Multiple-Choice Questions



Chapter 13

Multiple-Choice Questions

|1. |A listing of all the things which the auditor will do to gather sufficient, competent evidence is the: |

|easy | |

|b |a. audit strategy. |

| |b. audit program. |

| |c. audit procedure. |

| |d. audit risk model. |

| | |

|2. |Shown below (1 through 5) are the five types of tests which auditors use to determine whether financial statements |

|easy |are fairly stated. Which three are substantive tests? |

|b |1. procedures to obtain an understanding of internal control |

| |2. tests of controls |

| |3. tests of transactions |

| |4. analytical procedures |

| |5. tests of details of balances |

| |a. 1, 2, and 3. |

| |b. 3, 4, and 5. |

| |c. 2, 3, and 5. |

| |d. 2, 3, and 4. |

| | |

|3. |Collectively, procedures performed to obtain an understanding of the entity and its environment, including internal |

|easy |controls, represent the auditor’s: |

|c |a. audit strategy. |

| |b. tests of controls. |

| |c. risk assessment procedures. |

| |d. tests of transactions. |

| | |

|4. |For efficiency, tests of controls are frequently done at the same time as: |

|easy |a. analytical procedures. |

|c |b. compliance tests. |

| |c. tests of transactions. |

| |d. tests of details of balances. |

| | |

|5. |Which of the following procedures are frequently performed in response to the auditor’s assessment of the risk of |

|easy |material misstatement? |

|c |a. Ratio analysis |

| |b. Tests of controls |

| |c. Tests of details of balances |

| |d. Risk assessment procedures |

| | |

|6. |In which stage(s) of an audit are analytical procedures not performed? |

|easy |a. In the planning stage. |

|b |b. In the test of controls stage. |

| |c. In the completion stage. |

| |d. In conjunction with tests of transactions and tests of details of balances. |

| | |

|7. |Tests of controls may include which of the following types of evidence? |

|easy | |

|a | |Reperformance | |Observation |

| |a. |Yes | |Yes |

| |b. |No | |No |

| |c. |Yes | |No |

| |d. |No | |Yes |

| | |

|8. |The purpose of tests of controls is to provide reasonable assurance that the: |

|easy |a. accounting treatment of transactions and balances is valid and proper. |

|b |b. internal control procedures are functioning as intended. |

| |c. entity has complied with GAAP disclosure requirements. |

| |d. entity has complied with requirements of quality control. |

| | |

|9. |In the context of an audit of financial statements, substantive tests are audit procedures that: |

|easy |a. may be eliminated under certain conditions. |

|c |b. are designed to discover significant subsequent events. |

| |c. may be either tests of transactions, tests of balances, or analytical tests. |

| |d. will increase proportionately with the auditor’s reliance on internal control. |

| | |

|10. |Which of the following is not useful for obtaining an understanding of internal controls? |

|medium |a. Make inquiries of the client’s personnel. |

|c |b. Examine documents and records. |

| |c. Read industry trade magazines. |

| |d. Observe client activities and operations. |

| | |

|11. |A system walkthrough is used to: |

|medium |a. test balances. |

|c |b. test details of transactions. |

| |c. gain an understanding of internal controls. |

| |d. determine acceptance of the client. |

| | |

|12. (Public) |PCAOB Standard 2 _______ the auditor to perform walkthroughs of significant processes. |

|medium |a. encourages |

|b |b. requires |

| |c. does not allow |

| |d. permits |

| | |

|13. |The most important consideration in developing the audit plan and audit program is the: |

|medium |a. client’s size. |

|d |b. client’s industry. |

| |c. audit firm’s available personnel. |

| |d. the audit risk model used in its planning form. |

| | |

|14. |Tests of controls are directed toward the control’s: |

|medium |a. efficiency. |

|b |b. effectiveness. |

| |c. efficiency and effectiveness. |

| |d. cost benefit ratio. |

| | |

|15. |When the auditor finds that there are missing controls in an area of the accounting system, the audit program in that|

|medium |area would be modified in such a way as to: |

|d |a. increase the amount of tests of controls. |

| |b. increase the reliance on tests of controls. |

| |c. cause the issuance of a qualified or adverse opinion. |

| |d. eliminate the need for a test of controls. |

| | |

|16. |A procedure designed to test for monetary misstatements directly affecting the correctness of financial statement |

|medium |balances is a: |

|b |a. test of controls. |

| |b. substantive test. |

| |c. test of attributes. |

| |d. monetary-unit sampling test. |

| | |

|17. |Which of the following is not appropriate for purposes of testing the effectiveness of controls? |

|medium |a. Make inquiries of client personnel. |

|b |b. Evaluate prior experience with the client. |

| |c. Observe control-related activities. |

| |d. Reperform client procedures. |

| | |

|18. |Which of the following is not a direct result of performing analytical procedures? |

|medium |a. Identify areas of potential misstatements. |

|d |b. Reduce detailed audit tests. |

| |c. Understand the client’s business. |

| |d. Identify specific errors in the accounts. |

| | |

|19. |If no material differences are found using analytical procedures and the auditor concludes that misstatements are not|

|medium |likely to have occurred: |

|a |a. other tests may be reduced. |

| |b. it will be necessary to increase the tests of balances. |

| |c. it will not be necessary to perform tests of balances. |

| |d. it will be necessary to increase the tests of transactions. |

| | |

|20. |The primary emphasis in most tests of details of balances is on the: |

|medium |a. balance sheet accounts. |

|a |b. revenue accounts. |

| |c. cash flow statement accounts. |

| |d. expense accounts. |

| | |

|21. |Analytical procedures are defined in the auditing standards as: |

|medium |a. compliance tests. |

|b |b. substantive tests. |

| |c. tests of controls. |

| |d. helpful procedures not possessing the validity of other tests available to the auditor. |

| | |

|22. |Tests of transactions are used to determine whether ___________ have been satisfied. |

|medium |a. compliance test requirements. |

|c |b. balance coverage requirements. |

| |c. transaction-related audit objectives. |

| |d. existence assertions |

| | |

|23. |Which of the following statements is not true? |

|medium |a. Analytical procedures emphasize the overall reasonableness of transactions and balances. |

|b |b. Tests of controls are concerned with evaluating whether controls are sufficiently effective to justify reducing |

| |control risk and thereby reducing analytical review procedures. |

| |c. Substantive tests of transactions emphasize the verification of transactions recorded in the journals and then |

| |posted in the general ledger. |

| |d. Tests of details of balances emphasize the ending balances in the general ledger. |

| | |

|24. |Which of the following audit tests is usually the least costly to perform? |

|medium |a. Analytical procedures. |

|a |b. Tests of controls. |

| |c. Tests of balances. |

| |d. Substantive tests of transactions. |

| | |

|25. |Which of the following audit tests is usually the most costly to perform? |

|medium |a. Analytical procedures. |

|c |b. Tests of controls. |

| |c. Tests of balances. |

| |d. Substantive tests of transactions. |

| | |

|26. |Analytical procedures must be performed in: |

|medium |a. the planning and test of control stages. |

|c |b. conjunction with tests of transactions and tests of details of balances. |

| |c. the planning and completion stages. |

| |d. the planning, test of control, and completion stages. |

| | |

|27. |Which of the following tests commonly occur together? |

|medium |a. Substantive tests of transactions and tests of controls. |

|a |b. Substantive tests of transactions and obtaining an understanding of internal controls. |

| |c. Analytical procedures and tests of controls. |

| |d. Tests of controls and tests of details of balances. |

| | |

|28. |Which of the following relationships between types of tests and audit evidence is not correct? |

|medium |a. Tests of details and documentation. |

|c |b. Tests of controls and observation. |

| |c. Tests of details and observation. |

| |d. Substantive tests of transactions and reperformance |

| | |

|29. |An increased extent of tests of controls is most likely to occur when: |

|medium |a. it is a first-year audit. |

|c |b. the auditor is doing a “fraud audit.” |

| |c. controls are effective and the preliminary control risk assessment is low. |

| |d. controls are ineffective and the preliminary control risk assessment is high. |

| | |

|30. |Many auditors perform extensive analytical procedures on audits because: |

|medium |a. they are required by GAAS. |

|c |b. they pinpoint errors in accounts. |

| |c. they indicate areas of potential risk and misstatement. |

| |d. they are required for tests of controls. |

| | |

|31. (Public) |Which of the following types of procedures will be performed in an audit of internal control over financial |

|medium |reporting? |

|c | |

| | |Procedures to obtain an understanding of internal control | |Ratio analysis |

| |a. |Yes | |Yes |

| |b. |No | |No |

| |c. |Yes | |No |

| |d. |No | |Yes |

| | |

|32. |Tests of details of balances focus on: |

|medium |a. beginning of the year balances. |

|b |b. end of the year balances. |

| |c. transaction details for the period under audit. |

| |d. accounting cycles. |

| | |

|33. |Auditors who test manual controls that rely on IT-generated reports must consider: |

|medium |a. the benefits of relying on IT-generated reports. |

|c |b. separation of duties related to the IT-generated reports. |

| |c. the controls related to the accuracy of the information in the report. |

| |d. whether the manual controls are approved by the audit committee.. |

| | |

|34. |When an auditor believes that analytical procedures indicate a reasonable possibility of misstatement, the auditor |

|medium |usually would: |

|d | |

| | |Perform additional tests of controls | |Decide to modify tests of details of balances |

| |a. |Yes | |Yes |

| |b. |No | |No |

| |c. |Yes | |No |

| |d. |No | |Yes |

| | |

|35. |If the results of the tests of controls, substantive tests of transactions, and analytical procedures are not |

|medium |consistent with the predictions, tests of details of balances will be: |

|d |a. eliminated. |

| |b. increased. |

| |c. unaffected. |

| |d. changed. |

| | |

|36. |When controls are deemed ineffective and assessed control risk is at the maximum for a private company, there will be|

|medium |______ emphasis placed on tests of controls. |

|a |a. no |

| |b. relatively little |

| |c. moderate |

| |d. heavy |

| | |

|37. |Tests of controls address each of the following questions except: |

|medium |a. How were the procedures performed? |

|b |b. Why were the procedures performed? |

| |c. Were the necessary procedures performed? |

| |d. Who performed the procedures? |

| | |

|38. |Which of the following audit tests would be regarded as a test of controls? |

|medium |a. Comparison of the inventory pricing to vendors’ invoices. |

|b |b. Tests of the signatures on canceled checks to board of directors’ authorizations. |

| |c. Tests of the additions to property, plant, and equipment by physical inspections. |

| |d. Review of the specific items making up the balance in a given general ledger account. |

| | |

|39. (Public) |Which of the following tests form the basis for an auditor’s report on internal control over financial reporting? |

|medium | |

|c |a. Analytical procedures |

| |b. Tests of transactions |

| |c. Tests of controls |

| |d. Tests of details of balances |

| | |

|40. |After finishing the review phase of the study and evaluation of internal control in an audit, the auditor should |

|medium |perform tests of controls on: |

|a |a. those controls that the auditor wants and plans to rely upon. |

| |b. those controls in which material weaknesses were identified. |

| |c. those controls that have a material effect upon the financial statement balances. |

| |d. a random sample of the controls that were reviewed. |

| | |

|41. |At what point in the audit are tests of details most appropriately designed? |

|medium |a. Engagement evaluation. |

|b |b. Planning. |

| |c. Testing. |

| |d. Communication of material weaknesses. |

| | |

|42. (Public) |Which of the following is/are performed in an audit of internal control over financial reporting? |

|Medium | |

|b | |Procedures to obtain an | | | | |

| | |understanding of internal control| | | | |

| | | | |Test of details of balances | |Analytical Procedures |

| |a. |Yes | |Yes | |No |

| |b. |Yes | |No | |No |

| |c. |No | |Yes | |Yes |

| |d. |No | |No | |Yes |

| | |

|43. |The reliance placed on substantive tests in relation to the reliance placed on internal control varies in a |

|medium |relationship that is ordinarily: |

|b |a. parallel. |

| |b. inverse. |

| |c. direct. |

| |d. equal. |

| | |

|44. |Which of the following is ordinarily designed to detect possible material dollar errors on the financial statements? |

|medium | |

|b |a. Tests of controls. |

| |b. Analytical review procedures. |

| |c. Computer controls. |

| |d. None of the above. |

| | |

|45. |What type of test is used to obtain more types of evidence than any other? |

|challenging |a. Substantive tests of transactions. |

|d |b. Tests of controls. |

| |c. Analytical procedures. |

| |d. Tests of details. |

| | |

|46. |Only _______ involve physical examination and confirmation. |

|challenging |a. tests of controls |

|c |b. tests of transactions |

| |c. tests of balances |

| |d. analytical procedures |

| | |

|47. |Documentation is used in every type of test except ________. |

|challenging |a. tests of controls |

|c |b. tests of transactions |

| |c. analytical procedures |

| |d. tests of details |

| | |

|48. |Which of the following types of evidence is not available when using substantive tests of transactions? |

|challenging | |

|b |a. Documentation. |

| |b. Confirmation. |

| |c. Inquiries of the client. |

| |d. Reperformance. |

| | |

|49. |An exception in a test of control indicates the _______ of misstatements. |

|challenging |a. the amount |

|b |b. the likelihood |

| |c. the amount, likelihood, and classification |

| |d. the amount and the classification |

| | |

|50. |Which of the following is not a valid basis for omitting an audit test? |

|challenging |a. the difficulty and expense involved in testing a particular item. |

|a |b. the relative risk involved. |

| |c. the degree of reliance on the relevant internal controls. |

| |d. the relationship between the cost of obtaining evidence and its usefulness. |

| | |

|51. |Which of the following ultimately determines the specific audit procedures necessary to provide an independent |

|challenging |auditor with a reasonable basis for the expression of an opinion? |

|b |a. The audit program. |

| |b. The auditor’s judgment. |

| |c. Generally accepted auditing standards. |

| |d. The auditor’s working papers. |

| | |

Essay Questions

|52. |Contrast the circumstances in which the auditor would choose not to test controls with those in which he or she would|

|easy |perform tests of controls. |

| |Answer: |

| |If the auditor believes that controls have not been operating effectively during the period under audit, or that it |

| |would not be cost-effective to test controls, then he or she would choose not to test controls. In contrast, if the |

| |auditor believes that controls have been operating effectively during the period under audit, and that it would be |

| |cost-effective to test controls, the auditor will perform tests of controls. |

| | |

|53. |Three factors the auditor considers when assessing control risk are: the auditor’s belief concerning the |

|easy |effectiveness of internal controls, the results of tests of controls, and the cost-effectiveness of a reduced |

| |assessed control risk. Identify the combination of conditions for these three factors that is required before a |

| |reduction in substantive testing is permitted. |

| |Answer: |

| |A reduction in substantive testing is permitted when (1) the auditor identifies specific controls he or she believes |

| |have been operating effectively during the period under audit, (2) the auditor believes it will be cost-effective to |

| |test those controls, and (3) the results of tests of controls indicate that the controls have indeed been operating |

| |effectively. |

| | |

|54. |List each of the five types of audit tests and list at least two types of evidence that may be obtained from each |

|medium |type of test. |

| |Answer: |

| |Procedures to obtain an understanding of internal control - documentation, observation, inquiries of the client, and |

| |reperformance. |

| |Tests of controls - documentation, observation, inquiries of the client, and reperformance. |

| |Substantive tests of transactions - documentation, inquiries of the client, and reperformance. |

| |Analytical procedures - inquiries of the client and analytical procedures. |

| |Tests of details of balances - physical examination, confirmation, documentation, inquires of the client, and |

| |reperformance. |

| | |

|55. |Must auditors always perform tests of controls? |

|medium | |

| |Answer: |

| |Auditors only need to perform tests of controls in the audit of a private company if they intend to rely on them. |

| |Auditors must always perform tests of controls in the audit of a public company. |

| | |

|56. |Describe the five types of audit tests. Identify which of the five types are substantive tests, and which are used to|

|medium |reduce assessed control risk. |

| |Answer: |

| |The five types of audit tests used to determine whether financial statements are fairly stated are: procedures to |

| |obtain an understanding of internal control, tests of controls, substantive tests of transactions, analytical |

| |procedures, and tests of details of balances. Substantive tests of transactions, analytical procedures, and tests of |

| |details of balances are substantive tests, whereas procedures to obtain an understanding of internal control and |

| |tests of controls are used to reduce assessed control risk. |

| | |

|57. |Consider the audit risk model and the five types of audit tests. Which tests provide evidence pertinent to the |

|medium |various elements of the audit risk model? |

| |Answer: |

| |Evidence can be obtained about control risk via procedures to obtain an understanding of internal controls, tests of |

| |controls, and substantive tests of transactions. Evidence can be obtained about planned detection risk via |

| |substantive tests of transactions, analytical procedures, and tests of details of balances. |

| | |

|58. |Discuss the purposes of (1) substantive tests of transactions, (2) tests of controls, and (3) tests of details of |

|medium |balances. Give an example of each. |

| |Answer: |

| |The purpose of substantive tests of transactions is to determine whether all six transaction-related audit objectives|

| |have been satisfied for each class of transactions. For example, as part of the auditor’s test of the accuracy |

| |objective for sales, the auditor would compare the amount recorded in the sales journal for a sample of sales |

| |transactions with the total on the corresponding sales invoices. |

| |The purpose of tests of controls is to determine the effectiveness of both the design and operations of specific |

| |internal controls. For example, the auditor might observe for a month whether statements are mailed to all customers.|

| |The purpose of tests of details of balances is to determine the monetary correctness of the accounts to which they |

| |relate. The confirmation of accounts receivable is an example. |

|59. |There are three stages of the audit in which analytical procedures are performed. Identify each of these three stages|

|medium |and, for each stage, discuss the purpose of performing analytical procedures in that stage. Also indicate in which |

| |stage(s) analytical procedures are required by current professional auditing standards. |

| |Answer: |

| |Analytical procedures are performed in the audit planning stage to help the auditor decide the other evidence needed |

| |to satisfy sufficient competent evidence requirements. Analytical procedures can also be performed as substantive |

| |tests in the testing phase of the audit. Analytical procedures are performed in the audit completion phase as a final|

| |test of reasonableness. Auditing standards require that analytical procedures be performed in the planning and |

| |completion phases of every audit. |

| | |

|60. |Discuss the major determinants of the extent of tests of details of balances. |

|medium | |

| |Answer: |

| |Major determinants of the extent of tests of details of balances include: the results of tests of controls, |

| |substantive tests of transactions, and analytical procedures; the amount of tolerable misstatement; and the levels of|

| |inherent risk and acceptable audit risk. |

| | |

|61. |What are the four steps auditors follow when they plan to reduce assessed control risk? |

|challenging | |

| |Answer: |

| |The steps are as follows: |

| |Apply transaction-related audit objectives to the class of transaction being tested. |

| |Identify key controls that should reduce control risk for each transaction-related audit objective. |

| |Develop appropriate tests of controls for all internal controls used to reduce the preliminary assessment of control |

| |risk below maximum. |

| |For potential types of misstatements related to each transaction-related audit objectives, design appropriate |

| |substantive tests of transactions, considering deficiencies in internal control and expected results of the tests of |

| |controls. |

|62. |Discuss the relationship of each of the following to the extent of planned tests of details of balances: (1) |

|challenging |tolerable misstatement, (2) inherent risk, (3) control risk, and (4) acceptable audit risk. |

| |Answer: |

| |Inherent risk and control risk are directly related to the extent of planned tests of details of balances; that is, |

| |as inherent risk and/or control risk increase, the extent of planned tests of details of balances also increases. |

| |Tolerable misstatement and acceptable audit risk are inversely related to the extent of planned tests of details of |

| |balances; that is, as tolerable misstatement and/or acceptable audit risk increase, the extent of planned tests of |

| |details of balances decreases. |

| | |

|63. |There are seven types of audit evidence: physical examination, confirmation, documentation, observation, inquiries of|

|challenging |the client, reperformance, and analytical procedures. For each of the following types of audit tests, indicate the |

| |type(s) of evidence that can be obtained through the test: (1) tests of controls, (2) substantive tests of |

| |transactions, (3) analytical procedures, and (4) tests of details of balances. |

| |Answer: |

| |Tests of controls. Documentation, observation, inquiries of the client, reperformance. |

| |Substantive tests of transactions. Documentation, inquiries of the client, reperformance. |

| |Analytical procedures. Inquiries of the client, analytical procedures. |

| |Tests of details of balances. Physical examination, confirmation, documentation, inquiries of the client, |

| |reperformance. |

| | |

|64. |Discuss the major activities and procedures performed by the auditor in each of the four phases of an audit. |

|challenging | |

| |Answer: |

| |The major activities performed in the planning and design phase (Phase I) are: preplan the engagement; obtain |

| |background information about the client; obtain information about the client’s legal obligations; perform preliminary|

| |analytical procedures; set materiality, and assess acceptable audit risk and inherent risk; obtain an understanding |

| |of internal control, and assess control risk; and develop an overall audit plan and audit program. |

| |Phase II involves tests of controls, substantive tests of transactions, and an assessment of the likelihood of |

| |misstatements in the financial statements. |

| |Phase III involves analytical procedures and tests of details of balances. |

| |In Phase IV, the auditor performs the review for contingent liabilities, the review for subsequent events, |

| |accumulates final evidence, evaluates results, issues the audit report, and communicates with the client’s audit |

| |committee and management. |

| | |

Other Objective Answer Format Questions

|65. |One difference between procedures used to obtain an understanding of internal control and procedures used to test |

|easy |controls is that tests of controls are more extensive. |

|a |a. True |

| |b. False |

|66. |Tests of controls are generally less expensive to perform than analytical procedures. |

|easy |a. True |

|b |b. False |

|67. |Tests of controls provide evidence about the potential for misstatements in a client’s accounting system. |

|easy |a. True |

|a |b. False |

|68. |Auditing standards encourage, but do not require, a written audit program. |

|easy |a. True |

|b |b. False |

|69. |Substantive tests of transactions are the most expensive type of audit test to perform. |

|easy |a. True |

|b |b. False |

|70. |An exception in a test of control provides only an indication of the likelihood of monetary misstatements in the |

|easy |financial statements because tests of controls do not reveal whether monetary misstatements have actually occurred. |

|a |a. True |

| |b. False |

|71. |An exception in a substantive test of transactions provides only an indication of the likelihood of monetary |

|easy |misstatements in the financial statements because substantive tests of transactions do not reveal whether monetary |

|b |misstatements have actually occurred. |

| |a. True |

| |b. False |

|72. |Analytical procedures are the least expensive type of audit test. |

|easy |a. True |

|a |b. False |

|73. |If inherent risk is decreased from medium to low, tests of details of balances can be reduced. |

|easy |a. True |

|a |b. False |

|74. |When designing an audit program for tests of details of balances, the auditor should make assumptions about inherent |

|easy |risk and control risk, and predictions concerning the outcome of tests of controls, substantive tests of |

|a |transactions, and analytical procedures. |

| |a. True |

| |b. False |

|75. |The extent of tests of details of balances can be reduced when transaction-related audit objectives have been |

|easy |satisfied by tests of controls or substantive tests of transactions. |

|a |a. True |

| |b. False |

|76. |Tests of controls and substantive tests of transactions are rarely, if ever, conducted simultaneously on the same |

|easy |transactions. |

|b |a. True |

| |b. False |

|77. |Under normal circumstances, there should be no variation in the audit evidence mix from cycle to cycle for a given |

|easy |audit engagement. |

|b |a. True |

| |b. False |

|78. |Auditing standards recognize that in instances where a significant amount of audit evidence is in electronic form, it|

|medium |may not be possible to reduce detection risk to an acceptable level by performing only substantive tests. |

|a |True |

| |False |

|79. |When analytical procedures are performed during substantive testing, they are typically more focused and extensive |

|medium |than when performed as part of audit planning. |

|a |True |

| |False |

|80. |Tests of controls may be performed prior to substantive tests of transactions. |

|medium |a. True |

|a |b. False |

|81. |Tests of details of balances focus on beginning and ending of the year balances. |

|medium |a. True |

|b |b. False |

|82. |If tests of controls reveal that controls are sufficiently effective to justify reducing control risk, the auditor is|

|medium |justified in reducing substantive audit tests. |

|a |a. True |

| |b. False |

|83. |Analytical procedures are the most expensive type of audit test to perform because of the expertise and training |

|medium |required to properly use them. |

|b |a. True |

| |b. False |

|84. (Public) |PCAOB Standard 2 requires auditors to test controls every three years. |

|medium |a. True |

|b |b. False |

|85. |The auditor must communicate significant deficiencies in internal control only after the entire audit is complete to |

|medium |ensure the auditor has a sufficient understanding of the circumstances surrounding the deficiency. |

|b |a. True |

| |b. False |

|86. |The results of tests of controls and tests of details of balances affect the design of substantive tests of |

|medium |transactions. |

|b |a. True |

| |b. False |

|87. |If the auditor’s preliminary assessment of control risk is decreased from high to medium, tests of controls can be |

|medium |reduced. |

|b |a. True |

| |b. False |

|88. |When testing details of balances, most audit procedures satisfy only one balance-related objective, but more than one|

|medium |audit procedure should be used to test each objective. |

|b |a. True |

| |b. False |

|89. |Substantive tests of transactions and substantive tests of details of balances are often conducted simultaneously. |

|medium |a. True |

|b |b. False |

|90. |Auditing standards require that tests of controls be performed on every audit engagement. |

|medium |a. True |

|b |b. False |

|91. (Public) |In the audit of a public company, computer controls must be tested if they are considered to be key controls for |

|challenging |reducing the likelihood of material misstatements in the financial statements. |

|a |a. True |

| |b. False |

|92. |Procedures to obtain an understanding of internal control may suffice for tests of controls when the auditor is |

|challenging |assessing automated controls. |

|a |a. True |

| |b. False |

|93. |Analytical procedures are normally designed at the account level, whereas tests of controls and substantive tests of |

|challenging |transactions are normally designed at the transaction-related objective level. |

|a |a. True |

| |b. False |

|94. |Procedures to obtain an understanding of internal control may suffice for tests of controls when the auditor is |

|challenging |assessing control risk in a well defined transaction cycle that has not contained material misstatements in prior |

|b |audits. |

| |a. True |

| |b. False |

|95. |Analytical procedures provide fewer types of evidence than any other type of audit test. |

|challenging |a. True |

|a |b. False |

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