5-45. Multiple Choice Questions Select the best answer for each of the following questions. Explain the reasons for your selection a. Which of the following is not a financial statement assertion made by management? (1) Existence of recorded assets and liabilities. (2) Completeness of recorded assets and liabilities, (3) Valuation of assets and liabilities. (4) Effectiveness of internal control. b. Which of the following business characteristics is not indicative of high inherort ris (1) Operating results that are highly sensitive to economic factors. (2) Large likely misstatements detected in prior audits. (3) Substantial turnover of management. (4) A large amount of assets. c. As part of their audit, auditors obtain a representation letter from their client Which of following is not a valid purpose of such a letter? (1) To increase the efficiency of the audit by eliminating the need for other audis procedures. (2) To remind the client's management of its primary responsibility for the financial statements (3) To document in the audit working papers the client's responses to certain vetbal ries made by the auditors during the engagement (4) To provide evidence in those areas dependent upon management's future 5-4 d. Which of the following statements best describes why auditors investigate related party transactions? (1) Related party transactions generally areillegal acts. (2) The substance of related party transactions may differ from their form. (3) All related party transactions must be eliminated as a step in preparing consolidated financial statements (4) Related party transactions are a form of management fraud. Of the following, which is the least reliable type of audit evidence? (1) Confirmations mailed by outsiders to the auditors. (2) Correspondence between the auditors and suppliers (3) Copies of sales invoices inspected by the audiors. e. O 5-3 nceled checks returned in the year-end bank statement directly to the client Analytical procedures are most likely to detect (1) Weaknesses of a material nature in internal control. (2) Unusual transactions. (3) Noncompliance with prescribed control activities (4) Improper separation of accounting and other financial duties. Which of the following is not a primary approach to auditing an accounting estimate? LO 5-4 nd test management's process for developing the estimate. nsactions