CAT Auditing Principles & Procedures 3

Question 1

Which sampling method gives every item in the population an equal chance of being selected and is considered the most theoretically sound?

Accepted Answer

Simple random sampling

Answer

Simple random sampling ensures each item has an equal probability of selection, making it the most statistically rigorous approach and free from auditor bias.

Question 2

The 'lower assessed level of control risk' approach means the auditor:

Accepted Answer

Performs fewer substantive procedures because controls are deemed effective

Answer

When control risk is assessed lower (i.e., controls are considered effective), the auditor can reduce the extent of substantive procedures, relying more heavily on the controls.

Question 3

Which assertion is directly addressed when an auditor verifies that all recorded sales transactions actually occurred?

Accepted Answer

Occurrence

Answer

The occurrence assertion relates to whether recorded transactions and events actually took place and pertain to the entity.

Question 4

An auditor uses analytical procedures during the planning phase primarily to:

Accepted Answer

Identify unusual fluctuations that may indicate risk areas

Answer

During planning, analytical procedures help the auditor understand the entity and identify areas of potential misstatement risk that should receive more audit attention.

Question 5

What is the primary purpose of an engagement letter in an audit?

Accepted Answer

To document the terms and responsibilities of the audit engagement

Answer

The engagement letter establishes the agreed terms between the auditor and client, including the scope, objectives, responsibilities, and fees, reducing the risk of misunderstandings.

(CAT) Certified Accounting Technician Practice Test

(CAT) Certified Accounting Technician Practice Test

CAT Auditing Principles & Procedures 3