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

Which of the following statements is correct concerning the use of negative confirmation requests?a. Unreturned negative confirmation requests rarely provide significant explicit evidence.b. Negative confirmation requests are effective when detection risk is low.c. Unreturned negative confirmation
The tick mark most likely indicates that the amount was traced to thea. Deposits in transit of the applicable bank reconciliation.b. December cash receipts journal.c. January cash receipts journal.d. Year-end bank confirmations.
The tick mark ◆ most likely indicates that the amount was traced to thea. December cash disbursements journal.b. Outstanding check list of the applicable bank reconciliation.c. January cash disbursements journal.d. Year-end bank confirmations.
An auditor observes the mailing of monthly statements to a client’s customers and reviews evidence of follow-up on errors reported by the customers. This test of controls most likely is performed to support management’s financial statement assertion(s) of Presentation and disclosure Existence
The primary purpose of sending a standard confirmation request to financial institutions with which the client has done business during the year is toa. Detect kiting activities that may otherwise not be discovered.b. Corroborate information regarding deposit and loan balances.c. Provide the data
A cash shortage may be concealed by transporting funds from one location to another or by converting negotiable assets to cash. Because of this, which of the following is vital?a. Simultaneous confirmations.b. Simultaneous bank reconciliations.c. Simultaneous verification.d. Simultaneous surprise
Which of the following cash transfers results in a misstatement of cash at December 31, 2005?Bank Transfer Schedule Disbursement Receipt Transfer Recorded in books Paid by bank Recorded in books Received by banka. 12/31/X5 1/4/X6 12/31/X5 12/31/X5b. 1/4/X6 1/5/X6 12/31/X5 1/4/X6c. 12/31/X5 1/5/X6
To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would examine all of the following excepta. Cutoff bank statement.b. Year-end bank statement.c. Bank confirmation.d. General ledger.
An auditor should trace bank transfers for the last part of the audit period and first part of the subsequent period to detect whethera. The cash receipts journal was held open for a few days after the year-end.b. The last checks recorded before the year-end were actually mailed by the year-end.c.
Which of the following checks illustrate deposits/transfers in transit at December 31, 20X5?a. #101 and #202.b. #101 and #303.c. #202 and #404.d. #303 and #404.
Which of the following checks might indicate kiting?a. #101 and #303.b. #202 and #404.c. #101 and #404.d. #202 and #303.
An auditor most likely would limit substantive audit tests of sales transactions when control risk is assessed as low for the occurrence assertion concerning sales transactions and the auditor has already gathered evidence supportinga. Opening and closing inventory balances.b. Cash receipts and
The usefulness of the standard bank confirmation request may be limited because the bank employee who completes the form maya. Not believe that the bank is obligated to verify confidential information to a third party.b. Sign and return the form without inspecting the accuracy of the client’s
Which of the following sets of information does an auditor usually confirm on one form?a. Accounts payable and purchase commitments.b. Cash in bank and collateral for loans.c. Inventory on consignment and contingent liabilities.d. Accounts receivable and accrued interest receivable.
Audit documentation for audits performed under the requirements of the Public Company Accounting Oversight Board should be retained fora. The shorter of five years, or the period required by law.b. Seven years.c. The longer of seven years, or the period required by law.d. Indefinitely.
Under the requirements of the PCAOB, audit documentation must contain sufficient information to allow what type of auditor to understand the nature, timing, extent, and results of procedures performed?a. An experienced audit team member.b. An experienced auditor having no previous connection with
No deletions of audit documentation are allowed after thea. Client’s year-end.b. Documentation completion date.c. Last date of significant fieldwork.d. Report release date.
Which documentation is required for an audit in accordance with generally accepted auditing standards?a. A owchart or an internal control questionnaire that evaluates the effectiveness of the entity’s controls.b. A client engagement letter that provides details of timing of each significant
The audit working paper that reects the major components of an amount reported in the financial statements is thea. Interbank transfer schedule.b. Carryforward schedule.c. Supporting schedule.d. Lead schedule.
Which of the following factors most likely would affect an auditor’s judgment about the quantity, type, and content of the auditor’s working papers?a. The assessed level of control risk.b. The likelihood of a review by a concurring (second)partner.c. The number of personnel assigned to the
Which of the following is required documentation in an audit in accordance with generally accepted auditing standards?a. A owchart or narrative of the accounting system describing the recording and classification of transactions for financial reporting.b. The overall audit strategy and audit
Which of the following is least likely to be a factor in the auditor’s decision about the extent of the documentation of a particular audit area?a. The risk of material misstatement.b. The extent of the judgment involved in performing the procedures.c. The nature and extent of exceptions
An auditor ordinarily uses a working trial balance resembling the financial statements without footnotes, but containing columns fora. Cash ow increases and decreases.b. Audit objectives and assertions.c. Reclassifications and adjustments.d. Reconciliations and tick marks.
The permanent file of an auditor’s working papers generally would not includea. Bond indenture agreements.b. Lease agreements.c. Working trial balance.d. Flowchart of internal control.
An auditor’s working papers serve mainly toa. Provide the principal support for the auditor’s report.b. Satisfy the auditor’s responsibilities concerning the Code of Professional Conduct.c. Monitor the effectiveness of the CPA firm’s quality control procedures.d. Document the level of
Which of the following pairs of accounts would an auditor most likely analyze on the same working paper?a. Notes receivable and interest income.b. Accrued interest receivable and accrued interest payable.c. Notes payable and notes receivable.d. Interest income and interest expense.
Ignoring any particular legal or regulatory requirement, audit documentation should be retaineda. A minimum of five years.b. As long as lead schedules have relevance to forthcoming audits.c. Until three years after the client selects another auditor.d. Working papers must be maintained indefinitely.
Which statement is correct concerning the deletion of audit documentation?a. Superseded audit documentation should always be deleted from the audit file.b. After the audit file has been completed, the auditor should not delete or discard audit documentation.c. Auditors should use professional
In determining whether transactions have been recorded, the direction of the audit testing should be from thea. General ledger balances.b. Adjusted trial balance.c. Original source documents.d. General journal entries.B.3. Documentation
The auditor will most likely perform extensive tests for possible understatement ofa. Revenues.b. Assets.c. Liabilities.d. Capital.B.2. Specific Substantive Procedures
In the context of an audit of financial statements, substantive procedures are audit procedures thata. May be eliminated under certain conditions.b. Are designed to discover significant subsequent events.c. May be either tests of transactions, direct tests of financial balances, or analytical
The objective of tests of details of transactions performed as substantive procedures is toa. Comply with generally accepted auditing standards.b. Attain assurance about the reliability of the accounting system.c. Detect material misstatements in the financial statements.d. Evaluate whether
Which of the following is the best example of a substantive procedure?a. Examining a sample of cash disbursements to test whether expenses have been properly approved.b. Confirmation of balances of accounts receivable.c. Comparison of signatures on checks to a list of authorized signers.d.
To be effective, analytical procedures performed near the end of an audit engagement should be performed bya. The staff accountant who performed the substantive auditing procedures.b. The managing partner who has responsibility for all audit engagements at that practice office.c. A manager or
Which of the following comparisons would an auditor most likely make in evaluating an entity’s costs and expenses?a. The current year’s accounts receivable with the prior year’s accounts receivable.b. The current year’s payroll expense with the prior year’s payroll expense.c. The budgeted
Analytical procedures performed near the end of an audit suggest that several accounts have unexpected relationships.The results of these procedures most likely would indicate thata. Irregularities exist among the relevant account balances.b. Internal control activities are not operating
An auditor’s analytical procedures most likely would be facilitated if the entitya. Segregates obsolete inventory before the physical inventory count.b. Uses a standard cost system that produces variance reports.c. Corrects material weaknesses in internal control before the beginning of the
For all audits of financial statements made in accordance with generally accepted auditing standards, the use of analytical procedures is required to some extent In the risk assessment stage As a substantive procedure Near-audit completiona. Yes No Yesb. No Yes Noc. No Yes Yesd. Yes No No
A basic premise underlying the application of analytical procedures is thata. The study of financial ratios is an acceptable alternative to the investigation of unusual uctuations.b. Statistical tests of financial information may lead to the discovery of material misstatements in the financial
Which of the following tends to be most predictable for purposes of analytical procedures applied as substantive procedures?a. Relationships involving balance sheet accounts.b. Transactions subject to management discretion.c. Relationships involving income statement accounts.d. Data subject to
Analytical procedures used in the overall review stage of an audit generally includea. Gathering evidence concerning account balances that have not changed from the prior year.b. Retesting control procedures that appeared to be ineffective during the assessment of control risk.c. Considering
Auditors try to identify predictable relationships when using analytical procedures. Relationships involving transactions from which of the following accounts most likely would yield the highest level of evidence?a. Accounts receivable.b. Interest expense.c. Accounts payable.d. Travel and
An entity’s income statements were misstated due to the recording of journal entries that involved debits and credits to an unusual combination of expense and revenue accounts.The auditor most likely could have detected this fraudulent financial reporting bya. Tracing a sample of journal entries
An auditor may achieve audit objectives related to particular assertions bya. Performing analytical procedures.b. Adhering to a system of quality control.c. Preparing auditor working papers.d. Increasing the level of detection risk.
What type of analytical procedure would an auditor most likely use in developing relationships among balance sheet accounts when reviewing the financial statements of a nonpublic entity?a. Trend analysis.b. Regression analysis.c. Ratio analysis.d. Risk analysis.
Which of the following would not be considered an analytical procedure?a. Estimating payroll expense by multiplying the number of employees by the average hourly wage rate and the total hours worked.b. Projecting an error rate by comparing the results of a statistical sample with the actual
A client uses a suspense account for unresolved questions whose final accounting has not been determined. If a balance remains in the suspense account at year-end, the auditor would be most concerned abouta. Suspense debits that management believes will benefit future operations.b. Suspense debits
In testing the existence assertion for an asset, an auditor ordinarily works from thea. Financial statements to the potentially unrecorded items.b. Potentially unrecorded items to the financial statements.c. Accounting records to the supporting evidence.d. Supporting evidence to the accounting
In evaluating an entity’s accounting estimates, one of an auditor’s objectives is to determine whether the estimates area. Not subject to bias.b. Consistent with industry guidelines.c. Based on objective assumptions.d. Reasonable in the circumstances.
In evaluating the reasonableness of an accounting estimate, an auditor most likely would concentrate on key factors and assumptions that area. Consistent with prior periods.b. Similar to industry guidelines.c. Objective and not susceptible to bias.d. Deviations from historical patterns.
Which of the following procedures would an auditor ordinarily perform first in evaluating management’s accounting estimates for reasonableness?a. Develop independent expectations of management’s estimates.b. Consider the appropriateness of the key factors or assumptions used in preparing the
Which of the following is not a basic procedure used in an audit?a. Risk assessment procedures.b. Substantive procedures.c. Tests of controls.d. Tests of direct evidence.
In evaluating the reasonableness of an entity’s accounting estimates, an auditor normally would be concerned about assumptions that area. Susceptible to bias.b. Consistent with prior periods.c. Insensitive to variations.d. Similar to industry guidelines.A.2. Types of Audit Evidence
Which of the following types of audit evidence is the least persuasive?a. Prenumbered purchase order forms.b. Bank statements obtained from the client.c. Test counts of inventory performed by the auditor.d. Correspondence from the client’s attorney about litigation.
Which of the following statements relating to the appropriateness of audit evidence is always true?a. Audit evidence gathered by an auditor from outside an enterprise is reliable.b. Accounting data developed under satisfactory conditions of internal control are more relevant than data developed
Which of the following presumptions is correct about the reliability of audit evidence?a. Information obtained indirectly from outside sources is the most reliable audit evidence.b. To be reliable, audit evidence should be convincing rather than persuasive.c. Reliability of audit evidence refers to
Which of the following types of audit evidence is the most persuasive?a. Prenumbered client purchase order forms.b. Client work sheets supporting cost allocations.c. Bank statements obtained from the client.d. Client representation letter.
Which of the following is a general principle relating to the reliability of audit evidence?a. Audit evidence obtained from indirect sources rather than directly is more reliable than evidence obtained directly by the auditor.b. Audit evidence provided by copies is more reliable than that provided
Which of the following is not an assertion relating to classes of transactions?a. Accuracy.b. Consistency.c. Cutoff.d. Occurrence.
In assessing the objectivity of internal auditors, an independent auditor shoulda. Evaluate the quality control program in effect for the internal auditors.b. Examine documentary evidence of the work performed by the internal auditors.c. Test a sample of the transactions and balances that the
If the independent auditors decide that the work performed by the internal auditor may have a bearing on their own procedures, they should consider the internal auditor’sa. Competence and objectivity.b. Efficiency and experience.c. Independence and review skills.d. Training and supervisory skills.
In assessing the competence and objectivity of an entity’s internal auditor, an independent auditor would least likely consider information obtained froma. Discussions with management personnel.b. External quality reviews of the internal auditor’s activities.c. Previous experience with the
When assessing the internal auditor’s competence, the independent CPA should obtain information about thea. Organizational level to which the internal auditors report.b. Educational background and professional certification of the internal auditors.c. Policies prohibiting the internal auditors
During an audit an internal auditor may provide direct assistance to an independent CPA in Obtaining an understanding of internal control Performing tests of controls Performing substantive testsa. No No Nob. Yes No Noc. Yes Yes Nod. Yes Yes Yes
An internal auditor’s work would most likely affect the nature, timing, and extent of an independent CPA’s auditing procedures when the internal auditor’s work relates to assertions about thea. Existence of contingencies.b. Valuation of intangible assets.c. Existence of fixed asset
The work of internal auditors may affect the independent auditor’s I. Procedures performed in obtaining an understanding of internal control.II. Procedures performed in assessing the risk of material misstatement.III. Substantive procedures performed in gathering direct evidence.a. I and II
For which of the following judgments may an independent auditor share responsibility with an entity’s internal auditor who is assessed to be both competent and objective?Assessment of inherent risk Assessment of control riska. Yes Yesb. Yes Noc. No Yesd. No No
In assessing the competence of an internal auditor, an independent CPA most likely would obtain information about thea. Quality of the internal auditor’s working paper documentation.b. Organization’s commitment to integrity and ethical values.c. Inuence of management on the scope of the
During the audit the independent auditor identified the existence of a weakness in the client’s internal control and communicated this finding in writing to the client’s senior management and those charged with governance. The auditor shoulda. Consider the weakness a scope limitation and
Which of the following statements concerning material weaknesses and significant deficiencies is correct?a. An auditor should not identify and communicate material weaknesses separately from significant deficiencies.b. Compensating controls may limit the severity of a material weakness or
Which of the following representations should not be included in a report on internal control related matters noted in an audit?a. Significant deficiencies related to internal control exist.b. There are no significant deficiencies in the design or operation of internal control.c. Corrective
Which of the following statements is correct concerning significant deficiencies noted in an audit?a. Significant deficiencies are material weaknesses in the design or operation of specific internal control components.b. The auditor is obligated to search for significant deficiencies that could
Which of the following statements is correct concerning an auditor’s required communication of significant deficiencies?a. A significant deficiency previously communicated during the prior year’s audit that remains uncorrected causes a scope limitation.b. An auditor should perform tests of
An auditor’s letter issued on significant deficiencies relating to an entity’s internal control observed during a financial statement audit shoulda. Include a brief description of the tests of controls performed in searching for significant deficiencies and material weaknesses.b. Indicate that
Which of the following statements is correct concerning significant deficiencies in an audit?a. An auditor is required to search for significant deficiencies during an audit.b. All significant deficiencies are also considered to be material weaknesses.c. An auditor may communicate significant
Which of the following matters would an auditor most likely consider to be a material weakness to be communicated to those charged with governance of an audit client?a. Management’s failure to renegotiate unfavorable longterm purchase commitments.b. Recurring operating losses that may indicate
Which of the following is not an accurate statement about communication of internal control related matters to management on a nonissuer (nonpublic) company?a. The auditor must communicate both material weaknesses and significant deficiencies.b. The auditor must communicate in writing.c. Previously
In general, material fraud perpetrated by which of the following are most difficult to detect?a. Cashier.b. Keypunch operator.c. Internal auditor.d. Controller.D.1. Communication of Internal Control–Related Matters
When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually performsa. Tests of controls and extensive tests of property and equipment balances at the end of the year.b. Analytical procedures for current year
Which of the following controls would an entity most likely use in safeguarding against the loss of marketable securities?a. An independent trust company that has no direct contact with the employees who have recordkeeping responsibilities has possession of the securities.b. The internal auditor
Which of the following controls would an entity most likely use to assist in satisfying the completeness assertion related to long-term investments?a. Senior management verifies that securities in the bank safe-deposit box are registered in the entity’s name.b. The internal auditor compares the
A company holds bearer bonds as a short-term investment. Responsibility for custody of these bonds and submission of coupons for periodic interest collections probably should be delegated to thea. Chief Accountant.b. Internal Auditor.c. Cashier.d. Treasurer.
Which of the following controls would be most effective in assuring that the proper custody of assets in the investing cycle is maintained?a. Direct access to securities in the safe-deposit box is limited to only one corporate officer.b. Personnel who post investment transactions to the general
Which of the following questions would an auditor least likely include on an internal control questionnaire concerning the initiation and execution of equipment transactions?a. Are requests for major repairs approved at a higher level than the department initiating the request?b. Are prenumbered
A weakness in internal control over recording retirements of equipment may cause an auditor toa. Inspect certain items of equipment in the plant and trace those items to the accounting records.b. Review the subsidiary ledger to ascertain whether depreciation was taken on each item of equipment
Which of the following controls would a company most likely use to safeguard marketable securities when an independent trust agent is not employed?a. The investment committee of the board of directors periodically reviews the investment decisions delegated to the treasurer.b. Two company officials
Which of the following is not a control that is designed to protect investment securities?a. Custody over securities should be limited to individuals who have recordkeeping responsibility over the securities.b. Securities should be properly controlled physically in order to prevent unauthorized
Where no independent stock transfer agents are employed and the corporation issues its own stocks and maintains stock records, canceled stock certificates shoulda. Be defaced to prevent reissuance and attached to their corresponding stubs.b. Not be defaced but segregated from other stock
The primary responsibility of a bank acting as registrar of capital stock is toa. Ascertain that dividends declared do not exceed the statutory amount allowable in the state of incorporation.b. Account for stock certificates by comparing the total shares outstanding to the total in the shareholders
Which of the following questions would an auditor most likely include on an internal control questionnaire for notes payable?a. Are assets that collateralize notes payable critically needed for the entity’s continued existence?b. Are two or more authorized signatures required on checks that repay
Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?a. Personnel.b. Treasurer.c. Controller.d. Payroll.C.5. Financing
The auditor may observe the distribution of paychecks to ascertain whethera. Pay rate authorization is properly separated from the operating function.b. Deductions from gross pay are calculated correctly and are properly authorized.c. Employees of record actually exist and are employed by the
To minimize the opportunities for fraud, unclaimed cash payroll should bea. Deposited in a safe-deposit box.b. Held by the payroll custodian.c. Deposited in a special bank account.d. Held by the controller.
The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate thea. Authorization of transactions from the custody of related assets.b. Operational responsibility from the recordkeeping responsibility.c. Human resources function from the controllership
Proper internal control over the cash payroll function would mandate which of the following?a. The payroll clerk should fill the envelopes with cash and a computation of the net wages.b. Unclaimed pay envelopes should be retained by the paymaster.c. Each employee should be asked to sign a
In meeting the control objective of safeguarding of assets, which department should be responsible for Distribution of paychecks Custody of unclaimed paychecksa. Treasurer Treasurerb. Payroll Treasurerc. Treasurer Payrolld. Payroll Payroll
Which of the following controls most likely would prevent direct labor hours from being charged to manufacturing overhead?a. Periodic independent counts of work in process for comparison to recorded amounts.b. Comparison of daily journal entries with approved production orders.c. Use of time
An auditor most likely would assess control risk at a high level if the payroll department supervisor is responsible fora. Examining authorization forms for new employees.b. Comparing payroll registers with original batch transmittal data.c. Authorizing payroll rate changes for all employees.d.
In determining the effectiveness of an entity’s controls relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about anda. Observe the segregation of duties concerning personnel responsibilities and payroll disbursement.b. Inspect
Which of the following is a control that most likely could help prevent employee payroll fraud?a. The personnel department promptly sends employee termination notices to the payroll supervisor.b. Employees who distribute payroll checks forward unclaimed payroll checks to the absent

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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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