SOLVED

Learning Objective 13-1 1) Shown below (1 through 5) are the five types of tests which auditors use to determine whether financial statements are fairly stated. Which three are substantive tests? 1.risk assessment procedures 2.tests of controls 3.tests of transactions 4.analytical procedures 5. tests of details of balances A) 1, 2, and 3. B) 3, 4, and 5. C) 2, 3, and 5. D) 2, 3, and 4. 2) Collectively, procedures performed to obtain an understanding of the entity and its environment, including internal controls, represent the auditor’s: A) audit strategy. B) tests of controls. C) risk assessment procedures. D) tests of transactions. 3) Which of the following would not be considered further audit procedures? A) tests of controls B) substantive analytical procedures C) tests of details of balances D) risk assessment procedures 4) Which of the following procedures would most likely be performed in response to the auditor’s assessment of the risk of monetary misstatements in the financial statements? A) Ratio analysis B) Tests of controls C) Tests of details of balances D) Risk assessment procedures 5) Which of the following further audit procedures are used to determine whether all six transaction related audit objectives have been achieved for each class of transactions? A) tests of controls B) risk assessment procedures C) substantive tests D) preliminary analytical procedures 6) You are auditing Rodgers and Company. After performing substantive analytical procedures you conclude that, for the accounts tested, the client’s balance appears reasonable. This may indicate that: A) details test of balances can be eliminated for those accounts. B) certain test of balances procedures may be eliminated for those accounts. C) control tests may be eliminated for those accounts. D) control tests may be reduced for those accounts. 7) The purpose of tests of controls is to provide reasonable assurance that the: A) accounting treatment of transactions and balances is valid and proper. B) internal control procedures are functioning as intended. C) entity has complied with GAAP disclosure requirements. D) entity has complied with requirements of quality control. 8) In the context of an audit of financial statements, substantive tests are audit procedures that: A) may be eliminated under certain conditions. B) are designed to discover significant subsequent events. C) are designed to test for dollar misstatements. D) will increase proportionately with the auditor’s reliance on internal control. 9) Which of the following is true? A) tests of details of balances focus on the ending balances for accounts in the client’s ending trial balance B) tests of details of balances focus on the transactions during the period C) tests of details of balances focus on the auditor’s understanding of internal controls D) tests of details of balances focus on comparisons of recorded amounts to expectations developed by the auditor 10) A system walkthrough is primarily used to: A) test balances. B) test details of transactions. C) gain an understanding of internal controls. D) determine acceptance of the client. 1