POST-TEST 1 - Auditing and the Audit Process
The auditor conducted the same audit tests and procedures as would have
been applicable if the client employees took the physical inventory.
Due Feb 7 at 11:59pm
Points 25
Questions 25
Available Feb 6 at 12:01am - Feb 7 at 11:59pm 2 days
Time Limit 60 Minutes
Instructions
Incorrect
NOTES:
This Post-test 1 consists of 25 multiple choice questions that covers auditing and the auditing process.
This is good for 60 minutes or each question is good for 2 minutes and 24 seconds to answer.
Question 2
0 / 1 pts
Which of the following statements is correct?
INSTRUCTIONS:
The independent Auditor’s Report must state that the audit was conducted
in accordance with generally accepted accounting principles.
Select the best answer among the given choices.
Attempt History
LATEST
Attempt
Time
Score
Attempt 1
57 minutes
23 out of 25
 Correct answers will be available Mar 15 at 12:01am - May 22 at 11:59pm.
An audit can provide a guarantee or absolute assurance (certainty) that the
FS are free from material misstatement due to fraud and error.
The first part of the Independent Auditor’s report is the opinion of the
auditor.
Score for this quiz: 23 out of 25
Submitted Feb 7 at 11:16pm
This attempt took 57 minutes.
Question 1
An audit is a guarantee of the exactness of accuracy of assertions in the
financial statements.
1 / 1 pts
When an outside specialist has assumed full responsibility for taking the
client’s physical inventory, reliance in the specialist’s report is acceptable
Question 3
1 / 1 pts
if
Circumstances made it impracticable or impossible for the auditor either to
do the work personally or observe the work done by the inventory firm.
Which of the following audit procedures would most likely assist an
auditor in identifying conditions and events that may indicate there could
be substantial doubt an entity’s ability to continue as a going concern?
Confirmation of bank balances.
The auditor is satisfied through application of appropriate procedures as to
the reputation and competence of the specialist.
Review of compliance with terms of debt agreements.
Reconciliation of interest expense with debt outstanding.
The auditor’s report contains a reference to the assumption of full
responsibility.
Confirmation of accounts receivables from major customers.
Question 4
1 / 1 pts
Control risk is a function of
Question 6
1 / 1 pts
The independent audit is important to readers of financial statements
because it
None among the given choices
The possibility of material misstatement and the possibility that the auditor
will not detect such misstatement.
The effectiveness of the design and operation of internal control in
achieving the entity’s objectives relevant to the preparation of financial
statements.
Involves the objective examination of and reporting on managementprepared statements.
Determines the future stewardship of the management of the company
whose financial statements are audited.
Reports on the accuracy of all information in the financial statements.
The effectiveness of audit procedures and of its application by the auditor.
Question 5
Measures and communicates financial and business data included in
financial statements.
1 / 1 pts
Question 7
1 / 1 pts
Which of the following statements best describes the auditor’s
responsibility concerning the appropriateness of the going concern
assumption in the preparation of the financial statements?
The auditor’s responsibility is to predict future events or conditions that
may cause the entity to cease to continue as a going concern.
To list the difference between two related items so as to ascertain the
nature of differences and whether they signify errors, irregularities, or
need for adjustment of accounts, is to
Analyze
Trace
The auditor’s responsibility is to make a specific assessment of the entity’s
ability to continue as a going concern.
Reconcile
Confirm
The auditor’s responsibility is to consider the appropriateness of
management’s use of the going concern assumption and consider whether
there are material uncertainties about the entity’s ability to continue as a
going concern that need to be disclosed in the financial statements.
The auditor’s responsibility is to give a guarantee in the audit report that
the entity has the ability to continue as a going concern.
Question 8
1 / 1 pts
The date of the management representation letter should coincide with
the date of the
Auditor’s report.
It is a customary courtesy that all shareholders of a company receive an
independent report on management’s stewardship in managing the affairs
of the business.
Statement of Financial Position
Latest related party transaction.
Latest interim financial information.
Question 11
Question 9
1 / 1 pts
1 / 1 pts
Which of the following statements best expresses the auditor’s
responsibility with respect to facts discovered after the date of the
auditor’s report but before the date of the financial statements are issued?
It is described as the application of relevant knowledge and experience,
within the context provided by auditing, accounting and ethical standards,
in searching decisions about the courses of action that are appropriate in
the circumstances of the audit engagement.
The audit should withdraw from the engagement.
The auditor should amend the financial statements.
Audit Risk
If the facts discovered will materially affect the financial statements, the
auditor should issue a new report which contains either a qualified opinion
or an adverse opinion.
Professional skepticism
Materiality
Professional judgement
Question 10
The auditor should consider whether the financial statements need
amendment, discuss the matter with management, and consider taking
actions appropriate in the circumstances.
1 / 1 pts
Which of the following best describes why an independent auditor is
Question 12
1 / 1 pts
asked to express an opinion on the fair presentation of financial
statements?
Which of the following statements is not correct?
I. Auditing is a systematic process because it requires professional
It is management’s responsibility to seek available independent aid in the
appraisal of the financial information shown in its financial statements.
judgement in selecting steps to be followed during the audit.
II. Gathering of audit evidence must be objectively and subjectively done
by practitioners.
III. Audit evidence must not contradict assertions.
It is difficult to prepare financial statements that fairly present a company’s
financial position, cash flows and operations without the expertise of an
independent auditor.
II only
I only
The opinion of an independent party is needed because a company may
not be objective with respect to its own financial statements.
I only and II
I, II and III
Reconcile
Trace
Question 13
1 / 1 pts
Confirm
Vouch
After determining that a related party transaction has, in fact occurred, an
auditor should
Question 16
Substantiate that the transaction was consummated on terms equivalent to
an arm’s-length transaction.
1 / 1 pts
The degree of responsibility to be assumed by the client and the auditor in
an audit engagement is normally set forth in a/an
Add a separate paragraph to the auditor’s report to explain the transaction.
Representation letter
Obtain an understanding of the business purpose of the transaction.
Engagement letter
Perform analytical procedures to verify whether similar transactions
occurred, but were not recorded.
Comfort letter
Management letter
Question 14
1 / 1 pts
Incorrect
Question 17
0 / 1 pts
The risk of material misstatement is 30% while the acceptable audit risk is
3%, what would be the detection risk?
Which of the following is correct about audit evidence?
10%
Non-cumulative in nature.
100%
serves as a basis for expressing an opinion on whether the assertions of
management are fairly stated.
0%
9%
Primarily obtained from audit procedures performed during the audit.
May be obtained from previous audit.
Question 15
1 / 1 pts
This audit procedure involves the examination of underlying evidence to
support a transaction, entry or account balance.
Question 18
1 / 1 pts
A written understanding between the auditor and the client concerning the
auditor’s responsibility for the discovery of illegal acts is usually set forth
The higher the quality of the audit evidence, the more may be required.
in a (an)
Materiality is one of the factors to consider if a certain audit evidence is
sufficient and appropriate.
Client representation letter
Management letter
Having a questioning mind regarding audit evidences gathered is an
indication that a practitioner is exercising professional skepticism.
Letter of audit inquiry
Engagement letter
Question 19
1 / 1 pts
Question 21
1 / 1 pts
Analytical procedures performed in the overall review stage of an audit
Of the following statements about internal control, which one is not valid?
suggest that several accounts have unexpected relationships. The results
of these procedures most likely indicate that
Transactions must be properly authorized before such transactions are
processed.
Additional substantive tests of details are required.
Internal control activities are not operating effectively.
The communication with the audit committee should be revised.
Because of the cost/benefit relationship, a client may apply control
procedures on a test basis.
Irregularities exist among the relevant account balances.
Control procedures reasonably insure that collusion among employees
cannot occur.
Question 22
No one person should be responsible for the custodial responsibility and
the recording responsibility for an asset.
1 / 1 pts
An auditor may decide to assess control risk at the maximum level for
certain assertions because the auditor believes
Question 20
1 / 1 pts
The entity’s control environment, accounting system, and control
procedures are interrelated.
All of the following statements are correct, except:
More emphasis on tests of controls than substantive tests is warranted.
The more extensive the evidence gathering procedures, the lower the
chances of assurance engagement risk.
Sufficient evidential matter to support the assertions is likely to be
available.
Control policies and procedures are unlikely to pertain to the assertions.
Question 23
The date that the auditor’s report and audited financial statements are
made available to third parties.
1 / 1 pts
Question 25
1 / 1 pts
Which of the following statements is correct?
For good internal control, which of the following functions should not be
the responsibility of the treasurer's department?
Detection risk can be reduced to zero.
The auditor combines his assessment of inherent risk and control risk to
assess the likelihood of material error.
Establishing credit policies.
Data processing.
Handling of cash.
Inherent risk and control risk exist independently of the audit of the
financial statements.
Custody of securities.
Some control risk will always exist because of the inherent limitation of
audit procedures.
Question 24
1 / 1 pts
Which of the following statements best describes the “date of the financial
statements?
The date on which the audit has obtained sufficient appropriate audit
evidence on which to base the opinion on the financial statements.
The date on which those with the recognized authority assert that they
have prepared the entity’s complete set of financial statements, including
the related notes, and that they have taken responsibility for them.
The date of the end of the latest period covered by the financial
statements, which is normally the date of the most recent balance sheet in
the financial statements subject to audit.
Quiz Score: 23 out of 25