Post Test: Yasmeen Lumagui BSA181A

Yasmeen Lumagui
BSA181A
POST TEST
1. Which of the following procedures would an auditor most likely perform in planning a
financial statement audit?
a. Performing analytical procedures to identify areas that may represent specific risks.
b. Reviewing investment transactions of the audit period to determine whether related parties
were credited.
c. Reading the minutes of stockholder and director meetings to discover whether any unusual
transactions have occurred.
d. Obtaining a written representation letter from the client to emphasize management’s
responsibilities.
2. Analytical procedures, which means the analysis of significant ratios and trends including
the resulting investigation of fluctuations and relationships that are inconsistent with
other relevant information or which deviate from predicted amounts, are not required to
be applied
a. At the planning stage of the audit
b. As substantive procedures
c. Overall review stage of the audit
d. None of the above
3. Analytical procedures used in planning an audit focus on

a. Understanding the business and in identifying areas of potential risk.
b. Detecting material misstatements in the financial statements.
c. Obtaining audit evidence about the suitability of design and effective operation of the
accounting and internal control systems
d. Whether the financial statements as a whole are consistent with the auditor’s knowledge of the
business.
4. After the auditor has prepared a flowchart of internal control for sales, and cash receipts
transactions and evaluated the design of the system, the auditor would perform tests of
controls on all control procedures
a. That would aid in preventing irregularities.
b. Documented in the flowchart.
c. Considered to be deficiencies that might allow errors to enter the accounting system.
d. Considered to be strengths that the auditor plans to rely on in assessing control risk.
5. In considering internal control within the revenue/receipt cycle, what is the purpose of a
transaction walk through?
a. To assure that employees are performing assigned functions accurately.
b. To confirm the auditor’s understanding of the internal control structure.
c. To select documents for detailed tests of controls.
d. To verify the results of the auditor’s sampling plan.
Yasmeen Lumagui
BSA181A
6. Management can best strengthen internal control over the custody of inventory stored in
an off-site warehouse by implementing
a. Increases in insurance coverage.
b. Reconciliations of transfer slips to/from the warehouse with inventory records.
c. Regular reconciliation of physical inventories to accounting records.
d. Regular confirmation of the amount on hand with the custodian of the warehouse.
7. An effective internal control procedures covering fixed asset additions should require:
a. Authorization and approval of major fixed asset additions.
b. Classification as investments of those fixed asset additions that are not used in the business.
c. Capitalization of the cost of fixed asset addition in excess of a specific peso amount.
d. Performance of recurring fixed asset maintenance work solely by company maintenance staff.
8. Which of the following controls would an entity most likely use in safeguarding against
the loss of investment securities?
a. A designated member of the board of directors controls the securities in a bank safe deposit
box.
b. An independent trust company that has no direct contact with the employees who have
recordkeeping responsibilities has possession of securities.
c. The internal auditor verifies the investment securities in the entity’s safe each year on the
balance sheet date.
d. The independent auditor traces all purchases and sales of investment securities through the
subsidiary ledgers to the general ledger.
9. Based only on the information above, which of the following would most likely decrease
audit risk?
a. The accounting department experienced a high rate of turnover of key personnel.
b. This was the first year TWD operated at a profit since 2005 because the municipalities
received increased funding for environmental purposes.
c. TWD’s board of directors is controlled by, Jay Ar, the majority stockholder, who also acts as
the chief executive officer.
d. The internal auditor reports to the controller and the controller reports to Jay Ar.
10. Based only on the information above, which of the following would most likely increase
audit risk?
a. TWD’s bank has a loan officer who meets regularly with TWD’s CEO and controller to
monitor
TWD’s financial performance.
b. TWD’s employees are paid biweekly.
c. An initial public offering of TWD’s stock is planned for late 2012.
d. Roy has audited TWD for five years.
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3. Analytical procedures used in planning an audit focus on

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