1, Which of the following statements relating to audit testing is most correct?
A: If the auditor performs more substantive tests of transactions for an assertion about a class of transactions (e.g. sales), they will likely be able to perform fewer substantive tests of balances for the related assertion about the associated account balance (e.g. Accounts Receivable)
B: Test of controls directly examine material misstatements in the accounting records.
2, Which of the following statements relating to the performance of audit tests is most correct?
A: Vouching from the accounting records to the source documents provides reliable audit evidence on occurrence.
B: Inspection of tangible assets provides reliable audit evidence on completeness.
3, Which of the following statements relating to the assessment of control risk is most correct?
A: When the control environment is poor, the auditor will be reluctant to assess control risk at less than high.
B: When an effective control is identified, the auditor must assess control risk at less than high and perform test of controls.
4, Which of the following statements about the appropriateness of an audit strategy is most correct?
A: Assuming effective controls, a predominately substantive approach is likely to be the most efficient approach when auditing a large client.
B: Assuming effective controls, a predominately controls approach is likely to be the most efficient audit approach to reduce audit risk for the assertion of occurrence for sales revenue when there are a large number of repetitive sales transactions.
5, Which of the following independent circumstances describes an appropriate audit strategy?
A: Inherent risk about an assertion for a balance is assessed as low. The auditor assesses control risk as low and performs extensive tests of controls to support this assessment. Detection risk is assessed as high and the auditor does not perform any substantive procedures.
B: Inherent risk for an assertion for a balance is assessed as high. The auditor assesses control risk as high and does not perform test of controls. The auditor performs extensive substantive tests of transactions and balances in responses to a desired low level of detection risk
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