MT1S99

Answer Sheet for Audit Midterm I Spring 1999

Q-Bank Test Correct Answer

1 1 B - -~ -

1 17 2 A

2 23 3 C

2 22 4 C

2 21 5 A

2 34 6 C

2 38 7 D

5 22 8 C

5 21 9 D

5 30 10 A

5 29 11 B

5 31 12 B

5 40 13 C

6 25 14 A

6 37 15 C

6 49 16 A

6 39 17 B

6 29 l8 A

7 24 19 D

7 36 20 A

7 26 21 D

7 38 22 C

7 30 23 D

7 48 24 B

7 46 25 C

7 13 26 B

8 26 27 C

8 36 28 B

8 46 29 A

8 45 30 D

8 35 31 B

8 23 32 B

8 12 33 D

8 18 34 B

8 30 35 A

10 15 36 C

10 14 37 D

10 13 38 C

10 27 39 C

10 18 40 B

 

41

(a) In a data-base system separate files are replaced with an

integrated data-base that is shared by many application programs.

(b) Controls over data-base systems include:

* A system of user identification numbers and passwords should be used

to restrict specific date to authorized personnel.

* Terminal activity should be loqged by the operating system for

subsequent review for unauthorized access to data.

* The responsibility for updatinq specific data should be assigned to a

specific department.

42.

(a) The auditors' consideration of their clients' internal control is integral to both (1) the planning of the audit and (2) the assessing of control risk.

 

(b) The limitations of internal control include (only three required)

 

* Carelessness.

* Misunderstanding of instructions.

* Top management may override the system

* Collusion among employees may circumvent controls dependent upon segregation of duties.

* Cost considerations often limit the effectiveness of the design of the structure.

 

 

43. (a) Assertions made by management in financial statements include (only three required)

 

* Existence and occurrence--assets, liabilities, and owners' equity reflected in the financial statements cr50; the recorded transactions have occurred.

* Completeness--all transactions, assets liabilities, and owners equity that should be presented in the financial statements are included.

* Rights and obligations--the client has rights to assets and obligations to pay liabilities oat are included in the financial statements.

* Valuation or allocation- -assets, liabilities, owners' equity, revenues, and expenses are presented at amounts that are determined in accordance with generally accepted accounting principles.

* Presentation and disclosure--accounts are described and classified in the financial statements in accordance with generally accepted accounting principles and all material disclosures are provided.

(b) General objectives for the audit of asset accounts include (only

three required(

 

* Establish the existence of assets.

* Establish that the company has the rights to the assets.

* Establish completeness of recorded assets.

* Determine the appropriate valuation of the assets.

* Establish the clerical accuracy of the underlying records.

* Determine the appropriate financial statement presentation and

disclosure of the assets.

 

44.

(a) Introductory paragraph--describes the financial statements being auditing and the responsibilities of management and the auditors.

 

Scope paragraph--describes the nature of an audit and indicates whether the audit was performed in accordance with generally accepted auditing standards.

 

Opinion paragraph--expresses the auditors opinion on the financial statements.

 

(b) The report should be entitled "Independent Auditors' Report." The date is the last day of significant field work."