ACC 562 Exam PART 1

Name: ACC 562 Exam PART 1
Brand: Strayer University
Price: 2 USD
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Author: Sophia Lee

An assessment testing corporate financial reporting principles.

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ACC 562 EXAM PART 1
1. What analysis best considers the economic relationships among account balances?
Answer
Altman "Z" Analysis
Ratio analysis.
Vertical analysis.
Horizontal analysis.
2. The risk that financial statements are likely to be misstated materially without regard to the
effectiveness of internal control is which type of risk?
Answer
Inherent risk
Audit risk
Client risk
Control risk
3. Audit risk in the audit risk model concerns the risk that the auditor may issue an unqualified
opinion on financial statements that are materially misstated. What is the manner in which the
auditor assesses audit risk in using the audit risk model to determine the nature, extent and
timing of audit evidence to collect in an audit.
Answer
assessed to maintain low level of audit risk given residual risk
assessed to maintain low level of audit risk given financial statement risk
assessed to maintain a low level of audit risk given engagement risk
assessed to maintain a low level of audit risk given enterprise risk
4. The preliminary use of analytical review procedures by the auditor is
Answer
required to identify areas of heightened risk
optional in accordance with auditor judgment.
only used when other planning procedures cannot be applied.
used to assist the auditor in documenting internal control.

5. Which is a primary limitation of the audit risk model?
Answer
The audit risk model does not adequately consider external forces on the client organization.
Components of audit risk are treated as independent variables even though many
interdependencies exist between them.
The audit technology achieves approximate precision outside of a mathematical model.
Control risk must be adjusted at the hands of the auditor, not by an arbitrary estimation.
6. An auditor compares year-to-year account balances in order to perform analytical procedures.
This is an example of:
Answer
ratio analysis.
trend analysis.
internal control analysis.
vertical analysis.
7. Analytical procedures are used in an audit because it is assumed of financial statements that
Answer
management fraud can be discovered using such procedures.
it is plausible that no relationship among data exists.
analytical procedures are used as tests of controls.
plausible relationships among data may reasonably be expected to exist and continue.
8. What is the most important purpose that is achieved by having an auditor write a formal
engagement letter that is signed by the client?
Answer
Documented proof of auditor responsibility for financial statements in accordance with GAAP.
Multiple degrees of legal separation of the client from the auditor.
A locking-in of fees and timetable that must be adhered to by the client.
A communication and clarification of the responsibilities and expectations of the auditor and the
client.
9. When control risk is assessed as high the auditor needs to:
Answer
perform more tests of controls.

perform more direct testing of account balances.
perform significantly fewer tests of controls.
perform significantly less testing of account balances.
10. The PCAOB requires auditors of public companies to perform
Answer
a financial statement audit and an attest audit.
a financial statement audit and an assurance audit.
a financial statement audit and agreed upon procedures.
a financial statement audit and an audit of internal control.
11. An auditor of a client company that has multiple locations must:
Answer
increase control risk to moderate or high.
conclude that independent business units of the consolidation are immaterial.
issue multiple audit reports for each segment of the company.
determine the universal application of controls across the company.
12. The control environment includes which of the following?
Answer
Control activities.
Management philosophy and operating style.
Assessing activity level risks.
Application level controls.
13. Which of the following would result in an adverse report issued by an auditor on an audit of
internal control?
Answer
The control risk is assessed at a lower level.
The tests of controls support the documented understanding of controls.
There is a material weakness in the design or operation of controls.
A confirmation is not returned by a customer in a timely manner.
14. Which of the following best represents a walk-through?
Answer

The controller reviews the bank reconciliation prepared by the accountant and its resulting
journal entries.
The auditor walks the production line to find inefficiencies in the inventory process and reports
them to management.
The controller takes a sample of write-offs to ensure they have been adequately documented and
recorded.
The auditor traces three purchasing transactions from the purchase order to the financial
statement for observation and understanding.
15. Which of the following will an auditor perform to better understand a client's internal control
over accounting systems?
Answer
An auditor will re-test subsequent year working papers.
An auditor will review previous year working papers.
An auditor will copy previous year working papers.
An auditor will re-draft subsequent year working papers.
16. Which is clearly a test of control?
Answer
Confirmation to a customer of an accounts receivable balance.
Examination of a sample of purchase order records for electronic, authenticated, authorization.
Observing the controller's use of company owned equipment.
Sending a letter to the client's attorney to determine litigation that is pending between plaintiff
and the defendant.
17. An auditor's test of transaction processing whereby the auditor is evaluating both the
operation and effectiveness of controls and the correctness and completeness of processing and
posting to an account balance is:
Answer
a test of controls.
a substantive test.
a dual-purpose test.
an analytical review procedure.

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University

Strayer University

Subject

Accounting

ACC 562 Exam PART 1

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