AICPA CPA-Auditing Quiz 2 Topic 2 Questions 6-10

Question: 1

Which of the following types of audit evidence generally is the most reliable?

AInquiries made of management.

BConfirmation of account information.

CAnalytical procedures.

DReview of prior-year audit procedures.

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Question: 2

Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?

AObtaining a written representation letter from the client's management.

BExamining documents to detect illegal acts having a material effect on the financial statements.

CConsidering whether the client's accounting estimates are reasonable in the circumstances.

DDetermining the extent of involvement of the client's internal auditors.
Explanation
Choice 'd' is correct. The auditor considers several factors in planning the nature, timing and extent of auditing procedures. One of these factors is the extent of involvement of the client's internal auditors.
Choice 'a' is incorrect. Representation letters are obtained by the auditor at the end of the audit. The representation letter should not be dated earlier than the date of the auditor's report.
Choice 'b' is incorrect. The auditor does not perform tests to detect illegal acts during the planning process.
Choice 'c' is incorrect. The auditor does obtain and evaluate evidence to support significant accounting estimates, but this occurs subsequent to initial planning.

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Question: 3

An accountant's compilation report on a financial forecast should include a statement that:

AThe forecast should be read only in conjunction with the audited historical financial statements.

BThe accountant expresses only limited assurance on the forecasted statements and their assumptions.

CThere will usually be differences between the forecasted and actual results.

DThe hypothetical assumptions used in the forecast are reasonable in the circumstances.

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Question: 4

Which of the following types of audit evidence generally is the most reliable?

AInquiries made of management.

BConfirmation of account information.

CAnalytical procedures.

DReview of prior-year audit procedures.

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Question: 5

The accounts receivable turnover ratio increased significantly over a two-year period. This trend could indicate that:

AThe accounts receivable aging has deteriorated.

BThe company has eliminated its discount policy.

CThe company is more aggressively collecting customer accounts.

DCustomer sales have substantially decreased.

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AICPA CPA-Auditing Quiz:2 Topic:2 Questions:6-10