Which of the following would not likely be found in the minutes of the board of directors?

A.  Amount of dividends declared

B.  Approval to pledge assets as security for debts

C.  Authorization of officers' salaries.

D.  Approval of a new desktop computer for the controller

The type of financial analysis that expresses balance sheet accounts as percentages of total assets is known as: 

A. Horizontal analysis

B.  Vertical analysis

C.  Net worth analysis

D.  Expenditure analysis

Which of the following is an acceptable response to fraud risks related to sales that were identified in an audit?

A.  Exercise professional skepticism when performing sales testing

B.  Increase the assessment of control risk for sales

C.  Increase the assessment of detection risk for sales

D.  Perform additional substantive sales procedures on a surprise basis

The purpose of an audit strategy is 

A. To provide a defense against litigation

B.  To gain an understanding of the client

C.  To comply with securities law

D.  To set the scope, timing, and direction for auditing each relevant assertion. 

What assurance does the auditor provide that errors, frauds, and direct effect noncompliance that are material to the financial statements will be detected?

A.  Errors: limited; frauds; negative; direct effect noncompliance: limited.

B.  Errors: limited; frauds: limited; direct effect noncompliance: reasonable.

C.  Errors: reasonable; frauds: limited; direct effect noncompliance: limited.

D.  Errors: reasonable; frauds: reasonable; direct effect noncompliance: reasonable.

Auditing Standards do not require auditors of financial statements to

A.  Understand the nature of errors and frauds

B.  Assess the risk of occurrence of errors and frauds

C.  Design audits to provide reasonable assurance of detecting errors and frauds

D.  Report all errors and frauds found to police authorities

It is acceptable under generally accepted auditing standards for an audit team to

A.  Assess risk of material misstatement at high and achieve an acceptably low audit risk by performing extensive detection work.

B.  Assess control risk at zero and perform a minimum of dtection work.

C.  Assess inherent risk at zero and perform a minimum of detection work.

D.  Decide that audit risk can be 40 percent.

When auditors become aware of noncompliance with a law or regulation committed by client personnel, the primary reason that the auditors should obtain a better understanding of the  nature of the act is to

A. Recommend remedial actions to the audit committee.

B.  Evaluate the effect of the noncompliance on the financial statements.

C.  Determination whether to contact law enforcement officials.

D.  Determined whether other similar acts could have occurred.

Analytical procedures can be used in which of the following ways?

A. As a means of overall review at the end of an audit.

B.  As "attention-directing" methods when planning an audit at the beginning.

C. As substantive audit procedures to obtain evidence during an audit.

D.  All of the above.

The appropriate separation of duties does not include

A.  Having authorization to execute transactions.

B.  Recording transactions.

C.  Having custody of assets involved in the transactions.

D.  Preparing data.

Regardless of the assessed level of control risk, an auditor of a nonpublic company would perform some

A.  Tests of controls to determine the effectiveness of internal control policies.

B.  Analytical procedures to varidy the design of internal control activities.

C.  Substantive tests to restrict detection risk for significant transaction classes.

D.  Dual-purpose tests to evaluate both the risk of monetary misstatement and preliminary control risk.

Which of the following is not an input control activity?

A.  Reasonableness tests.

B.  Record counts.

C.  Financial totals.

D.  Hash totals. 

Which of the following audit procedures most likely would provide an auditor the most assurance about the effectiveness of the operation of an entity's internal control?

A.  Confrimation with outside parties.

B.  Inquiry of client personnel.

C.  Successful reperformance of the control activity.

D.  Observation of client personnel.

When the audit team increases the planned assessed level of control risk because certain control activities were determined to be ineffective, the audit team would most likely increase the 

A.  Extent of substantive tests of details.

B.  Level of inherent risk.

C.  Extent of tests of controls.

D.  Level of detection risk.

Which of the following most likely would not be considered an inherent limitation of the potential effectiveness of an entity's internal controls?

A. Incompatible duties.

B. Managment override.

C. Mistakes in judgement.

D. Collusion among employees.

In an audit of financial statements of a nonpublic company in accordance with generally accepted auditing standards, an auditor is required to

A. Document his or her understanding of the entity's internal control.

B. Search for significant deficiencies in the operation of internal controls.

C. Perform tests of controls to evaluate the effectiveness of the entity's accounting system.

D. Determine whether control activities are operating effectively to prevent or detect material misstatements. 

Which of the following areas can external auditors rely on internal auditors' work in auditing internal controls?

A. Evaluating of the auditing environment.

B. Testing of low-risk internal control activities.

C. All testing of the operating effectiveness of internal control activities.

D. Providing the principal evidence for the external auditors' opinion.

Tests of controls in a GAAS audit are required for 

A. Obtaining evidence about the financial statement assertions. 

B. Accomplishing control over the occurrence of recorded trasactions.

C. Applying analytical procedures to financial statement balances.

D. Obtaining evidence about the operating effectiveness of client control activities.

Which report would not be appropriate for a public accounting firm to provide on financial reporting controls?

A. Unqualified- no material weakness found.

B. Disclaimer of opinion- unable to perform all neccessary procedures.

C. Disclaimer of opinion- significant deficiencies exist.

D. Adverse- material weakness exist.

The auditors' information source for vouching the bank reconciliation items is the 

A. Standard bank confirmation.

B. Bank statement at audit date.

C. Cutoff bank statement.

D. Accounting journal at year end.