CPA AA - Audit & Insurance Exam
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Total 80 questions
Question #6 (Topic: )
A production manager for a medium-sized manufacturing company began ordering
excessive raw materials and had them delivered to a wholesale company he runs as a side
business. He falsified receiving documents and approved the invoices for payment.
Which of the following audit procedures would most likely detect this fraud?
excessive raw materials and had them delivered to a wholesale company he runs as a side
business. He falsified receiving documents and approved the invoices for payment.
Which of the following audit procedures would most likely detect this fraud?
A. Take a sample of cash disbursement; compare purchase orders, receiving reports, invoices, and check copies.
B. Take a sample and confirm the amount purchased, purchase price, and date of shipment with the vendors.
C. Observe the receiving dock and count material received; compare your counts to receiving reports completed by receiving personnel.
D. Prepare analytical tests, comparing production, material purchased, and raw material inventory levels and investigate differences.
Answer: D
Question #7 (Topic: )
Auditors seek written representations from management to support oral representations
that have been made during the course of the audit.
Which of the following would require a written representation in relation to a statutory audit?
(i)The directors have fulfilled their responsibility for the preparation of the financial
statements
(ii)The accounting policies selected and applied by management are appropriate
(iii) A material item, subject to management judgement, for which no other evidence could
reasonably be expected to exist
that have been made during the course of the audit.
Which of the following would require a written representation in relation to a statutory audit?
(i)The directors have fulfilled their responsibility for the preparation of the financial
statements
(ii)The accounting policies selected and applied by management are appropriate
(iii) A material item, subject to management judgement, for which no other evidence could
reasonably be expected to exist
A. (i) only
B. (i) and (iiii) only
C. (ii) and (iii) only
D. (ii) only
Answer: A
Question #8 (Topic: )
When you audit a company, your main goal is to provide assurance to the users of the
companys financial statements that those documents are free of material misstatement.
You use the audit risk model, which consists of inherent, control, and detection risk on your
clients financial statements.
Audit risk here does refer to________________.
companys financial statements that those documents are free of material misstatement.
You use the audit risk model, which consists of inherent, control, and detection risk on your
clients financial statements.
Audit risk here does refer to________________.
A. process of auditing
B. loss from litigation
C. adverse publicity
D. events arising in connection with the audit of financial statements
Answer: A
Question #9 (Topic: )
Hiltson Hotels is a global group of hotels. The parent company, Hiltson Holdings plc
employs an internal audit function which carries out audits and investigations on the
individual hotels in the group.
Which of the following could the internal audit function carry out and still operate
effectively?
employs an internal audit function which carries out audits and investigations on the
individual hotels in the group.
Which of the following could the internal audit function carry out and still operate
effectively?
A. Secondment to the accounts department of the Singapore Hiltson to cover the maternity leave of the financial controller
B. Special investigation into the profits of the New York Hiltson where the group directors suspect a fraud may have been carried out
C. Secondment to the finance department of the Edinburgh Hiltson
D. Identification of risks at the proposed Nairobi Hiltson, which is due to open in nine months time
Answer: B
Question #10 (Topic: )
Pahari Robert has been appointed the auditor of Safe Haven which has a year end of 31
May. Safe Haven is a small registered charity based in a small town in Warshire. The
organisation provides shelter for abandoned dogs and puppies with the aim of finding new
homes for as many as possible.
Safe Haven also employs a number of paid employees. The shelter is managed by John
and Jane Sheldon, who are husband and wife. Safe Haven has a high turnover of staff in
the accounts department.
Which type of risk has been illustrated in Safe Haven?
May. Safe Haven is a small registered charity based in a small town in Warshire. The
organisation provides shelter for abandoned dogs and puppies with the aim of finding new
homes for as many as possible.
Safe Haven also employs a number of paid employees. The shelter is managed by John
and Jane Sheldon, who are husband and wife. Safe Haven has a high turnover of staff in
the accounts department.
Which type of risk has been illustrated in Safe Haven?
A. Inherent risk
B. Control risk
C. Detection risk
D. Audit risk
Answer: B
