Submitted by: Submitted by cachidoo
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Pages: 22
Category: Business and Industry
Date Submitted: 02/24/2014 08:09 PM
AUDITING THEORY
1. As an auditor which of the following would be classified as an error? a. Intentional omission of the recording of a transaction to benefit a third party. b. Misappropriation of assets for the benefit of management. c. Misinterpretation by management of the facts that existed when the financial statements were
prepared.
d. Preparation of records by employee to cover a fraudulent transactions. 2. Which of the following circumstances least likely indicate the possibility of fraud or error?
a. b. c. d.
Unrealistic time deadlines for audit completion imposed by management. Limitation in audit scope imposed by management. Conservative application of accounting principles. Significant difficult-to-audit figures in the accounts.
3. Which of management’s concerns with respect to implementing internal controls is the auditor primarily
concerned? a. Efficiency of operations. b. Reliability of financial reporting. c. Effectiveness of operations. d. Compliance with applicable laws and regulations
4. Which of the following statements is not correct? a. The principal purpose in conducting a study and evaluation of the existing internal control system is for
the independent auditor to maintain a state of independence in mental attitude in all matters related to the audit. b. Working papers can be destroyed after corporate and statutory retention requirements are met. c. The audit program contains the list of specific tasks to be performed and estimated time required. d. An audit program would not contain the documentation of system being reviewed.
5. Which of the following conditions or events most likely would cause an auditor to have substantial doubt
about an entity’s ability to continue as a going concern? a. Cash flows from operating activities are negative. b. Research and development projects are postponed. c. Significant related party transactions are pervasive. d. Stock dividends replace annual cash dividends.
6. Competence as an independent...