Auditing MCQs

Page No. 6

Of the following, which is the least persuasive type of audit evidence?


aBank statements obtained from the client

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bDocuments obtained by auditor from third parties directly.

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cCarbon copies of sales invoices inspected by the auditor

✓


dComputations made by the auditor

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What is the primary objective of analytical procedures used in the overall review stage of an audit?


aTo help to corroborate the conclusions drawn from individual components of financial statements

✓


bTo reduce specific detection risk

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cTo direct attention to potential risk areas

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dTo satisfy doubts when questions arise about a client’s ability to continue

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When applying analytical procedures, an auditor could develop independent estimate of an account balance to compare it to­___________?


aclient’s unedited account balance

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bclient’s unedited account balance adjusted for trends in the industry

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cPrior year audited balance

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dPrior year audited balance adjusted for trends in the industry

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Which of the following is not an analytical procedure?


aTracing of purchases recurred in the purchase book to purchase invoices.

✓


bComparing aggregate wages paid to number of employees

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cComparing the actual costs with standard costs

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dAll of them are analytical procedure

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What are analytical procedures?


aSubstantive tests designed to assess control risk

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b Substantive tests designed to evaluate the validity of management’s representation letter

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cSubstantive tests designed to study relationships between financial and non­financial

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dAll of the above

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The basic assumption underlying the use of analytical procedures is:____________?


a It helps the auditor to study relationship among elements of financial information

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bRelationship among data exist and continue in the absence of known condition to the contrary

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cAnalytical procedures will not be able to detect unusual relationships

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d None of the above.

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Which of the following statements is most closely associated with analytical procedure applied at substantive stage?


aIt helps to study relationship among balance sheet accounts

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bIt helps to discover material misstatements in the financial statements

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cIt helps to identify possible oversights

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dIt helps to accumulate evidence supporting the validity of a specific account balance

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Analytical procedures issued in the planning stage of an audit, generally?


ahelps to determine the nature, timing and extent of other audit procedures

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bdirects attention to potential risk areas

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cindicates important aspects of business

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dAll of the above

✓


View Answer All of the above

In determining the level of materiality for an audit, what should not be considered?


aPrior year’s errors

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bThe auditor’s remuneration

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cAdjusted interim financial statements

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dPrior year’s financial statements

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When issuing unqualified opinion, the auditor who evaluates the audit findings should be satisfied that the_____________?


a Amount of known misstatement is documented in working papers

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bEstimates of the total likely misstatement is less than materiality level

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cEstimate of the total likely misstatement is more than materially level

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dEstimates of the total likely misstatement cannot be made

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