Auditing Chapter 5 – Flashcards
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Which of the following is NOT a financial statement assertion made by management?
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Effectiveness of internal control
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Which of the following business characteristics is NOT indicative of high inherent risk?
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A large amount of assets
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As part of their audit, auditors obtain a representation letter from their client. Which of the following is not a valid purpose of such a letter?
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To increase the efficiency of the audit by eliminating the need for other audit procedures
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Which of the following statements best describes why auditors investigate related party transactions?
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The substance of related party transaction may differ from their form
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Of the following, which is the least reliable type of audit evidence?
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Copies of sales invoices inspected by the auditors
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Analytical procedures are most likely to detect:
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Unusual transactions
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Which of the following is NOT a primary approach to auditing an accounting estimate?
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Confirm the amounts
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A primary purpose of the audit working papers is to:
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Support the auditor's opinion
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In what section of the audit working papers would a long-term lease agreement be filed?
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Permanent working paper file
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Which of the following is NOT a function of audit working papers?
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Assist management in illustrating that the financial statements are in accordance with generally accepted accounting principles
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In using the work of a specialist, the auditors referred to the specialist's findings in their report. This would be an appropriate reporting practice if the:
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Auditors, as a result of the specialist's findings, give a qualified opinion on the financial statements
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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 the matter. The working papers would probably:
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Document the assistant auditor's position and how the difference of opinion was resolved
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Performing analytical procedure may help an auditor to:
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Achieve audit objectives related to a particular assertion
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Analytical procedures performed near the end of the audit to assist the auditor in forming an overall conclusion on the financial statements are aimed primarily at:
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Considering unusual or unexpected account balances that were not previously identified.
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What type of analytical procedure would an auditor most likely use in developing relationships among balance sheet accounts?
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Ratio analysis
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The cost of analytical procedures in terms of time needed to perform, when compared to other tests, is ordinarily considered:
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Low
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In developing an expectation for analytical procedures, the auditors are least likely to consider:
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Anticipated costs of audit completion
