Question 1

What effect would the sale of a company's trading securities at their carrying amounts for cash have on each of the following ratios?

Options :

A : Option A

B : Option B

C : Option C

D : Option D

Answer: A

Question 2

For which of the following audit tests would a CPA most likely use attribute sampling?

Options :

A : Identifying entries posted to incorrect accounts.

B : Estimating the amount in an expense account.

C : Evaluating the reasonableness of depreciation expense.

D : Selecting receivables for confirmation of account balances.

Answer: A

Question 3

Stratified mean per unit (MPU) sampling is a statistical technique that may be more efficient than unstratified MPU because it usually:

Options :

A : May be applied to populations where many monetary errors are expected to occur.

B : Produces an estimate having a desired level of precision with a smaller sample size.

C :

Increases the variability among items in a stratum by grouping sampling units with similar characteristics.

D :

Yields a weighted sum of the strata standard deviations that is greater than the standard deviation of the population.

Answer: B

Question 4

As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses control risk lower than appropriate. The most likely Explanation: for this situation is that:

Options :

A : The deviation rates of both the auditor's sample and the population exceed the tolerable rate.

B : The deviation rates of both the auditor's sample and the population is less than the tolerable rate.

C :

The deviation rate in the auditor's sample is less than the tolerable rate, but the deviation rate in the population exceeds the tolerable rate.

D :

The deviation rate in the auditor's sample exceeds the tolerable rate, but the deviation rate in the population is less than the tolerable rate.

Answer: C

Question 5

An auditor's analytical procedures most likely would be facilitated if the entity:

Options :

A : Segregates obsolete inventory before the physical inventory count.

B : Uses a standard cost system that produces variance reports.

C : Corrects material weaknesses in internal control before the beginning of the audit.

D : Develops its data from sources solely within the entity.

Answer: B

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