Risk-Based Auditing Exam Practice Tests
Course Introduction
Risk-Based Auditing is a comprehensive course designed to equip students with the knowledge and skills necessary to evaluate and audit an organization's risk management processes. The course emphasizes the identification, assessment, and prioritization of risks within various business contexts and integrates the risk-based approach into the planning, execution, and reporting phases of an audit. Students will learn to focus audit resources on areas of highest risk to maximize efficiency and effectiveness, utilizing industry frameworks and regulatory guidelines. Through case studies and practical exercises, learners develop critical thinking skills and gain expertise in risk assessment, internal controls evaluation, and the use of technology in risk-based auditing methodologies.
Recommended Textbook
Auditing A Risk Based Approach to Conducting a Quality Audit 10th Edition by Karla Johnstone
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17 Chapters
1898 Verified Questions
1898 Flashcards
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Chapter 1: Auditing: Integral to the Economy
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100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/21875
Sample Questions
Q1) Auditors should conduct their work with an attitude of professional skepticism.
A)True
B)False Answer: True
Q2) Internal controls are the responsibility of management.
A)True
B)False Answer: True
Q3) Only the Big 4 audit firms can conduct audits of private companies in the United States.
A)True
B)False Answer: False
Q4) The Public Company Accounting Oversight Board was established by the AICPA in response to Securities laws.
A)True
B)False Answer: False
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Page 3
Chapter 2: The Auditors Responsibilities Regarding Fraud and
Mechanisms to Address Fraud: Regulation and Corporate Governance
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120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/21876
Sample Questions
Q1) Rationalization is one element of the Fraud Triangle.
A)True
B)False
Answer: True
Q2) The PCAOB has how many board members?
A) Three
B) Five
C) Seven
D) Nine
Answer: B
Q3) Which of the following best describes professional skepticism?
A) An intent to deceive.
B) An attitude of intrusion and obstinacy.
C) A character that does not waver.
D) A questioning mind.
Answer: D
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Chapter 3: Internal Control Over Financial Reporting:
Responsibilities of Management and the External Auditors
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104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/21877
Sample Questions
Q1) Integrated audit.
Explain the application of an integrated audit as it relates to regulation. Discuss the reasons that this integrated approach may occur.
Answer: The Sarbanes-Oxley Act of 2002 requires reporting by management of publicly-held companies on the effectiveness of internal control over financial reporting. The Public Company Accounting Oversight Board (PCAOB) requires the external auditor to perform an integrated audit of the effectiveness of internal controls and financial reporting. In other words, the same auditor must attest to both the financial statements and management's assertions regarding the effectiveness of internal controls over financial reporting.
Because of the above mentioned regulatory requirements, auditors will perform an audit on both financial statements and internal controls for all public clients.
Q2) An organization's control environment is established and maintained by the internal auditing department.
A)True
B)False
Answer: False
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5
Chapter 4: Professional Liability, Auditor Judgment
Frameworks, and Professional Responsibilities
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88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/21878
Sample Questions
Q1) An ethical dilemma occurs in a situation in which moral duties or obligations conflict.
A)True
B)False
Q2) Keeping client information confidential.
The rule on confidentiality is intended to protect the client's information. The rule, however, does not apply in certain circumstances.
A.Explain the rule on confidentiality.
B.Identify the circumstances in which the rule of confidentiality does not apply.
Q3) The Principles of the AICPA Code of Professional Conduct provide a very detailed set of rules that represent a low level of actions.
A)True
B)False
Q4) Under Common Law, liability concepts are developed through court decisions based on negligence, gross negligence, or fraud.
A)True
B)False
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Chapter 5: Professional Auditing Standards and the Audit
Opinion Formulation Process
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104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/21879
Sample Questions
Q1) The reporting standards of the ten generally accepted audit standards of the PCAOB includes consistency, disclosure, and due professional care.
A)True
B)False
Q2) Which of the following statements is correct concerning the auditor's opinion on internal control effectiveness?
A) The report describes any material weaknesses and discusses actions taken by management to remediate the problems.
B) The report does not discuss whether the control weaknesses were first identified by management or the auditor.
C) The report does not recognize the integrated nature of the audit and the affect of the material weakness on the planning of the financial statement audit.
D) The report identifies management's actions to remedy the prior year's control weaknesses.
Q3) PCAOB Assertions.
Discuss the five management financial statement assertions identified in the PCAOB Standards. Provide examples.
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Page 7
Chapter 6: A Framework for Audit Evidence
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108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/21880
Sample Questions
Q1) Audit findings represent a summary of incorrect transactions detected during the audit.
A)True
B)False
Q2) External documentation may lack reliability. Which of the following is the most probable reason for that?
A) The external party may be competent in performing duties.
B) The documentation may be properly understood by the client in the response.
C) The auditor may decide not to use the documentation and replace it with other documents.
D) The documentation may have been altered if the process is not controlled from inception.
Q3) Which one of the following would be the most reliable type of evidence?
A) Photocopies.
B) Indirectly obtained evidence.
C) Observation of assets.
D) Inquiry with the in-house attorney.
Q4) Evidence can be directly or indirectly relevant to an assertion.
A)True
B)False
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Chapter 7: Planning the Audit: Identifying and Responding to
the Risks of Material Misstatement
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92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/21881
Sample Questions
Q1) Which of the following are common brainstorming session guidelines?
A) Freedom of expression.
B) Respectful communication.
C) Suspension of criticism.
D) All of the above.
Q2) Which of the following terms best describes the risk that audit procedures will fail to detect misstatements exceeding tolerable misstatement?
A) Audit risk.
B) Control risk.
C) Detection risk.
D) Inherent risk.
Q3) To learn more about a company and its inherent risks, auditors can use which of the following resources?
A) Management inquiries.
B) Economic statistics.
C) Online searches.
D) Any of the above could be used.
Q4) Risk Responses.
When considering risk responses, what steps should the auditor take?
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Chapter 8: Specialized Audit Tools: Sampling and
Generalized Audit Software
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114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/21882
Sample Questions
Q1) Which of the following describes sampling risk?
A) The sample will not contain characteristics representative of the population such that inferences made about that population will be incorrect.
B) The population will not contain characteristics representative of the sample such that inferences made about that sample will be incorrect.
C) The auditor incorrectly applies sampling methodology.
D) The sample size will be larger than needed.
Q2) The auditor must define the population to which sampling relates if the auditor is to use statistical sampling for substantive tests of account balances.
A)True
B)False
Q3) An example of attribute testing involves obtaining evidence that the client has matched the vendor invoice details with a purchase order and receiving report before payment approval.
A)True
B)False
Q4) Sampling and non-sampling risk.
Discuss what is meant by "sampling risk" and "nonsampling risk".
10
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Chapter 9: Auditing the Revenue Cycle
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116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/21883
Sample Questions
Q1) Control over completeness for the revenue cycle. What control procedures should be implemented to ensure the completeness objective is met with respect to sales?
Q2) The significance of the bill of lading is to provide which of the following?
A) The warehouse personnel with the product that must be shipped to customers.
B) Invoices to customers for proper collection.
C) A credit application for customer approval.
D) Evidence of title transfer of goods to customers.
Q3) When the client has a large number of relatively small accounts receivable and the assessed level of control risk for receivables and related revenue transactions is high, the auditor is more likely to use negative confirmations.
A)True
B)False
Q4) Accounts receivable confirmations usually provide strong evidence about which of the following?
A) The existence of receivables.
B) The completeness of receivables.
C) The presentation and disclosure of receivables.
D) The obligations of receivables.
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Chapter 10: Auditing Cash and Marketable Securities
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101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/21884
Sample Questions
Q1) Which of the following is not a cash management technique frequently used by management?
A) Imprest funds.
B) Lockboxes.
C) Electronic funds transfers.
D) Cash management agreement with financial institutions.
E) All of the above.
Q2) Auditors test the assertion of completeness by determining if any restrictions on the use of commercial paper by an entity are disclosed in the footnotes.
A)True
B)False
Q3) Which one of the following risks is not a risk associated with cash?
A) The large volume of transactions.
B) Importance of meeting debt covenants.
C) Valuation issues are typically complex.
D) Easy to manipulate.
Q4) Bank confirmations.
There are two parts in a standard bank confirmation. Discuss the purposes and what would be requested by each component and to whom it would be sent.
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Chapter 11: Auditing Inventory, Goods and Services, and
Accounts Payable: the Acquisition and Payment Cycle
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102 Verified Questions
102 Flashcards
Source URL: https://quizplus.com/quiz/21885
Sample Questions
Q1) Which of the following would the auditor most likely do when testing the existence assertion for inventory?
A) Observe the client's count of the annual physical inventory and perform test counts.
B) Review vendor invoices for the amounts recorded.
C) Review open purchase orders at year end.
D) Trace raw material purchases to invoices and to the general ledger.
Q2) Which one of the following accounts would an auditor most likely test by performing analytical procedures?
A) Sales commissions expense.
B) Legal expenses.
C) Repairs and maintenance expense.
D) Travel expense.
Q3) Valuation is the most complex assertion related to inventory.
A)True
B)False
Q4) Supply chain management has helped many companies improve the efficiency of operations.
A)True
B)False
13
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Chapter 12: Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal
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97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/21886
Sample Questions
Q1) A common technique used to fraudulently misstate financial statements involves the understatement of long-lived assets through undervaluing existing long-lived assets.
A)True
B)False
Q2) The auditor would be most likely to request a schedule of repairs and maintenance expense to satisfy the auditor about the existence of long-lived assets.
A)True
B)False
Q3) An inherent risk associated with intangible assets such as a patent is the accounting for research and development costs
A)True
B)False
Q4) Which of the following procedures is a substantive procedure that relates to the rights and obligations assertion?
A) Assess management's impairment estimates.
B) Examine documents of title.
C) Recalculate amortization expense.
D) Inquire management about assets that are idle.
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Chapter 13: Auditing Debt Obligations and Stockholders
Equity Transactions
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120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/21887
Sample Questions
Q1) Which of the following is not true regarding preliminary analytical procedures performed by the auditor when planning the audit?
A) The primary preliminary analytical procedure for stockholders' equity accounts is a comparison of current year account balances with prior year account balances.
B) If there are unusual or unexpected relationships, the planned audit procedures would be adjusted to address the potential material misstatements.
C) The auditor should have an expectation as to the nature and magnitude of any account balance changes.
D) Auditors show focus on just the numbers when performing analytical procedures.
Q2) As a starting point for testing capital stock and equity transactions, which of the following should the auditor perform?
A) Trace the proceeds of stock sold to the cash receipts journal.
B) Review the minutes of the board of directors meetings.
C) Examine documentation maintained by the transfer agent.
D) Review a copy of the client's articles of incorporation.
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Chapter 14: Activities Required in Completing a Quality Audit
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184 Verified Questions
184 Flashcards
Source URL: https://quizplus.com/quiz/21888
Sample Questions
Q1) Auditors should have heightened skepticism regarding period-end adjusting journal entries that relate to accounts with significant estimates.
A)True
B)False
Q2) Auditors should obtain a management representation letter at the end of each audit.
A)True
B)False
Q3) A policy providing a reserve for returned products at the original sales price rather than at replacement cost violates GAAP.
A)True
B)False
Q4) Management representation letters.
Describe the purpose of the management representation letter.
Q5) A disclosure checklist is a convenient documentation format for evidence that the auditor adequately evaluated the client's disclosures.
A)True
B)False
Page 16
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Chapter 15: Audit Reports on Financial Statements
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109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/21889
Sample Questions
Q1) Types of Audit Opinions
On January 2, 2014, the Zoom Detail Shoppe received notice from its primary supplier that all wholesale prices were being increased by 10%, effective immediately. Based on this notice, Zoom revalued is December 31, 2013 inventory to reflect the higher costs. The inventory is a large proportion of the total assets. The effect of the revaluation was material to current assets, but not to total assets or net income. The increase is adequately disclosed in the footnotes.
REQUIRED: Which type of audit report would you suggest be issued this year and why?
Q2) An emphasis of a matter may result in which of the following?
A) A disclaimer of an audit opinion.
B) A qualified audit opinion.
C) An adverse opinion.
D) An unqualified audit opinion with an explanatory paragraph either before or after the opinion paragraph.
Q3) If the auditor concludes that the financial statements taken as a whole are not fairly presented, the auditor should issue an adverse opinion.
A)True
B)False
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Page 17
Chapter 16: Advanced Topics Concerning Complex Auditing Judgments
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132 Verified Questions
132 Flashcards
Source URL: https://quizplus.com/quiz/21890
Sample Questions
Q1) Assume that the external auditor decides that because of work performed by internal auditors, the audit risk has been reduced to an acceptable level. As a result of this assessment, the auditor can do which of the following?
A) The auditor must test the assertions directly and document a separate conclusion.
B) The auditor can decide that direct testing is not necessary.
C) The auditor must delegate the responsibility of expressing an opinion to the internal auditors.
D) The auditor can assume that inherent risk is zero.
Q2) A materiality level where the auditor believes that the errors below that level would not, even when aggregated with all other misstatements, be material to the financial statements is often based on whether something is considered clearly trivial.
A)True
B)False
Q3) Complex audit judgments and decisions often involve accounts that require subjective estimates by management.
A)True
B)False
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Page 18
Chapter 17: Other Services Provided by Audit Firms
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107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/21891
Sample Questions
Q1) Which of the following statements is false regarding compilation procedures?
A) The practitioner should have a general knowledge of the organization's industry, the nature of its accounting records, the accounting basis to be used (GAAP or a special purpose framework other than GAAP), and the form and content of the financial statements.
B) The practitioner is required to make inquiries or perform procedures to verify, corroborate, or review information provided by the client.
C) The practitioner is not required to obtain an understanding of internal control over financial reporting.
D) The practitioner should read the financial statements, including footnotes, to make sure that they are appropriate in form and free from obvious material misstatement.
Q2) Accruals, such as estimates of bad debt and income tax expenses, are not usually as precise on interim financial reports as they are on year-end financial reports.
A)True B)False
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