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86 multiple-choice questions and 50 flashcards on Audit procedures, about 21% of the CPA AUD bank. Every one carries a written rationale.
Audit procedures is one of 6 chapters in CoStudy's CPA — Auditing & Attestation (AUD) [Core] bank, and it holds 86 of the bank's 410 multiple-choice questions — roughly 21% of the total. That proportion is not arbitrary: chapters follow the certifying body's published exam outline, and the number of questions in each is set by that domain's published weight, so the share of your practice time this chapter takes matches the share of the real exam it accounts for.
Studying by chapter is worth doing once you have a diagnostic score. A single overall percentage tells you whether you are close; it does not tell you which domain is dragging. Working a weak chapter in isolation, and re-testing it in isolation, is the fastest way to move a score that has stalled — and it is why the mock exams in CoStudy report by domain rather than as one number.
10 questions drawn from this chapter, with the full rationale shown — the controlling principle behind the right answer, and why each wrong option tempts and fails.
Which of the following BEST describes a fundamental difference between statistical and nonstatistical sampling?
Answer: B — Statistical sampling uses random selection and probability theory to measure sampling risk and evaluate results, while nonstatistical sampling relies on the auditor's judgment and does not quantify sampling risk using probability theory
A) Sampling risk must be considered under both approaches; the difference lies in whether it is quantified using probability theory, not whether it is considered at all. C) Both sampling approaches may be applied to tests of controls or substantive tests of details; the distinction is not tied to the type of test. D) No sampling approach, statistical or nonstatistical, eliminates sampling risk entirely. B) Correct — this captures the core methodological distinction between the two approaches.
If the risk of assessing control risk too low (risk of overreliance) is set at a LOWER level, the required attribute sample size will:
Answer: D — increase, because greater assurance requires more evidence
A) A lower acceptable risk of overreliance means the auditor wants more assurance, which requires a larger sample, not fewer items. B) Risk of overreliance is a direct input into sample-size determination. C) Tolerable misstatement is a substantive-testing (dollar) concept, not the driver of attribute sample size for controls testing. D) Correct — setting a lower risk of overreliance, wanting greater confidence that controls really are effective, requires a larger sample size.
The 'search for unrecorded liabilities' primarily tests which assertion for accounts payable?
Answer: D — Completeness of the payable
A) Existence tests move from records to source (vouching). B) Rights/obligations relate to whether the entity owes the liability. C) Valuation relates to measurement. D) Correct — reviewing subsequent disbursements and unmatched receivers tests completeness of period-end liabilities.
Under AU-C 250, the auditor's responsibility for laws and regulations that have a DIRECT effect on the determination of material amounts in the financial statements (e.g., tax law provisions affecting the tax accrual) is to:
Answer: C — Obtain sufficient appropriate audit evidence about compliance with those provisions
A) Direct-effect laws require more than the limited inquiry-based procedures applicable to indirect-effect laws, since these provisions directly determine financial statement amounts. B) While management is responsible for compliance, the auditor still must obtain evidence about direct-effect provisions because they affect the financial statements being audited. C) Correct — for laws and regulations with a direct effect on determining material financial statement amounts, the auditor obtains sufficient appropriate audit evidence regarding compliance. D) Auditors do not routinely report to regulators before issuing their report; reporting outside the entity is limited to specific, narrow circumstances.
The Standard Bank Confirmation form typically requests information about all of the following EXCEPT:
Answer: A — The bank's internal audit findings on the branch
D) Deposit balances are a standard confirmation item. B) Loan balances are requested. C) Compensating balances are requested. A) Correct — the bank's internal audit findings are NOT part of the Standard Bank Confirmation.
Positive confirmations differ from negative confirmations in that:
Answer: A — Positive confirmations request a response in all cases
A) Correct — positive confirmations request a reply whether or not the recipient agrees, so silence is a follow-up matter. Negative confirmations ask for a reply only if the recipient disagrees. B) Positive confirmations are preferred for higher-risk balances. C) Notarization is not required. D) All confirmation testing is subject to sampling risk.
A key precondition for using classical variables sampling techniques such as mean-per-unit estimation is that:
Answer: D — the sample size and precision are based on the estimated variability (standard deviation) of the population
A) There is no fixed 100-item ceiling or floor for classical variables sampling. B) Items need not share identical book values; the technique is designed for populations with dollar variability. C) Stratification is commonly used WITH classical variables sampling to improve precision, not prohibited. D) Correct — classical variables sampling relies on statistical theory where required sample size and achieved precision are functions of the population's estimated variability (standard deviation), unlike PPS, which relies on dollar-unit sampling.
Which of the following would MOST likely limit the effectiveness of a substantive analytical procedure applied to an expense account?
Answer: D — The account is significantly affected by unusual, one-time management decisions each period
A) A well-controlled, predictable process supports effective use of analytics, rather than limiting it. B) Available corroborating industry data strengthens, rather than limits, the procedure. C) Historical stability supports precise expectations, which strengthens the analytic. D) Correct — when balances are driven by unpredictable, discretionary management decisions rather than consistent relationships, expectations become imprecise, limiting the analytical procedure's effectiveness and often requiring tests of details instead.
External confirmations from third parties are generally MOST useful for testing:
Answer: B — Existence and completeness of cash and receivables
A) Intangible valuations typically require specialist input. B) Correct — confirmations from banks, customers, and lenders provide strong evidence about existence (and, for some accounts, completeness) of cash, receivables, and debt. C) Classification is tested through document inspection. D) Disclosure adequacy is tested by review, not confirmation.
Under ASC 606, revenue is recognized when (or as) the entity satisfies:
Answer: C — A performance obligation in a contract
A) Payment timing does not drive recognition. B) Internal budgets are not the criterion. C) Correct — ASC 606's five-step model recognizes revenue when (or as) the entity satisfies a performance obligation by transferring control of goods or services. D) Auditor testing does not drive recognition.
4 cards from the 50 in this chapter.
How does disaggregation improve the precision of a substantive analytical procedure?
Developing the expectation at a more disaggregated level (e.g., by month and location, rather than an annual company-wide total) narrows the range of plausible outcomes and increases the procedure's ability to detect a material misstatement.
If the omitted procedure is important and reliance continues, what should the auditor do?
Apply the omitted procedure, or an appropriate alternative, as promptly as practicable.
What is the core methodological difference between statistical and nonstatistical sampling?
Statistical sampling uses random selection and probability theory to measure sampling risk and evaluate results objectively; nonstatistical sampling relies on auditor judgment without quantifying sampling risk via probability theory.
Auditing accounting estimates?
Evaluate reasonableness, develop independent expectation, review subsequent events.
These are a sample. The full Audit procedures chapter runs 136 items with per-chapter progress tracking, on the web and in the iOS app.