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web.groovymark@gmail.com
- December 12, 2024
Question 41
What is the primary purpose of a walk-through in an audit?
a) To verify the accuracy of financial statements
b) To understand the flow of transactions and identify potential risks
c) To perform substantive tests on financial data
d) To gather evidence from external parties
Answer: b) To understand the flow of transactions and identify potential risks
Explanation: A walk-through involves following a transaction from initiation to recording to understand the process and identify risks.
Question 42
Which of the following audit procedures tests the completeness assertion for sales transactions?
a) Vouching sales invoices to shipping documents
b) Tracing shipping documents to sales invoices
c) Recalculation of sales figures
d) Confirming sales with customers
Answer: b) Tracing shipping documents to sales invoices
Explanation: Tracing shipping documents to sales invoices tests whether all shipments are recorded as sales, ensuring completeness.
Question 43
Which of the following is the most reliable type of audit evidence?
a) Internally generated documents
b) Bank statements received directly by the auditor
c) Client inquiry responses
d) Board minutes prepared by management
Answer: b) Bank statements received directly by the auditor
Explanation: Bank statements received directly from the bank are considered reliable third-party evidence.
Question 44
What is the purpose of the analytical procedures performed during the audit planning phase?
a) To test the effectiveness of internal controls
b) To identify potential risk areas
c) To confirm account balances
d) To detect fraud
Answer: b) To identify potential risk areas
Explanation: Analytical procedures during the planning phase help auditors identify areas of potential risk that may require additional attention.
Question 45
Which of the following would be considered a weakness in internal control?
a) Segregation of duties
b) Use of pre-numbered invoices
c) Lack of employee background checks
d) Regular reconciliation of bank accounts
Answer: c) Lack of employee background checks
Explanation: A lack of employee background checks can expose the organization to fraud risks, representing a weakness in internal control.
Question 46
Which control ensures that authorized personnel approve transactions before they are recorded?
a) Detective control
b) Approval control
c) Preventive control
d) Authorization control
Answer: d) Authorization control
Explanation: Authorization controls ensure that only authorized individuals approve transactions before they are recorded.
Question 47
Which assertion is being tested when an auditor verifies that expenses are recorded in the correct period?
a) Completeness
b) Cutoff
c) Valuation
d) Accuracy
Answer: b) Cutoff
Explanation: The cutoff assertion ensures that transactions are recorded in the appropriate accounting period.
Question 48
What is the auditor’s responsibility in relation to a company’s internal controls?
a) To establish the internal controls
b) To design the company’s control environment
c) To assess the effectiveness of the internal controls
d) To manage internal control deficiencies
Answer: c) To assess the effectiveness of the internal controls
Explanation: The auditor’s role is to assess the effectiveness of a company’s internal controls, not to design or establish them.
Question 49
Which procedure involves following a transaction from initiation to recording?
a) Vouching
b) Walk-through
c) Analytical procedures
d) Reperformance
Answer: b) Walk-through
Explanation: A walk-through involves tracing a transaction through each step of the process to understand how it flows through the system.
Question 50
Which of the following is an inherent limitation of internal control?
a) Segregation of duties
b) Authorization procedures
c) Human error
d) Use of automated systems
Answer: c) Human error
Explanation: Internal controls are subject to inherent limitations such as human error, which can lead to mistakes or oversights in procedures.
