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medium     The Auditing Standards Board has concluded that analytical procedures are so important that they are required during
     a.     planning and testing phases.
     b.     planning and completion phases.
     c.     testing and completion phases.
     d.     planning, testing, and completion phases.
42.     Which of the following statements regarding analytical procedures is not correct?
     a.     The definition of analytical tests places the emphasis on the comparison of client’s recorded data to GAAP.
     b.     Analytical procedures are required on all audits.
     c.     Analytical procedures are required on all review service engagements.
     d.     For certain accounts with small balances, analytical procedures alone may be sufficient evidence.
43.     A benefit obtained from comparing client’s data with industry averages is that it provides
medium     a.     an indication of the likelihood of financial failure.
     b.     an indication where errors exist in the statements.
     c.     a benchmark to be used in evaluating client’s budgets.
     d.     a comparison of “what is” with “what should be.”
     The primary purpose of performing analytical procedures in the testing phase of an audit is to
a.     help the auditor obtain an understanding of the client’s industry and business.
b.     assess the going concern assumption.
c.     indicate possible misstatements (attention directing).
d.     reduce tests of details of balances.

45.     Which of the following is not a correct combination of terms and related type of audit evidence?
medium     a.     Foot – reperformance.
     b.     Compare – documentation.
     c.     Vouch – documentation.
     d.     Trace – analytical procedures.
46.     Which of the following is not a correct combination of terms and related type of audit evidence?
medium     a.     Inquire – inquiries of client.
     b.     Count – physical examination.
     c.     Recompute – documentation.
     d.     Read – documentation.
47.     Which of the following is not one of the major types of analytical procedures?
medium     a.     Compare client with industry averages.
     b.     Compare client with prior year.
     c.     Compare client with budget.
     d.     Compare client with SEC averages.
48.     What is the overall objective of audit documentation?
medium     a.     Defend against claims of a deficient audit.
     b.     Provide a basis for reviewing the work of subordinates.
     c.     Provide reasonable assurance that the audit was conducted in accordance with GAAS.
     d.     None of the above.
49.     An important benefit of industry comparisons is as
medium     a.     an aid to understanding the client’s business.
     b.     an indicator of errors.
     c.     an indicator of fraud.
     d.     a least-cost indicator for audit procedures.
50.     The permanent files included in the audit documentation includes all, but which of the following
medium     a.     A copy of the current and prior years’ audit programs.
     b.     Copies of articles of incorporation, bylaws and contracts.
     c.     Information related to the understanding of internal control.
     d.     Results of analytical procedures from prior years.
medium     Negative confirmations of accounts receivable are less effective than positive confirmations of accounts receivable because when using negative confirmations,
     a.     they do not produce evidential matter that is statistically quantifiable.
     b.     the auditor cannot infer that all nonrespondents have verified their account information.
     c.     some recipients may report incorrect balances that require extensive follow-up.
     d.     a majority of recipients usually lack the willingness to respond objectively.
52.     An auditor would be least likely to use confirmations in connection with the examination of
medium     a.     inventories.
     b.     long-term debt.
     c.     property, plant, and equipment.
     d.     stockholders’ equity.
53.     Those procedures specifically outlined in an audit program are primarily designed to
medium     a.     prevent litigation.
     b.     detect errors or irregularities.
     c.     test internal systems.
     d.     gather evidence.
54.     Evidence is generally considered competent when
medium     a.     it has been obtained by random selection.
     b.     there is enough of it to afford a reasonable basis for an opinion on financial statements.
     c.     it has the qualities of being relevant, objective, and free from known bias.
     d.     it consists of written statements made by managers of the enterprise under audit.
challenging     In determining the quantity and quality of evidence to gather, the auditor will be satisfied when the evidence is
     a.     irrefutable.
     b.     conclusive.
     c.     persuasive.
     d.     completely convincing.
challenging     The auditor is concerned that a client is failing to bill customers for shipments. An audit procedure that would gather relevant evidence would be to
     a.     select a sample of duplicate sales invoices and trace each to related shipping documents.
     b.     trace a sample of shipping documents to related duplicate sales invoices.
     c.     trace a sample of Sales Journal entries to the Accounts Receivable subsidiary ledger.
     d.     compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable account in the general ledger.
57.     Which of the following statements about the competence of evidence is not correct?
challenging     a.     Competence can be improved by selecting a larger sample size.
     b.     Competence deals only with the audit procedures selected.
     c.     Competence can be improved by selecting audit procedures that contain a higher quality of the characteristics sought.
     d.     Competence cannot be improved by selecting different population items to include in the sample size.
challenging     Audit documentation should possess certain characteristics. Which of the following is not one the characteristics discussed in the text?
     a.     Audit files should be properly identified.
     b.     Audit documentation should be indexed and cross-referenced.
     c.     Audit documentation should clearly indicate the audit work performed.
     d.     All of the above are essential characteristics.
59.     Which of the following statements is an incorrect use of the terminology?
     a.     Evidence obtained from an independent source outside the client organization is more reliable than that obtained from within.
     b.     Documentary evidence is more reliable when it is received by the auditor directly from an independent third party.
     c.     Documents that originate outside the company are considered more reliable than those that originate within the client’s organization.
     d.     External evidence, such as communications from banks, is generally regarded as more reliable than answers obtained from inquiries of the client.
60.     Evidence is usually more persuasive for balance sheet accounts when it is obtained
challenging     a.     as close to the balance sheet date as possible.
     b.     only from transactions occurring on the balance sheet date.
     c.     from various times throughout the client’s year.
     d.     from the time period when transactions in that account were most numerous during the fiscal period.

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