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| 1 | |
Which of the following is generally NOT considered one of the five business processes or cycles? |
| | A) | Information technology. |
| | B) | Revenue [or sales]. |
| | C) | Financing. |
| | D) | Inventory management. |
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| 2 | |
Which of the following is NOT a typical responsibility for an associate/staff level auditor? |
| | A) | Assisting in the development of the audit plan. |
| | B) | Performing the audit procedures assigned to them. |
| | C) | Preparing adequate and appropriate documentation of completed work. |
| | D) | Informing the senior about any auditing or accounting problems encountered. |
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| 3 | |
The principles underlying an audit conducted in accordance with the ISAs include all of the following except |
| | A) | The auditor should maintain professional skepticism and exercise professional judgement throughout the planning and performance of the audit. |
| | B) | The auditor should obtain sufficient appropriate audit evidence about whether material misstatements exist in the financial statements. |
| | C) | The auditor should plan and conduct the audit to obtain assurance that the financial statements are free of any misstatement. |
| | D) | The auditor should have appropriate competence and capability to perform the audit. |
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| 4 | |
The responsibility for implementing sound accounting practices and principles, maintaining an adequate internal control structure, and making fair representations in the financial statements rests primarily with the |
| | A) | Senior management. |
| | B) | External auditors. |
| | C) | Internal audit department. |
| | D) | Shareholders. |
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| 5 | |
Which of the following is considered an example of a compliance audit? |
| | A) | The examination a company’s claims that its product is superior to that of a competitor on specific dimensions. |
| | B) | The examination of a school district networked computer system. |
| | C) | The examination of a company’s adherence to government-mandated safety provisions. |
| | D) | The examination of a company’s financial statements. |
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| 6 | |
Which of the following best describes the relationship between management and the board of directors? |
| | A) | Management reports to the board of directors. |
| | B) | The board of directors reports to management. |
| | C) | Neither group is accountable to the other. |
| | D) | Both groups report directly to the shareholders. |
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| 7 | |
Which of the following best describes 'mid-tier' audit firms? |
| | A) | Audit firms where about 80% of their clients are publicly traded companies. |
| | B) | International network firms. |
| | C) | Generally regional in their practices. |
| | D) | Generally local in their practices (such as large metropolitan areas). |
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| 8 | |
Which of the following organizations affect the environment that external auditors work in? |
| | A) | The International Accounting Standards Board (IASB). |
| | B) | The International Ethics Standards Board for Accountants (IESBA). |
| | C) | The International Auditing and Assurance Standards Board (IAASB). |
| | D) | All of the above. |
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| 9 | |
Which of the following primarily shapes the context in which auditing takes place? |
| | A) | The International Auditing and Assurance Board (IAASB). |
| | B) | International Accounting Standards Board (IASB). |
| | C) | The entity’s business environment. |
| | D) | Legislation passed by Parliament (or similar legislative body). |
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| 10 | |
Operational auditing is oriented primarily toward |
| | A) | Future improvements to accomplish the goals of management. |
| | B) | The accuracy of data reflected in management’s financial records. |
| | C) | Verification that an entity’s financial statements are fairly presented. |
| | D) | Past protection provided by existing internal control. |
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| 11 | |
Which of the following statements best describes management’s and the external auditor’s respective levels of responsibility for a company’s financial statements? |
| | A) | Management and the external auditor share equal responsibility for the fairness of the entity’s financial statements in accordance with the applicable financial reporting framework. |
| | B) | Neither management nor the external auditor has significant responsibility for the fairness of the entity’s financial statements in accordance with the applicable financial reporting framework. |
| | C) | Management has the primary responsibility to ensure that the company’s financial statements are prepared in accordance with the applicable financial reporting framework, and the auditor provides reasonable assurance that the statements are free of material misstatement. |
| | D) | Management has the primary responsibility to ensure that the company’s financial statements are prepared in accordance with the applicable financial reporting framework, and the auditor provides a guarantee that the statements are free of material misstatement. |
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| 12 | |
Which of the following best describes the relationship between business objectives, strategies, processes, controls, and transactions? |
| | A) | To achieve its objectives, a business formulates strategies and implements processes, which are carried out through business transactions. The entity’s information and internal control systems must be designed to ensure that the transactions are properly executed, captured, and processed. |
| | B) | To achieve its strategies, a business formulates objectives and implements processes, which are carried out through the entity’s information and internal control systems. Transactions are conducted to ensure that the processes are properly executed, captured, and processed. |
| | C) | To achieve its objectives, a business formulates strategies to implement its transactions, which are carried out through business processes. The entity’s information and internal control systems must be designed to ensure that the processes are properly executed, captured, and processed. |
| | D) | To achieve its business processes, a business formulates objectives, which are carried out through the entity’s strategies. The entity’s information and internal control systems must be designed to ensure that the entity’s strategies are properly executed, captured, and processed. |
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