AUDIT

Pre-Assessment
Mock Board Training Program 2024-2025

1. Which of the following is most likely to be unique to the audit work of CPAs as compared to
work performed by practitioners of other professions?
a. Due professional care.
b. Competence.
c. Independence.
d. Complex body of knowledge.
2. Which of the following is a “self-review” threat to member independence?
a. An engagement team member has a spouse that serves as CFO of the attest client.
b. A second partner review is required on all attest engagements.
c. An engagement team member prepares invoices for the attest client.
d. An engagement team member has a direct financial interest in the attest client.
3. To exercise due professional care an auditor should
a. Critically review the judgment exercised by those assisting in the audit.
b. Examine all available corroborating evidence supporting managements assertions.
c. Design the audit to detect all instances of illegal acts.
d. Attain the proper balance of professional experience and formal education.
4. The nature and extent of a CPA firm’s quality control policies and procedures depend on
The CPA firm’s size The nature of the CPA firm’s practice Cost-benefit
considerations
a. Yes Yes Yes
b. Yes Yes No
c. Yes No Yes
d. No Yes Yes
5. Which of the following is not an element of quality control?
a. Acceptance and continuance of client relationships and specific engagements.
b. Human resources.
c. Internal control.
d. Monitoring.
6. One of a CPA firm’s basic objectives is to provide professional services that conform with
professional standards. Reasonable assurance of achieving this basic objective is provided
through
a. A system of quality control.
b. A system of peer review.
c. Continuing professional education.
d. Compliance with generally accepted accounting principles.
7. Which of the following is not a financial statement assertion relating to account balances?
a. Completeness.
b. Existence.
c. Rights and obligations.
d. Valuation and competence
8. As the acceptable level of detection risk decreases, an auditor may
a. Reduce substantive testing by relying on the assessments of inherent risk and control
risk.
b. Postpone the planned timing of substantive tests from interim dates to the year-end.
c. Eliminate the assessed level of inherent risk from consideration as a planning factor.
d. Lower the assessed level of control risk from the maximum level to below the
maximum.
9. As the acceptable level of detection risk decreases, the assurance directly provided from
a. Substantive tests should increase.
b. Substantive tests should decrease.
c. Tests of controls should increase.
d. Tests of controls should decrease.
10.Which of the following would an auditor most likely use in determining the auditor’s
preliminary judgment about materiality?
a. The anticipated sample size of the planned substantive tests.
b. The entity’s annualized interim financial statements.
c. The results of the internal control questionnaire.
d. The contents of the management representation letter.
11.Which of the following is an example of fraudulent financial reporting?
a. Company management changes inventory count tags and overstates ending inventory,
while understating cost of goods sold.
b. The treasurer diverts customer payments to his personal due, concealing his actions by
debiting an expense account, thus overstating expenses.
c. An employee steals inventory and the “shrinkage” is recorded in cost of goods sold.
d. An employee steals small tools from the company and neglects to return them; the cost
is reported as a miscellaneous operating expense.
12.Which of the following characteristics most likely would heighten an auditor’s concern
about the risk of intentional manipulation of financial statements?
a. Turnover of senior accounting personnel is low.
b. Insiders recently purchased additional shares of the entity’s stock.
c. Management places substantial emphasis on meeting earnings projections.
d. The rate of change in the entity’s industry is slow
13.Which of the following most accurately summarizes what is meant by the term “material
misstatement?”
a. Fraud and direct-effect illegal acts.
b. Fraud involving senior management and material fraud.
c. Material error, material fraud, and certain illegal acts.
d. Material error and material illegal acts.
14.Which of the following would be least likely to be considered an audit planning procedure?
a. Use an engagement letter.
b. Develop the overall audit strategy.
c. Perform risk assessment.
d. Develop the audit plan.
15.An auditor who discovers that client employees have committed an illegal act that has a
material effect on the client’s financial statements most likely would withdraw from the
engagement if
a. The illegal act is a violation of generally accepted accounting principles.
b. The client does not take the remedial action that the auditor considers necessary.
c. The illegal act was committed during a prior year that was not audited.
d. The auditor has already assessed control risk at the maximum level.
16.The auditor should document the understanding established with a client through a(n)
a. Oral communication with the client.
b. Written communication with the client.
c. Written or oral communication with the client.
d. Completely detailed audit plan.
17.In designing written audit plans, an auditor should establish specific audit objectives that
relate primarily to the
a. Timing of audit procedures.
b. Cost-benefit of gathering evidence.
c. Selected audit techniques.
d. Financial statement assertions.
18.An auditor obtains knowledge about a new client’s business and its industry to
a. Make constructive suggestions concerning improvements to the client’s internal
control.
b. Develop an attitude of professional skepticism concerning management’s financial
statement assertions.
c. Evaluate whether the aggregation of known misstatements causes the financial
statements taken as a whole to be materially misstated.
 d. Understand the events and transactions that may have an effect on the client’s
financial statements.
19.Analytical procedures used during risk assessment in an audit should focus on
a. Reducing the scope of tests of controls and substantive tests.
b. Providing assurance that potential material misstatements will be identified.
c. Enhancing the auditor’s understanding of the client’s business.
d. Assessing the adequacy of the available evidence.
20.A primary purpose of performing analytical procedures as risk assessment procedures is to
identify the existence of
a. Unusual transactions and events.
b. Illegal acts that went undetected because of internal control weaknesses.
c. Related-party transactions.
d. Recorded transactions that were not properly authorized.
21.Which of the following is least likely to be considered a risk assessment procedure?
a. Analytical procedures.
b. Confirmation of ending accounts receivable.
c. Inspection of documents.
d. Observation of the performance of certain accounting procedures.
22.Which of the following statements is correct about the auditor’s use of the work of a
specialist?
a. The specialist should not have an understanding of the auditor’s corroborative use of
the specialist’s findings.
b. The auditor is required to perform substantive procedures to verify the specialist’s
assumptions and findings.
c. The client should not have an understanding of the nature of the work to be performed
by the specialist.
d. The auditor should obtain an understanding of the methods and assumptions used by
the specialist.
23.Which of the following is not a component of an entity’s internal control?
a. Control risk.
b. Control activities.
c. Monitoring.
d. Control environment.
24.Proper segregation of functional responsibilities calls for separation of the functions of
a. Authorization, execution, and payment.
b. Authorization, recording, and custody.
c. Custody, execution, and reporting.
d. Authorization, payment, and recording.
25.An auditor suspects that certain client employees are ordering merchandise for
themselves over the Internet without recording the purchase or receipt of the
merchandise. When vendors’ invoices arrive, one of the employees approves the invoices
for payment. After the invoices are paid, the employee destroys the invoices and the
related vouchers. In gathering evidence regarding the fraud, the auditor most likely would
select items for testing from the file of all
a. Cash disbursements.
b. Approved vouchers.
c. Receiving reports.
d. Vendors’ invoices.
26.A primary objective of procedures performed to obtain an understanding of internal control
is to provide an auditor with
a. Knowledge necessary to assess the risks of material misstatements.
b. Evidence to use in assessing inherent risk.
c. A basis for modifying tests of controls.
d. An evaluation of the consistency of application of management’s policies.
27.An auditor may compensate for a weakness in internal control by increasing the
a. Level of detection risk.
 b. Extent of tests of controls.
c. Preliminary judgment about audit risk.
d. Extent of analytical procedures.
28.An auditor generally tests the segregation of duties related to inventory by
a. Personal inquiry and observation.
b. Test counts and cutoff procedures.
c. Analytical procedures and invoice recomputation.
d. Document inspection and reconciliation.
29.Which of the following is not an assertion relating to classes of transactions?
a. Accuracy.
b. Consistency.
c. Cutoff.
d. Occurrence.
30.An auditor tests an entity’s policy of obtaining credit approval before shipping goods to
customers in support of management’s financial statement assertion of
a. Valuation or allocation.
b. Completeness.
c. Existence or occurrence.
d. Rights and obligations.
31.In assessing control risk for purchases, an auditor vouches a sample of entries in the
voucher register to the supporting documents. Which assertion would this test of controls
most likely support?
a. Completeness.
b. Existence or occurrence.
c. Valuation or allocation.
d. Rights and obligations.
32.Internal control is strengthened when the quantity of merchandise ordered is omitted from
the copy of the purchase order sent to the
a. Department that initiated the requisition.
b. Receiving department.
c. Purchasing agent.
d. Accounts payable department.
33.Where no independent stock transfer agents are employed and the corporation issues its
own stocks and maintains stock records, canceled stock certificates should
a. Be defaced to prevent reissuance and attached to their corresponding stubs.
b. Not be defaced but segregated from other stock certificates and retained in a canceled
certificates file.
c. Be destroyed to prevent fraudulent reissuance.
d. Be defaced and sent to the secretary of state.
34.In general, material fraud perpetrated by which of the following are most difficult to
detect?
a. Cashier.
b. Keypunch operator.
c. Internal auditor.
d. Controller
35.If the independent auditors decide that the work performed by the internal auditor may
have a bearing on their own procedures, they should consider the internal auditor’s
a. Competence and objectivity.
b. Efficiency and experience.
c. Independence and review skills.
d. Training and supervisory skills
36.Which of the following is not a major reason for maintaining an audit trail for a computer
system?
a. Deterrent to fraud.
b. Monitoring purposes.
c. Analytical procedures.
 d. Query answering.

37.An auditor would most likely be concerned with which of the following controls in a
distributed data processing system?
a. Hardware controls.
b. Systems documentation controls.
c. Access controls.
d. Disaster recovery controls.
38.To obtain evidence that online access controls are properly functioning, an auditor most
likely would
a. Create checkpoints at periodic intervals after live data processing to test for
unauthorized use of the system.
b. Examine the transaction log to discover whether any transactions were lost or entered
twice due to a system malfunction.
c. Enter invalid identification numbers or passwords to ascertain whether the system
rejects them.
d. Vouch a random sample of processed transactions to assure proper authorization.
39.An abnormal fluctuation in gross profit that might suggest the need for extended audit
procedures for sales and inventories would most likely be identified in the planning phase
of the audit by the use of
a. Tests of transactions and balances.
b. A preliminary review of internal control.
c. Specialized audit programs.
d. Analytical procedures.
40.When an auditor reissues in 20X7 the auditor’s report on the 20X5 financial statements at
the request of the client without revising the 20X5 wording, the auditor should
a. Use the date of the original report.
b. Use the date of the client’s request.
c. Use the date of the current period report.
d. Dual date the report.
41.An auditor was unable to obtain audited financial statements or other evidence supporting
an entity’s investment in a foreign subsidiary. Between which of the following opinions
should the entity’s auditor choose?
a. Adverse and unmodified (unqualified) with an emphasis-of-matter paragraph added.
b. Disclaimer and unmodified (unqualified) with an emphasis-of-matter paragraph added.
c. Qualified and adverse.
d. Qualified and disclaimer.
42.The risk that an auditor’s procedures will lead to the conclusion that a material
misstatement does not exist in an account balance when, in fact, such misstatement does
exist is referred to as
a. Audit risk.
b. Inherent risk.
c. Control risk.
d. Detection risk.
43.The primary reason an auditor requests letters of inquiry be sent to a client’s attorneys is
to provide the auditor with
a. A description and evaluation of litigation, claims, and assessments that existed at the
date of the balance sheet.
b. An expert opinion as to whether a loss is possible, probable, or remote.
c. The opportunity to examine the documentation concerning litigation, claims, and
assessments.
d. Corroboration of the information furnished by management concerning litigation,
claims, and assessments.
44.Which of the following statements correctly defines the term reasonable assurance?
a. A substantial level of assurance to allow an auditor to detect a material misstatement.
 b. A significant level of assurance to allow an auditor to detect a material misstatement.
c. An absolute level of assurance to allow an auditor to detect a material misstatement.
d. A high, but not absolute, level of assurance to allow an auditor to detect a material
misstatement.

45.Which of the following procedures would most likely assist an auditor in identifying related
party transactions?
a. Evaluate the reasonableness of management’s accounting estimates that are subject
to bias.
b. Retest ineffective internal control activities for evidence of management override.
c. Review the minutes of the meetings of the board of directors and its committees.
d. Send second requests for unanswered positive confirmations of accounts receivable.
46.Which of the following statements is correct regarding a management representation
letter?
a. A representation letter can be used in place of specific, previously identified audit
procedures.
b. A representation letter encompasses a different set of assertions than those inherent in
the financial statements.
c. The date of the representation letter should typically be the same as the audit report.
d. The representations made apply until the date of a client’s financial statements.
47.A typical objective of an operational audit is to determine whether an entity’s
a. Internal control is adequately operating as designed.
b. Operational information is in accordance with generally accepted governmental
auditing standards.
c. Financial statements present fairly the results of operations.
d. Specific operating units are functioning efficiently and effectively
48.A financial statement audit report issued for the audit of an issuer (public) company
concludes that the financial statements follow
a. Generally accepted accounting principles.
b. Public Company Accounting Oversight Board standards.
c. Generally accepted auditing standards.
d. International accounting standards.
49.Which of the following types of reports is most likely to include an alert as to its use being
restricted to certain specified parties?
a. Audit report.
b. Review report.
c. Compilation report.
d. Agreed-upon procedures report.
50.Which of the following is least likely to be included in an agreed-upon procedures
attestation engagement report?
a. The specified party takes responsibility for the sufficiency of procedures.
b. Use of the report is restricted.
c. Limited assurance on the information presented.
d. A summary of procedures performed.
ANSWER KEY 35. A.
1. C. 36. C.
2. C. 37. C.
3. A. 38. C.
4. A. 39. D.
5. C. 40. A.
6. A. 41. D.
7. D. 42. D.
8. B. 43. D.
9. A. 44. D.
10. B. 45. C.
11. A. 46. C.
12. C. 47. D.
13. C. 48. A.
14. C. 49. D.
15. B. 50. C.
16. B.
17. D.
18. D.
19. C.
20. A.
21. B.
22. D.
23. A.
24. B.
25. A.
26. A.
27. D.
28. A.
29. B.
30. A.
31. B.
32. B.
33. A.
34. D.