Chapter 4 (PG)

Who is responsible for the preparation of the financial report?  
 

•  Auditor
• Management
• Both auditor and management.
• None of the answers given are correct.

  3. Which of the following items is an example of professional scepticism?  
 

• Determining a low level of materiality.
•  Determining a high level of risk
• Being alert to conditions that may indicate risks of fraud
•  All of the answers given are correct.

Which of the following tests would involve the exercising of professional judgment?  
 

• Assessing the appropriateness of the estimate of the provision for doubtful debts. 
• Obtaining a bank confirmation to support the cash at bank figure.
• Checking the calculations on a sales invoice.
• All of the answers given are correct.

Which audit assertion relates to ensuring that all recorded sales are valid?  
 

   

• Existence
• Completeness.
• Occurrence
• Accuracy. 

Which of the following audit objectives relates primarily to the financial report assertion of valuation and allocation?  
 

•  Inventory listings are accurately compiled and the totals are properly included in the inventory accounts.
• Inventory quantities include all products, materials and supplies owned by the company that are in transit
• Slow-moving and obsolete items included in inventories are properly identified. 
• Inventories exclude items billed to customers or owned by others.

Which of the following audit objectives relates primarily to the financial report assertion of valuation and allocation?  
 

•  Inventory listings are accurately compiled and the totals are properly included in the inventory accounts.
• Inventory quantities include all products, materials and supplies owned by the company that are in transit
• Slow-moving and obsolete items included in inventories are properly identified. 
• Inventories exclude items billed to customers or owned by others.

Your audit client is under intense pressure to meet an earnings target. Which transaction assertion for purchases is most at risk?  
 

• Occurrence
• Completeness
•  Classification
• Accuracy.

Which of the following is not a financial report assertion?  
 

• Inspection
• Rights and obligations
•  Valuation and allocation.
• Existence.

As part of accounts payable testing, an auditor reviews cash payments made post balance date. This is done mainly to gain evidence about which assertion?  
 

• Valuation and allocation
• Rights and obligations
• Completeness
•  Existence.

Tracing is used primarily to test which of the following assertions about classes of transactions?  
 

•  Occurrence
• Completeness.
• Cut-off.
• Classification.