Auditing and Internal Control

Which of the following should the auditors normally interview as part of their assessment of fraud risk?

• Senior management

• Audit committee

• Various employees whose duties do not include normal financial reporting responsibilities

• All of the given choices

An audit plan is a

• detailed plan of analytical procedures and all substantive tests to be performed in the course of the audit.

• document that provides an overview of the company and a general plan for the audit work to be accomplished, timing of the work, and other matters of concern to the audit.

• generic document that auditing firms have developed to lead the process of the audit through a systematic and logical process.

• budget of the time that should be necessary to complete each phase of the audit procedures.

Philippine Standards on Auditing require auditors to assess the risk of material misstatements due to fraud

• for every adult

• for first time adults

• sufficient to find any frauds which may exist.

• whenever it would be appropriate.

Which of the following is most likely to be an overall response to fraud risks identified in an audit?

• Supervise members of the audit team less closely and rely more upon judgment.

• Use less predictable audit procedures.

• Use only certified public accountants on the engagement.

• Place increased emphasis on the audit of objective transactions rather than subjective transactions.

When must an auditor perform analytical review procedures in a financial statement audit?

• Testing controls over financial cycles

• Performing tests to substantiate balances

• Planning the nature, timing and extent of procedures

• Performing tests to substantiate transactions

Which of the following represents a procedure that the auditor may use because plausible relationships among financial statement balances are expected to exist?

• Attributes testing

• Enterprise risk assessment

• Inherent tests of control

• Analytical review

Which statement is correct regarding business risks?

• The risk of material misstatements in the financial statements is broader than business risk, though it includes the latter.

• The auditor should identify or assess all business risks.

• All business risks give rise to risks of material misstatement.

• A business risk may have an immediate consequence for the risk of misstatement for classes of transactions, account balances, and disclosures at the assertion level or the financial statements as a whole.

Which of the following is least likely considered a financial statement audit risk factor?

• Management operating and financing decisions are dominated by top management.

• A new client with no prior audit history.

• Rate of change in the entity's industry is rapid.

• Profitability of the entity relative to its industry is inconsistent.

As part of audit planning, CPAs should design audit programs fo individual audit and should include audit steps and procedures to

• detect and eliminate fraud.

• increase the amount of management information available.

• provide assurance that the objectives of audit are met

• ensure that only material items are audited

Which of the following is not considered a valid source of information about the client's processes?

• Confirmation from third-parties

• Review of the client's budget

• A tour of the client's plant facility

• Management inquiry