Auditing (ACCM4201)
BSc. Accounting - ACC
Semester: Second Semester
Level: 400
Year: 2019
THE UNIVERSITY OF BAMENDA/UNIVERSITE DE BAMENDA
FACULTY OF ECONOMICS AND MANAGEMENT SCIENCES
ACCOUNT1NG DEPARTMENT
Second Semester Examination 2018/2019 Academic year
Course code and title: ACCM 4201 -Auditing. Credit Value: 5. Status: C
Course instructors: Dr. OMENGUELE Rene Guy / Mr. NDINGA Octavian
Venue: PBB 05 / PBB 06 Date 02/07/2019 Time: 10:30- 12:40
Instructions: Answer all questions
Indicate only the letter corresponding to the right answer for each question.
1. Which of the following types of internal controls does a small limited liability
company normally have particular difficulty in implementing satisfactorily?
1. Segregation of duties.
2. Performance reviews.
3. Information processing.
A B C D
(1) only (2) only (3) only (I) (2) and (3J
2. Which of the following strategies should give an auditor the STRONGEST
assurance as to the existence of trade receivables year-end balances, in a company
with weak internal controls, over the sales and trade receivables function?
A. Carrying out a positive circularisation of receivable balances m respect of
the year-end balances.
B. Carrying out a negative circularisation of receivables balances in respect
of year-end balances.
C. Confirming receivables balances by agreeing to sales invoices, authorised
delivery notes and valid order.
D. Confirming receivables balances by verifying subsequent payments after
the year end.
3. The auditor of Berry Co, a manufacturing company, has noted an increase in total
sales value but a decrease in the company’s gross profit percentage for 2011 as
compared to the previous year.
Which of the following is consistent with, and adequately explains, the decrease?
(1)
Sales volumes have decreased as compared to 2010.
(2)
During 2011, due to a scarcity of supply the company had to pay higher
prices when purchasing components.
(3)
During 2011, a major component supplier withdrew early settlement
discounts previously granted.
A B C D
(1) only (1) and (2) (2) only (3) only
4. An auditor’s responsibility extends to both evaluating the overall presentation of the
financial statements AND evaluating the reasonableness of accounting estimates
made by management.
Is this statement true or false?
A B C D
True False Not relevant Indifferent
5. Which of the following statements is TRUE with regard to an emphasis of matter
paragraph included in a modified auditor’s report?
1. The paragraph may refer to a matter other than those presented or
disclosed in the financial statements that, in the auditor’s opinion is
relevant to users ’ understanding of the audit.
2. The paragraph should ordinarily refer to the fact that the auditor’s
opinion is modified in respect of the subject matter.
i.
The inclusion of the paragraph should not affect the auditor's opinion on th e
financial statements.
A B C D
(1) only (2) only (3) only (1) (2) and (3)
6. A client has capitalisable leases but refuses to capitalize them in the financial
statements. Which of the following reporting options does an auditor have if the
amounts pervasively distort the financial statements?
A. Qualified opinion.
B. Unqualified opinion.
C. Disclaimer opinion.
D. Adverse opinion
7. The inability to complete which of the following activities most likely would
prevent an accountant from accepting and completing an engagement for a review of
financial statements performed in accordance with
Statements on Standards for
Accounting and Review Services
?
A. Performing tests of details of major account balances.
B. Performing inquiries and analytical procedures.
C. Obtaining an understanding of internal control to assess control risk.
D. Having previous experience in the client's industry.
8. Which of the following procedures most likely would be performed in a review
engagement of a nonissue’s financial statements in accordance with
Statements on
Standards for Accounting and Review Services
?
A. Making inquiries of management.
B. Observing a year-end inventory count.
C.
C. Assessing the internal control system.
D.
D Examining subsequent cash receipts.
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9. An accountant was asked by a potential client to perform a compilation of its financial
statements. The accountant is not familiar with the industry in which the client operates. In this
situation, which of the following actions is the accountant most likely to take?
A.
Request that management engage an independent industry expert to consult with
the accountant.
B.
Accept the engagement and obtain an adequate level of knowledge about the
industry.
C.
Decline the engagement.
D.
Postpone accepting the engagement until the accountant has obtained an
adequate level of knowledge about the industry.
10. To compile financial statements of a non-issuer in accordance with
Statements on
Standards for Accounting and Review Services,
an accountant should:
A.
Identify material misstatements in the financial, statements.
B.
Review bank statement reconciliations.
C.
Make inquiries of significant customers, vendors, and creditors.
D.
Obtain a general understanding of the client's business transactions
11.
Which of the following items should be included in prospective financial
statements issued in an attestation engagement performed in accordance with
Statements on Standards for Attestation Engagements
?
A.
All significant assertions used to prepare the financial statements.
B.
All significant assumptions used to prepare the financial statements.
C.
Pro forma financial statements for the past two years.
D.
Historical financial statements for the past three years.
12.
Which of the following activities is an accountant not responsible for in review
engagements performed in accordance with
Statements on Standards for Accounting
and Review Services
?
A.
Performing basic analytical procedures.
B.
Remaining independent.
C.
Developing an understanding of internal control.
D.
Providing any form of assurance.
13.
Which of the following procedures would be generally performed when evaluating the
accounts receivable balance in an engagement to review financial statements in accordance with
Statements on Standards for Accounting and Review Services
?
A.
Perform a reasonableness test of the balance by computing days' sales m
receivables.
B.
Vouch a sample of subsequent cash receipts from customers.
C.
Confirm individually significant receivable balances with customers.
D.
Review subsequent bank statements for evidence of cash deposits.
14.
Which of the following is the best way to compensate for the lack of adequate segregation
of duties in a small organization?
A.
Disclosing lack of segregation of duties to the
external auditors
during the annual
review.
B.
Replacing personnel every three or four years.
C.
Requiring accountants to pass a yearly background check.
D.
Allowing for greater management oversight of incompatible activities.
15.
Which of the following situations most likely represents the highest risk of a material
misstatement arising from misappropriations of assets?
A.
A large number of bearer bonds on hand.
B.
A large number of inventory items with low sales prices.
C.
A large number of transactions processed in a short period of lime.
D.
A large number of fixed assets with easily identifiable serial numbers.
16.
Auditing has to report that accounts have been prepared as per GAAP and represent a:
Correct view of
Business
operations.
Authentic view of
business
operations
Accountant’s
view of business
operations.
True and fair view
of business
operations
17.
In the case of financial audit, a set of financial statements are said to be true anc fair when
they are free of:
A B C D
Error Fraud Material Accounting corrections
misstatements
18. An audit which is compulsory by the law ______ .
A) Government audit. B) Internal audit.
C) Cost audit. D) Statutory audit.
19. Audit done by the employees of the business undertaking is called
___________________
A) Final audit. B) Management audit.
C) Government audit. D) Company audit
20. Management audit otherwise called as________________
A A) Final audit. B
) Efficiency audit.
C) Cost audit D)Cash audit
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21. A number of checks and controls exercised in a business to ensure its
efficient working is known as _ ________________________
A)
Internal check. B) Internal control
C) internal audit. D) Interim check.
22. Voucher relates to _____ .
A)
Cash receipt. B) Cash payment.
C) Credit transactions. D) All the above.
23. Internal check is meant for _______ .
A)
Prevention of frauds. B) Detection of frauds.
C) Helping audit is depth. D) Defection of errors.
24. An Internal auditor is appointed by __ .
A)
The management. B) The shareholders
C) Internal rules and regulations. D) The statutory body.
25. Auditing begins where____ ends.
A)
Selling.
B)
Inventory valuation.
C)
Accounting.
D)
Purchases.
26. Which of the following is not true about opinion on financial
statements?
A)
The auditor should express an opinion on financial statements.
B)
His opinion is no guarantee to future viability of business
C)
He is responsible for detection and prevention of frauds and errors in
Financial statements
D)
He should examine whether recognised accounting principle have been
consistently
27. A sale of 500 000 CFAF to A was entered as a sale to B. This is an
example of
A)
Error of omission
B)
Error of commission
C)
Compensating error
D)
Error of principle
28. The objective of an audit of financial statements is to enable an auditor
to ..............on financial statements.
A
B
C
D
Make a compilation of
audit
express an opinion
check
transactions
check fraud
29. The concept of stewardship means that a company’s directors___
?
A.
Are responsible for ensuring that the company complies with the law
B.
Are responsible for ensuring that the company pays its tax by the due
date
C.
Safeguard the company’s assets and manage them on behalf of the
shareholders
D.
Report suspected fraud and money laundering to the authorities
30. Both auditing and accounting are concerned with financial statements. Which of the
following is correct about auditing and accounting
A)
Auditing uses the theory of evidence to verify the financial information made
available by Accountancy
B)
Auditing hauls credibility dimension and quality dimension to the financial
statements prepared by the accountant.
C)
Auditor should have thorough knowledge of accounting concepts and convention to
enable him to express an opinion on financial statements
D)
All of the above.
31. The main object of an audit is ___
A)
Expression of opinion
B)
Detection and Prevention of fraud and error
C)
Both (A) and (B)
D)
Depends on the type of audit
31. As per AAS4 if auditor detects an error then -
A)
He should inform the management.
B)
He should communicate it to the management: if it is material
C) The auditor should ensure financial statements are adjusted for detected errors.
D) Both (B) and (C)
32. Who normally appoints the external auditors of a company?
A.
Directors B. Shareholders
C. Audit committee
D.
The
General
Manager
33.
The authenticity of financial statements is very essential and such authenticity
or accounts can be assured with the help of
A B C D
The Accountant Management Company Directors Auditing
34.
Who is responsible for the prevention and detection of fraud within an
organisation?
A.
External auditors
B.
Directors
C.
Internal auditors
D.
All of the above.
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