Free Bachelor of Science in Accountancy: Audit Questions and Answers — Questions and Answers
Question 1: The kind of control that is intended to stop, catch, and fix important misstatements before the action takes place is called a:
- Detective Control
- Monitoring Control
- Risk Assessment
- Preventative Control (Correct answer)
Correct answer: Preventative Control
Preventive measures. A corporation implements preventative control to find problems before they happen. <br> Making the manager evaluate an adjusting journal entry created by a senior accountant before booking is an illustration of this.
Question 2: Which form of statement does the auditor tackle from the bottom up?
- Cutoff
- Completeness (Correct answer)
- Understandability and Classification
- Existence and Occurrence
Correct answer: Completeness
An auditor must start with the source document, follow each individual item through the process, and confirm that they appear in the financial statements in order to verify completeness and ensure that nothing is being falsified.
Question 3: For BDE Company, the ratio of accounts payable turnover grew from year 3 to year 4. What might be the cause of this?
- Total liabilities increased from year 3 to year 4
- The company took on a significant long term debt to purchase another company
- Accounts payable in year 4 increased from year 3
- Cost of goods sold increased from year 3 to year 4 but accounts payable remained the same. (Correct answer)
Correct answer: Cost of goods sold increased from year 3 to year 4 but accounts payable remained the same.
Cost of goods sold divided by average accounts payable equals the accounts payable turnover ratio. <br> The ratio will rise if the numerator rises.
Question 4: An Emphasis-of-Matter Paragraph should be inserted to the auditors' report when:
- There is a going concern uncertainty (Correct answer)
- There is large cash disbursements relating to investment in assets
- The company has material misstatements in the financial statements
- The company is purchasing another company
Correct answer: There is a going concern uncertainty
The auditor must include an explanation that uses the terms "serious doubt" and "going concern" where there is ambiguity about the going concern.
Question 5: True or False: Even if an auditor does not find any false statements during an audit, a serious flaw or material weakness may still exist within a corporation.
- False
- True (Correct answer)
Correct answer: True
Even if there are no false statements found during an audit, an auditor may not find any flaws or significant weaknesses in internal controls.
Question 6: A nonissuer's internal control problems should be reported as soon as possible if:
- 30 days after the report release date
- 60 days after the deficiency is discovered
- 60 days after the report release date (Correct answer)
- 30 days after the deficiency is discovered
Correct answer: 60 days after the report release date
A nonissuer's timely basis is taken into account 60 days after the report release date.
Question 7: According to the PCAOB standard, issuer auditors must do the
- Internal Audit
- Integrated Audit (Correct answer)
- Review
- Financial Statement Audit only
Correct answer: Integrated Audit
The auditor must conduct an integrated audit on behalf of the issuer, which entails examining both the financial statements and the management's evaluation of the efficiency of internal controls over financial reporting.
Free Bachelor of Science in Accountancy: Audit Questions and Answers
The kind of control that is intended to stop, catch, and fix important misstatements before the action takes place is called a: