The use of standard operating procedure questionnaires in audit fieldwork can be beneficial
because.

A.

These questionnaires can both identify discrepancies and educate clients.

B.

Standard operating procedures are essential to the effectiveness and efficiency of operations.

C.

These questionnaires are more comprehensive than are other types of techniques for gathering
data during fieldwork.

D.

These questionnaires do not normally require prior clearance with management of the audited
area.

Checklists used to assess audit risk have been criticized for all of the following reasons except:

A.

Providing a false sense of security that all relevant factors are addressed.

B.

Inappropriately implying equal weight to each item on the checklist.

C.

Decreasing the uniformity of data acquisition.

D.

Being incapable of translating the experience or sound reasoning intended to be captured by
each item on the checklist.

A limitation of using ratio analysis in an audit engagement is that it:

A.

Often uses financial information provided by management which has not been reviewed for
reliability and validity.

B.

Is an expensive method of testing.

C.

Requires computer software in order to develop meaningful interpretations of data.

D.

 Is useful only when comparisons can be made across other industries.

Which of the following would cause a company's accounts receivable turnover ratio to decrease
steadily over a three-year period?

A.

An increase in the discount offered for early payment.

B.

A more liberal credit policy.

C.

Invoices provided on a weekly rather than a monthly basis.

D.

Increased cash sales

Which of the following would be the best audit procedure to use to determine if a division's
unusually high sales and gross margin for November and December were the result of fraudulently
recorded sales?

A.

Trace a sample of shipping documents to related sales invoices to verify proper billing.

B.

Confirm accounts receivable balances with customers.

C.

Compare sales and gross margin totals with those of the previous ten months and the first
month of the following year.

D.

Use regression analysis techniques to estimate the sales and cost of goods sold for November
and December.

Which of the following factors could interfere with effective problem solving by an internal auditor?
I. Reacting to previous experiences with clients.
II. Focusing only on the most likely cause.
III. Correcting the symptoms of problems.

A.

 I only

B.

III only

C.

I and II only

D.

 I, II, and III

A company owns a machine that will produce 100 light switches in four hours. Due to increased
demand, a second machine capable of producing 100 light switches in three hours has been
added.
Approximately how many hours will it take to produce 100 light switches using both machines
working together?

A.

7.0

B.

3.5

C.

 1.7

D.

0.58

A retail sales company has discontinued a product that normally sold for $100. During the first
month of a sale of the product, a 20 percent discount was given. Later that sale price was reduced
by an additional 40 percent. What was the overall discount from the original selling price?

A.

60 percent.

B.

52 percent.

C.

48 percent.

D.

30 percent

A recent survey indicated that residents of a small town take the train to a nearby city eight times
per month, on average. The same survey showed that the number of train trips that a resident
takes per month (y) is determined by the number of days per month that the resident works in the
nearby city (x), according to the equation: y = 2 + 2x. A person who never works in the nearby city
is expected to take the train:

A.

Zero times per month.

B.

Two times per month.

C.

Four times per month.

D.

Eight times per month.

A manager of one of a retailer's several retail outlets is stealing cash from cash sales, recording
the sales as accounts receivable, and subsequently writing off the fictitious accounts receivable as
bad debts. Which of the following comparisons would be most effective in signaling the possibility
of such a fraud?

A.

Bad debt expense as a percentage of sales, compared to that of the other outlets.

B.

Bad debt expense as a percentage of sales, compared to that of previous years.

C.

Percentage of past-due accounts receivable, compared to that of the other outlets.

D.

Percentage of past-due accounts receivable, compared to that of previous years