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Question(s) / Instruction(s):


1) The highest cost audit will be incurred when the auditor expected that the internal control system


A) Have few effective controls, but client’s personnel were well-trained and knowledgeable.

B) have few effective controls, and tests of balances found many errors.

C) be very sophisticated, and the tests of controls confirmed this.

D) be effective, but the auditor found extensive control test deviations and significant errors

during tests of transactions.


2) For efficiency, tests of controls are frequently done at the same time as:

A) analytical procedures.

B) substantive tests of balances.

C) substantive tests of transactions.

D) compliance tests.


3) The reliance placed on substantive tests in relation to the reliance placed on internal control varies

in a relationship that is ordinarily:

A) direct.

B) parallel.

C) inverse.

 D) equal.


4) In the context of an audit of financial statements, substantive tests are audit procedures that:

A) will increase proportionately with the auditor’s reliance on internal control.

B) are designed to discover significant subsequent events.

C) may be either tests of transactions, direct tests of financial balances or analytical tests.

D) may be eliminated under certain conditions.


5) Phase IV of the audit primarily relies on which type/s of audit evidence?

A) Inquiries of client

B) Documentation

C) Analytical procedures

 D) All of the above.


6) With respect to the auditors planning of a year-end examination, which one of the following

statements are always true?

A) An inventory count must be observed at the balance sheet date.

B) It is an acceptable practice to carry out substantial parts of the examination at interim dates.

C) The clients audit committee should not be told of the specific audit procedures that will be


D) An engagement should not be accepted after the financial year ends.


7) Extended performance of tests of controls is most likely when:

A) controls are ineffective and assessed control risk is high.

B) it is a first-year audit.

C) controls are effective and assessed control risk is low.

D) the auditor is doing a fraud audit


8) Which of the following is/are a type/s of evidence collected during substantive tests of


A) Reperformance.

B) Documentation.

C) Inquiries of the client.

D) All of the above.


9) Where a significant amount of evidence is in electronic form:

A) audit risk decreases.

B) acceptable assurance usually increases.

C) it may not be possible to reduce detection risk to an acceptable level by performing only

substantive tests.

D) it is usually impractical to evaluate controls.


10) The timing of phase II audit procedures is typically:

A) Before the balance sheet date.

B) At the end of fieldwork.

C) On or after the balance sheet date.

D) Any time.

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