Advanced Auditing Final Exam
Course Introduction
Advanced Auditing delves into complex topics and contemporary practices in the field of auditing, equipping students with in-depth knowledge of audit methodologies, risk assessment, and the application of professional standards in diverse and evolving business environments. The course covers areas such as forensic auditing, auditing in computerized environments, regulatory frameworks, and ethical considerations, while also examining current developments, such as sustainability auditing and international auditing standards. Through case studies and practical assignments, students enhance their analytical skills and learn to evaluate complex control systems, identify fraud risks, and make informed professional judgments in real-world audit scenarios.
Recommended Textbook
Auditing and Assurance Services 7th Edition by Timothy J Louwers
Available Study Resources on Quizplus
20 Chapters
1606 Verified Questions
1606 Flashcards
Source URL: https://quizplus.com/study-set/2920 Page 2
Chapter 1: Auditing and Assurance Services
Available Study Resources on Quizplus for this Chatper
62 Verified Questions
62 Flashcards
Source URL: https://quizplus.com/quiz/58142
Sample Questions
Q1) ABC Company had a major sale to XYZ Company.This sale accounted for 20% of the revenue of ABC Company.The auditors performed the audit procedures listed 1-3.For each audit procedure select the ASB transaction assertion that is most likely being tested.
A.Occurrence
B.Completeness
C.Cutoff
D.Accuracy
E.Classification
1.The auditor reviewed the shipping documents to check the date that product was shipped to XYZ Company.
2.The auditor reviewed the shipping documents to ensure that all product included in the sales revenue to XYZ had been shipped.
3.The auditor reviewed the invoice sent to XYZ Company to ensure that XYZ had been properly billed.
Answer: 1.C,2.B,3.D
Q2) What are the four basic requirements for becoming a CPA?
Answer: Education,the CPA Examination,experience,and a state certificate.
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Professional Standards
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/58141
Sample Questions
Q1) PCAOB inspections are conducted by
A)Individuals selected by the PCAOB who are not current employees of public accounting firms.
B)Another public accounting firm selected by the firm being inspected.
C)Current employees of another public accounting firm selected by the PCAOB.
D)The AICPA's Public Oversight Board.
Answer: A
Q2) Which of the following statements is true with respect to the quality of audit evidence?
A)Quality is related to the relevance of evidence,but not the reliability of evidence.
B)Evidence is considered of higher quality when gathered prior to year-end than following year-end.
C)Evidence obtained under environments of stronger internal control is of higher quality than evidence obtained under environments of weaker internal control.
D)In evaluating quality,sufficiency of evidence is of greater importance than appropriateness of evidence.
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Engagement Planning
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/58140
Sample Questions
Q1) In designing written audit plans,an auditor should establish specific audit objectives that relate primarily to the
A)timing of audit procedures.
B)cost-benefit of gathering techniques.
C)selected audit techniques.
D)financial statement assertions.
Answer: D
Q2) The auditor is not required to ask the predecessor auditor about A)facts that might bear on the integrity of management.
B)disagreements the predecessor may have had with management about accounting principles and audit procedures.
C)the fees charged for the previous audit.
D)the predecessor's understanding about the reasons for the change of auditors. Answer: C
Q3) Which of the following is not considered an accounting estimate?
A)Allowance for loan losses
B)Credit sales
C)Net realizable value of inventory
D)Percentage-of-completion revenue to be recorded Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Management Fraud and Audit Risk
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/58139
Sample Questions
Q1) In the planning stage,analytical procedures are used to
A)identify potential problem areas.
B)provide direct evidence about the balances in accounts.
C)determine the mathematical correctness of the financial statements.
D)perform all of these.
Q2) Which of the following would not likely be found in the minutes of the board of directors?
A)Amount of dividends declared
B)Approval to pledge assets as security for debts
C)Authorization of officers' salaries
D)Approval of a new desktop computer for the controller
Q3) The probability that an audit team will give an inappropriate opinion on financial statements best describes
A)audit risk.
B)inherent risk.
C)control risk.
D)detection risk.
Q4) Why is it important for auditors to understand their clients' business risks?
Q5) What are the independent auditor's responsibilities to detect and report errors and frauds?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Risk Assessment: Internal Control Evaluation
Available Study Resources on Quizplus for this Chatper
67 Verified Questions
67 Flashcards
Source URL: https://quizplus.com/quiz/58138
Sample Questions
Q1) The "obtaining an understanding" work phase (Phase 1)of internal control evaluation would not give auditors an overall acquaintance with the client's A)control environment.
B)information and communication system.
C)control activity effectiveness.
D)monitoring activities.
Q2) As part of understanding the internal control,an auditor is not required to A)consider factors that affect the risk of material misstatement.
B)ascertain whether internal control policies and activities have been placed in operation.
C)identify the types of potential misstatements that can occur.
D)obtain knowledge about the operating effectiveness of the client's internal control activities.
Q3) What is the difference between an internal control's design effectiveness and its operating effectiveness?
Q4) What is the difference between a significant deficiency and a material weakness?
Q5) List and explain briefly the phases of an internal control evaluation.
Q6) List several elements of a company's control environment.
Q7) What constitutes a material weakness?
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Employee Fraud and the Audit of Cash
Available Study Resources on Quizplus for this Chatper
41 Verified Questions
41 Flashcards
Source URL: https://quizplus.com/quiz/58137
Sample Questions
Q1) As payments are received,one mailroom employee is assigned the responsibility of prelisting receipts and preparing the deposit slip prior to forwarding the receipts,deposit slip,and remittance advices to accounts receivable for posting.Accounts receivable personnel re-foot the deposit slip,stamp a restrictive endorsement on the back of each check,and then forward the receipts and deposit slip to the treasury department.Evaluate the internal control of the described process.Which of the following is a reasonable assessment of internal control in this process?
A)Adequate internal control
B)Inadequate internal control because mailroom employees should not have access to cash
C)Inadequate internal control because treasury employees should prepare the deposit slip
D)Inadequate internal control because of a lack of separation of duties
Q2) A proof of cash
A)is required by GAAS.
B)can be used to test the transactions process.
C)is most helpful when control risk for cash is low.
D)always detects lapping.
Q3) Describe how a lockbox works and indicate the advantages of such a system.
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Revenue and Collection Cycle
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/58136
Sample Questions
Q1) A computer generally cannot be used for scanning large files of accounts receivable for unusual credit balances.
Question also found in study guide
A)True
B)False
Q2) The auditor maintains control of the mailing and receipt of confirmations by typically performing all of the following except
A)preparing the confirmation letters.
B)mailing the confirmation letters.
C)receiving the confirmation letters.
D)None of the above.
Q3) While performing interim audit procedures of accounts receivable,numerous unexpected errors are found resulting in a change of risk assessment.Which of the following audit responses would be most appropriate?
A)Move detailed analytical procedures from year end to interim.
B)Increase the dollar threshold of vouching customer invoices.
C)Send negative accounts receivable confirmations instead of positive accounts receivable confirmations.
D)Use more experienced audit team members to perform year-end testing.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Acquisition and Expenditure Cycle
Available Study Resources on Quizplus for this Chatper
131 Verified Questions
131 Flashcards
Source URL: https://quizplus.com/quiz/58135
Sample Questions
Q1) When verifying debits to the perpetual inventory records of a nonmanufacturing company,auditors would be most interested in examining a sample of purchase
A)Approvals.
B)Requisitions.
C)Invoices.
D)Orders.
Q2) Which of the following accounts would most likely be reviewed by the auditor to gain reasonable assurance that additions to the equipment account are not understated?
A)Depreciation expense.
B)Gain on disposal of equipment.
C)Accounts payable.
D)Repairs and maintenance expense.
Q3) Cash disbursements are authorized by
A)Purchase orders.
B)Invoices.
C)Receiving reports.
D)A complete voucher package.
Q4) ...
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Production Cycle
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/58134
Sample Questions
Q1) Explain briefly the two directions of inventory test counts.
A.Basic transaction files to perpetual inventory records (completeness assertion).
B.Perpetual inventory records to the detail source documents (existence or occurrence assertion).
Q2) An auditor's tests of controls over the issuance of raw materials to production would most likely include
A)Reconciling raw materials and work-in-process perpetual inventory records to general ledger balances.
B)Inquiring of the custodian about the procedures followed when defective materials are received from vendors.
C)Observing that raw materials are stored in secure areas and that storeroom security is supervised by a responsible individual.
D)Examining material requisitions and reperforming client controls designed to process and record issuances.
Q3) Cost accounting is responsible for reconciling inventory usage with production.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: Finance and Investment Cycle
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/58133
Sample Questions
Q1) ABC Company has 100 shares of IBM stock that is held as an investment.The stock was purchased three years ago and has been in the client's safe deposit box along with other investment securities.During an inspection of securities held by the client,the auditor noted the 100 shares of IBM stock had a different CUSIP number than the number listed when purchased and the number verified during the previous audit.Which of the following would be the auditor's main concern about this discovery?
A)The certificates in the safe deposit box were forgeries.
B)There was unauthorized buying and selling of investment securities.
C)The securities may be misclassified on the balance sheet.
D)The securities were no longer owned by ABC Company.
Q2) Which of the following is not a relevant aspect of internal controls over estimates?
A)External auditor involvement in developing assumptions.
B)Adequate review by appropriate levels of authority.
C)Comparison of prior estimates with subsequent results.
D)All the above are relevant aspects of internal controls over estimates.
Q3) ...
Q4) What are "off-balance-sheet" financing transactions? Explain and provide two or more examples.
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Completing the Audit
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/58132
Sample Questions
Q1) Auditors have a responsibility to evaluate whether financial statements properly reflect all known events through the:
A)Date of the financial statements.
B)Date of the auditors' report.
C)Audit report release date.
D)Subsequent year's date of the financial statements.
Q2) Which of the following procedures would auditors most likely perform in obtaining evidence about subsequent events?
A)Determine that changes in employee pay rates after year end were properly authorized.
B)Recompute depreciation charges for plant assets sold after year end.
C)Inquire about payroll checks that were recorded before year end but cashed after year end.
D)Investigate changes in long-term debt occurring after year end.
Q3) Subsequent events occur between the ____ and the____.
A)Date of the financial statements; date of the auditors' report.
B)Date of the auditors' report; audit report release date.
C)Date of the financial statements; audit report release date.
D)Audit report release date; beginning of subsequent year's audit.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Reports on Audited Financial Statements
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/58131
Sample Questions
Q1) Which of the following situations would require auditors to add an other-matter paragraph to their report on comparative financial statements?
A)An unmodified opinion is issued in the current year while a qualified opinion was issued in prior years.
B)A qualified opinion is issued in the current year because of a scope limitation; because this limitation was not encountered in prior years,the opinion issued in those years was unmodified.
C)The updated opinion issued on prior years' financial statements differs from the opinion originally issued on those financial statements.
D)The auditors' unmodified opinion issued on prior years' financial statements is still considered to be appropriate.
Q2) If financial statements contain a material but non-pervasive departure from generally accepted accounting principles,the auditors should render a(n)
A)Qualified opinion with reference to departure.
B)Adverse opinion with scope limitation reference.
C)Adverse opinion with reference to departure.
D)Disclaimer of opinion.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Other Public Accounting Services
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/58130
Sample Questions
Q1) In reporting on a nonpublic entity's internal control over financial reporting,an accountant should include a paragraph that describes the
A)documentary evidence regarding the control environment factors.
B)changes in the entity's internal control since the prior report.
C)potential benefits from the accountant's suggested improvements.
D)inherent limitations of internal control.
Q2) When a company uses a service organization to prepare its payroll,the company's auditors
A)have no obligation concerning the internal controls at the service organization.
B)need to understand the internal controls over the transaction regardless of the location of the control.
C)must audit the internal controls at the service organization.
D)should include the audit report of the service company's auditors with their auditors' report.
Q3) Review work on unaudited financial statements consists primarily of conducting inquiries,performing analytical procedures,and obtaining a management representation letter.List the typical procedures accountants would perform on a review engagement.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Professional Ethics
Available Study Resources on Quizplus for this Chatper
46 Verified Questions
46 Flashcards
Source URL: https://quizplus.com/quiz/58129
Sample Questions
Q1) Which of the following is NOT a restriction placed on audit partners by Sarbanes-Oxley?
A)Limits engagement partners to a five-year term as the engagement partner.
B)Limits other partners associated with the engagement to a seven-year term
C)Engagement partners must review nonaudit work to insure that independence has not been compromised.
D)Partners that engage in selling services,other than audit,review,and attestation services,to an audit client are not independent with respect to that client.
Q2) According to Sarbanes-Oxley,the audit committee must pre-approve all audit and non-audit services.This can be done
A)Case-by-case basis: Yes; Through established policies: No; Delegating the responsibility: Yes
B)Case-by-case basis: Yes; Through established policies: Yes; Delegating the responsibility: No
C)Case-by-case basis: No; Through established policies: Yes; Delegating the responsibility: No
D)Case-by-case basis: No; Through established policies: No; Delegating the responsibility: Yes
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Legal Liability
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/58128
Sample Questions
Q1) Under the anti-fraud provisions of section 10(b)of the Securities Exchange Act of 1934,auditors may be liable if they acted
A)With ordinary negligence.
B)With independence.
C)Without due diligence.
D)Without good faith.
Q2) What are the legal liabilities of auditors under common law?
Q3) Typical defenses for auditors in common law actions include all of the following,except
A)The plaintiff was foreseen.
B)The plaintiff contributed to the failure to detect material misstatements.
C)The financial statements were not materially misstated.
D)The audit was conducted in accordance with generally accepted auditing standards.
Q4) The SEC Rule 10b-5 deals with
A)Fraud in the purchase or sale of securities.
B)Penalties for willfully and knowingly violating the Securities Exchange Act of 1934.
C)The use of the "due diligence" defense to avoid liability.
D)Integrated disclosure system for annual reports.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Internal Audits, Governmental Audits, and Fraud Examinations
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/58127
Sample Questions
Q1) GAO performs three types of government audits:
and
audits.
Question also found in study guide
Q2) The purpose of the internal audit's evaluation of the effectiveness of existing risk management processes is to determine that
A)management has planned and designed operations to provide reasonable assurance of achieving objectives and goals.
B)management's policies and procedures will achieve objectives and goals.
C)the organization's objectives and goals are established within risk limits established by the internal audit organization.
D)the organization's objectives and goals will be achieved in an accurate and timely manner and with minimal use of resources.
Q3) In a fraud investigation,the first objective is
A)identify possible motives to commit a fraud.
B)inspect documentation for tampering.
C)establish who the perpetrators are.
D)to determine if a fraud has been committed.
Q4) Explain briefly the purpose and requirements under the Single Audit Act.
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Overview of Sampling
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/58126
Sample Questions
Q1) Below are examples of procedures performed in a sampling plan to estimate the average height of a student-athlete.Indicate,using the correct letter,which step in the sampling process is most closely associated with the example.Each step is associated with only one example.
A.Determine the objective of sampling.
B.Define the population.
C.Measure the sample items.
D.Evaluate the sample results.1___.Identify the sport(s)from which you wish to select student-athletes.2___.Compare the height of the student-athletes against a predetermined comparator group.3___.Hypothesize the expected relationship between the height of student-athletes and a predetermined comparator group.4___.Using a tape measure or other system,determine the height of the sample of student-athletes.
Q2) Meghan, CPA, selected every 10th item in a randomly ordered population.
A) Unrestricted random selection.
B) Systematic random selection.
C) Haphazard selection.
D) Block selection.
To view all questions and flashcards with answers, click on the resource link above.
Page 19
Chapter 18: Attributes Sampling
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/58125
Sample Questions
Q1) Samples to test internal control procedures are intended to provide a basis for an auditor to conclude whether:
A)The control procedures are operating effectively.
B)The financial statements are materially misstated.
C)The risk of incorrect acceptance is too high.
D)Overall materiality for planning purposes is at a sufficiently low level.
Q2) Using the appropriate sampling tables,identify the missing data for each of the following independent attributes sampling applications. \(\begin{array}{lcccc} \text { } & \underline{A} & \mathrm{B} & \underline{\mathrm{C}} & \underline{\mathrm{D}} \\
\text { Risk of overreliance } & 5 \% & 10 \% & (3) & 5 \% \\
\text { Tolerable rate of deviation } & 6 \% & (2) & 7 \% & 6 \% \\
\text {Expected population deviation rate } & 3 \% & 2 \% & 1 \% & (4) \\
\text {Expected population deviation rate } & (1) & 132 & 55 & 150
\end{array}\)
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Variables Sampling
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/58124
Sample Questions
Q1) In which of the following situations would the auditor be more likely to use monetary unit sampling as opposed to classical variables sampling?
A)Larger expected misstatement: Yes; Concern with overstatements: Yes
B)Larger expected misstatement: Yes; Concern with overstatements: No
C)Larger expected misstatement: No; Concern with overstatements: Yes
D)Larger expected misstatement: No; Concern with overstatements: No
Q2) Which of the following is not true with respect to the risk of incorrect rejection?
A)Incorrect rejection occurs when the auditor concludes that the account balance is not fairly stated.
B)The risk of incorrect rejection has an inverse relationship with sample size.
C)The risk of incorrect rejection exposes the auditor to an efficiency loss.
D)Incorrect rejection occurs when the true (but unknown)account balance is materially misstated.
Q3) An auditor may decide to increase the risk of incorrect rejection when:
A)Increased reliability from the sample is desired.
B)Many differences are expected.
C)Initial sample results do not support the planned level of control risk.
D)The cost and effort of selecting additional items is low.
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 20: Auditing and Information Technology
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/58123
Sample Questions
Q1) Which of the following is an example of a computer operations control?
A)Control totals.
B)Balancing input to output.
C)File backup and retention.
D)Transaction logs.
Q2) Which of the following control procedures most likely could prevent computer personnel from modifying programs to bypass computer controls?
A)Periodic management review of computer utilization reports and systems documentation.
B)Separation of duties for computer programming and computer operations.
C)Participation of user department personnel in designing and approving new systems.
D)Physical security of computer facilities in limiting access to computer equipment.
Q3) Audit teams would least likely use computer-assisted audit techniques to A)Access client data files.
B)Prepare spreadsheets.
C)Assess control risk related to computerized processing systems.
D)Construct and perform parallel simulations.
To view all questions and flashcards with answers, click on the resource link above.
22