysis of balance sheet accounts.b. Analysis of income statement accounts.c. All matters of continuing accounting significance.d. Facts that might bear on the integrity of
Independence is required for which of the following types of engagements?Agreed-upon procedures Reviewa. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following statements best describes the primary purpose of Statements on Auditing Standards?a. They are guides intended to set forth auditing procedures that are applicable to a variety of situations.b. They are procedural outlines that are intended to narrow the areas of inconsistency
Which of the following is ordinarily considered to be a fraud risk factor?a. The company’s financial statements include a number of last minute material adjustments.b. Management regularly informs investors of forecast information.c. The company has experienced increasing earnings over the
An entity has the following invoices in a batch:Invoice # Product Quantity Unit price 201 F10 150 $5.00 202 G15 200 $10.00 203 H20 250 $25.00 204 K35 300 $30.00 Which of the following numbers represents the record count?a. 1b. 4c. 810d. 900
An auditor most likely would test for the presence of unauthorized computer program changes by running aa. Program with test data.b. Check digit verification program.c. Source code comparison program.d. Program that computes control totals.
Smith Corporation has numerous customers. A customer file is kept on disk storage. Each customer file contains name, address, credit limit, and account balance. The auditor wishes to test this file to determine whether credit limits are being exceeded. The best procedure for the auditor to follow
Auditors often make use of computer programs that perform routine processing functions such as sorting and merging.These programs are made available by electronic data processing companies and others and are specifically referred to asa. Compiler programs.b. Supervisory programs.c. Utility
A primary advantage of using generalized audit software packages to audit the financial statements of a client that uses a computer system is that the auditor maya. Access information stored on computer files while having a limited understanding of the client’s hardware and software features.b.
An auditor would least likely use computer software toa. Access client data files.b. Prepare spreadsheets.c. Assess computer control risk.d. Construct parallel simulations.
Using laptop computers in auditing may affect the methods used to review the work of staff assistants becausea. The generally accepted auditing standards may differ.b. Documenting the supervisory review may require assistance of consulting services personnel.c. Supervisory personnel may not have an
In creating lead schedules for an audit engagement, a CPA often uses automated workpaper software. What client information is needed to begin this process?a. Interim financial information such as third quarter sales, net income, and inventory and receivables balances.b. Specialized journal
Which of the following methods of testing application controls utilizes a generalized audit software package prepared by the auditors?a. Parallel simulation.b. Integrated testing facility approach.c. Test data approach.d. Exception report tests.
Which of the following computer-assisted auditing techniques allows fictitious and real transactions to be processed together without client operating personnel being aware of the testing process?a. Integrated test facility.b. Input controls matrix.c. Parallel simulation.d. Data entry monitor.
Which of the following is not among the errors that an auditor might include in the test data when auditing a client’s computer system?a. Numeric characters in alphanumeric fields.b. Authorized code.c. Differences in description of units of measure.d. Illogical entries in fields whose logic is
When an auditor tests a computerized accounting system, which of the following is true of the test data approach?a. Several transactions of each type must be tested.b. Test data are processed by the client’s computer programs under the auditor’s control.c. Test data must consist of all possible
An auditor most likely would introduce test data into a computerized payroll system to test controls related to thea. Existence of unclaimed payroll checks held by supervisors.b. Early cashing of payroll checks by employees.c. Discovery of invalid employee I.D. numbers.d. Proper approval of
To obtain evidence that online access controls are properly functioning, an auditor most likely woulda. Create checkpoints at periodic intervals after live data processing to test for unauthorized use of the system.b. Examine the transaction log to discover whether any transactions were lost or
Which of the following computer-assisted auditing techniques processes client input data on a controlled program under the auditor’s control to test controls in the computer system?a. Test data.b. Review of program logic.c. Integrated test facility.d. Parallel simulation.B. Computerized Audit
An auditor who wishes to capture an entity’s data as transactions are processed and continuously test the entity’s computerized information system most likely would use which of the following techniques?a. Snapshot application.b. Embedded audit module.c. Integrated data check.d. Test data
Which of the following client information technology(IT) systems generally can be audited without examining or directly testing the IT computer programs of the system?a. A system that performs relatively uncomplicated processes and produces detailed output.b. A system that affects a number of
Auditing by testing the input and output of a computer system instead of the computer program itself willa. Not detect program errors which do not show up in the output sampled.b. Detect all program errors, regardless of the nature of the output.c. Provide the auditor with the same type of evidence
After the preliminary phase of the review of a client’s computer controls, an auditor may decide not to perform tests of controls related to the controls within the computer portion of the client’s internal control. Which of the following would not be a valid reason for choosing to omit such
An auditor anticipates assessing control risk at a low level in a computerized environment. Under these circumstances, on which of the following activities would the auditor initially focus?a. Programmed control activities.b. Application control activities.c. Output control activities.d. General
Which of the following types of evidence would an auditor most likely examine to determine whether internal control is operating as designed?a. Gross margin information regarding the client’s industry.b. Confirmations of receivables verifying account balances.c. Client records documenting the use
An auditor would most likely be concerned with which of the following controls in a distributed data processing system?a. Hardware controls.b. Systems documentation controls.c. Access controls.d. Disaster recovery controls.
Computer systems are typically supported by a variety of utility software packages that are important to an auditor because theya. May enable unauthorized changes to data files if not properly controlled.b. Are very versatile programs that can be used on hardware of many manufacturers.c. May be
Which of the following is not a major reason for maintaining an audit trail for a computer system?a. Deterrent to fraud.b. Monitoring purposes.c. Analytical procedures.d. Query answering.
Which of the following strategies would a CPA most likely consider in auditing an entity that processes most of its financial data only in electronic form, such as a paperless system?a. Continuous monitoring and analysis of transaction processing with an embedded audit module.b. Increased reliance
Which of the following is least likely to be considered by an auditor considering engagement of an information technology (IT) specialist on an audit?a. Complexity of client’s systems and IT controls.b. Requirements to assess going concern status.c. Client’s use of emerging technologies.d.
In a highly automated information processing system tests of controla. Must be performed in all circumstances.b. May be required in some circumstances.c. Are never required.d. Are required in first year audits.
An auditor would be most likely to assess control risk at the maximum level in an electronic environment with automated system-generated information whena. Sales orders are initiated using predetermined, automated decision rules.b. Payables are based on many transactions and large in dollar
Which of the following is correct concerning batch processing of transactions?a. Transactions are processed in the order they occur, regardless of type.b. It has largely been replaced by online real-time processing in all but legacy systems.c. It is more likely to result in an easy-to-follow audit
Matthews Corp. has changed from a system of recording time worked on clock cards to a computerized payroll system in which employees record time in and out with magnetic cards. The computer system automatically updates all payroll records. Because of this changea. A generalized computer audit
A owchart is most frequently used by an auditor in connection with thea. Preparation of generalized computer audit plans.b. Review of the client’s internal control.c. Use of statistical sampling in performing an audit.d. Performance of analytical procedures of account balances.
An advantage of using systems owcharts to document information about internal control instead of using internal control questionnaires is that systems owchartsa. Identify internal control weaknesses more prominently.b. Provide a visual depiction of clients’ activities.c. Indicate whether
Which of the following most likely would be an advantage in using classical variables sampling rather than probability-proportional-to-size (PPS) sampling?a. An estimate of the standard deviation of the population’s recorded amounts is not required.b. The auditor rarely needs the assistance of a
Which of the following statements is correct concerning the auditor’s use of statistical sampling?a. An auditor needs to estimate the dollar amount of the standard deviation of the population to use classical variables sampling.b. An assumption of PPS sampling is that the underlying accounting
The major reason that the difference and ratio estimation methods would be expected to produce audit efficiency is that thea. Number of members of the populations of differences or ratios is smaller than the number of members of the population of book values.b. Beta risk may be completely
An auditor is performing substantive tests of pricing and extensions of perpetual inventory balances consisting of a large number of items. Past experience indicates numerous pricing and extension errors. Which of the following statistical sampling approaches is most appropriate?a. Unstratified
Use of the ratio estimation sampling technique to estimated dollar amounts is inappropriate whena. The total book value is known and corresponds to the sum of all the individual book values.b. A book value for each sample item is unknown.c. There are some observed differences between audited values
Using statistical sampling to assist in verifying the yearend accounts payable balance, an auditor has accumulated the following data:Number of accounts Book balance Balance determined by the auditor Population 4,100 $5,000,000 ?Sample 200 $250,000 $300,000 Using the ratio estimation technique, the
In the application of statistical techniques to the estimation of dollar amounts, a preliminary sample is usually taken primarily for the purpose of estimating the populationa. Variability.b. Mode.c. Range.d. Median.
The use of the ratio estimation sampling technique is most effective whena. The calculated audit amounts are approximately proportional to the client’s book amounts.b. A relatively small number of differences exist in the population.c. Estimating populations whose records consist of quantities,
In statistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups ifa. Probability-proportional-to-size (PPS) sampling is used.b. The population has highly variable recorded amounts.c. The auditor’s estimated tolerable
An auditor is determining the sample size for an inventory observation using mean-per-unit estimation, which is a variables sampling plan. To calculate the required sample size, the auditor usually determines the Variability in the dollar amounts of inventory items Risk of incorrect acceptancea.
In a probability-proportional-to-size sample with a sampling interval of $5,000, an auditor discovered that a selected account receivable with a recorded amount of $10,000 had an audit amount of $8,000. If this were the only error discovered by the auditor, the projected error of this sample would
Hill has decided to use probability-proportional-to-size(PPS) sampling, sometimes called dollar-unit sampling, in the audit of a client’s accounts receivable balances. Hill plans to use the following PPS sampling table:TABLE Reliability Factors for Overstatements Number of over- Risk of incorrect
Which of the following statements is correct concerning probability-proportional-to-size (PPS) sampling, also known as dollar unit sampling?a. The sampling distribution should approximate the normal distribution.b. Overstated units have a lower probability of sample selection than units that are
An auditor established a $60,000 tolerable misstatement for an asset with an account balance of $1,000,000. The auditor selected a sample of every twentieth item from the population that represented the asset account balance and discovered overstatements of $3,700 and understatements of $200. Under
In estimation sampling for variables, which of the following must be known in order to estimate the appropriate sample size required to meet the auditor’s needs in a given situation?a. The qualitative aspects of errors.b. The total dollar amount of the population.c. The acceptable level of
A number of factors inuences the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?a. Greater reliance on internal control.b. Greater reliance on analytical procedures.c. Smaller expected
When planning a sample for a substantive test of details, an auditor should consider tolerable misstatement for the sample. This consideration shoulda. Be related to the auditor’s business risk.b. Not be adjusted for qualitative factors.c. Be related to preliminary judgments about materiality
Which of the following sample planning factors would inuence the sample size for a substantive test of details for a specific account?Expected amount of misstatements Measure of tolerable misstatementa. No Nob. Yes Yesc. No Yesd. Yes No
Which of the following courses of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements?a. Set the tolerable rate of deviation at a lower level than originally planned.b. Stratify the cash
How would increases in tolerable misstatement and assessed level of control risk affect the sample size in a substantive test of details?Increase in tolerable misstatement Increase in assessed level of control riska. Increase sample size Increase sample sizeb. Increase sample size Decrease sample
When an auditor has chosen a random sample and is using nonstatistical attributes sampling, that auditora. Need not consider the risk of assessing control risk too low.b. Has committed a nonsampling error.c. Will have to use discovery sampling to evaluate the results.d. Should compare the deviation
Which of the following statements is correct concerning statistical sampling in tests of controls?a. The population size has little or no effect on determining sample size except for very small populations.b. The expected population deviation rate has little or no effect on determining sample size

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Wiley CPA Excel Exam Review Study Guide Auditing And Attestation 2015 14th Edition O. Ray Whittington - Solutions

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