WGU D215 Auditing ACTUAL EXAM
COMPLETE 100 QUESTIONS AND
CORRECT DETAILED ANSWERS
WITH RATIONALES (VERIFIED
ANSWERS) |ALREADY GRADED A+
Client's records of the initial accounting entry and supporting
documents. Acid-test (quick) ratio - ANSWER//Measures ability
to meet short-term obligations with liquid assets such as cash,
short-term investments, and receivables. Advance shipping
notice (ASN) - ANSWER//An electronic acknowledgement of a
transaction by a supplier indicating goods shipped, prices, and
other information such as freight costs or taxes. Adverse
interest threat - ANSWER//The threat that a CPA will not act
with objectivity because the CPA's interests are opposed to the
client's interests. Adverse opinion - ANSWER//Auditors state
the financial statements are not fairly presented due to a
pervasively material departure from the applicable financial
reporting framework. Advocacy threat - ANSWER//The threat
that a CPA will promote a client's interests or position to the
point that his or her objectivity or independence is
compromised. Allowance for sampling risk (ASR) - ANSWER//A
measure of the uncertainty associated with not sampling the
entire population. Analytical procedures -
ANSWER//Evaluations of financial information through analysis
of plausible relationships among both financial and nonfinancial
data; analytical procedures also encompass such investigation,
as is necessary, of identified fluctuations or relationships that
are inconsistent with other relevant information or that differ
from expected values by a significant amount. Appropriate -
ANSWER//Refers to the quality of audit evidence gathered.
Assertions - ANSWER//Statements or representations, explicit
or implied, made by management regarding the recognition,
,measurement, presentation, and disclosure of items included in
the financial statements. Assurance services -
ANSWER//Independent professional services that improve the
quality of information, or its context, for decision makers.
Attestation services - ANSWER//Services performed when an
independent practitioner, or CPA, is engaged to issue a report
on subject matter that is the responsibility of another party.
Attribute sampling - ANSWER//A sampling technique used to
reach a conclusion about a population in terms of a rate
(frequency) of occurrence. Audit committee - ANSWER//A
committee of the board of directors responsible for oversight
of internal controls, financial reporting and disclosure in the
financial statements, regulatory compliance, and the
company's independent auditors. Audit data analytics (ADA) -
ANSWER//The science and art of discovering and analyzing
patterns, identifying anomalies, and extracting other useful
information in data underlying or related to the subject matter
of an audit through analysis, modeling, and visualization for
planning and performing the audit. Audit evidence -
ANSWER//Information gathered by the auditor that is used
when forming an opinion on the fair presentation of a client's
financial statements. Audit program - ANSWER//A listing of
details of the audit procedures to be used when testing
controls, conducting detailed substantive audit procedures, and
completing the audit. Audit risk - ANSWER//The risk that an
auditor expresses an inappropriate audit opinion when the
financial statements are materially misstated. Audit sampling -
ANSWER//The selection and evaluation of less than 100% of
the population of audit relevance such that the auditor expects
the items selected (the sample) to be representative of the
population and, thus, likely to provide a reasonable basis for
conclusions about the population. Audit services -
ANSWER//Services by an independent CPA that provide
financial statement users with (1) an opinion on whether the
financial statements are presented fairly, in all material
,respects, in accordance with an applicable financial reporting
framework and, in some cases, (2) an opinion on the
effectiveness of ICFR, which enhances the degree of confidence
that intended users can place in the financial statements. Audit
strategy - ANSWER//The determination of the amount of time
spent testing the client's internal controls and conducting
detailed testing of transactions and account balances. Bank
confirmation - ANSWER//Correspondence sent directly by the
auditors to their client's bank requesting information such as
cash held in the bank and details of any loans with the bank
and interest rates charged. Basic precision (BP) - ANSWER//The
amount of estimated misstatement in the population, even if
no misstatements are detected in the sample. Benchmarking -
ANSWER//An audit testing strategy that can be used to allow
evidence obtained in prior audit periods to support a
conclusion about IT application controls in the current audit
period. Bid rigging - ANSWER//An employee assists a vendor in
winning a competitive bid for a contract; employee is
compensated, usually in the form of a cash payment. Bill-and-
hold transactions - ANSWER//A customer is billed for goods,
but goods are not shipped; accounting principles have very
narrow criteria for when revenue can be recognized for a bill-
and-hold transaction; the transaction must be initiated by the
customer, and the customer must have a sound economic
reason for purchasing the goods and asking the seller to
continue to hold the goods. Board of directors - ANSWER//A
group that represents the shareholders and is responsible for
ensuring the company is being run to benefit the shareholders.
Bond trustee - ANSWER//A bond trustee is usually a
commercial bank or a trust company that is given fiduciary
powers by a bond issuer to enforce the terms of a bond
indenture; the trustee sees that bond interest payments are
made as scheduled and protects the interests of the
bondholders if the issuer defaults. Breach of contract -
ANSWER//A binding agreement is not honored by one or more
, parties to a contract. Cash earnings per share (CEPS) ratio -
ANSWER//Shows cash flow capacity of a company for each
common share issued. Classical variables sampling -
ANSWER//A sampling method that uses normal distribution
theory to select a sample from a population and evaluate the
characteristics of a population based on the results of the
sample. Close relative - ANSWER//A covered member's parents,
nondependent children, brothers and sisters, or stepbrothers
or stepsisters. Closing procedures - ANSWER//Processes used
by a client when finalizing the accounts for an accounting
period. Cluster analysis - ANSWER//The process of discovering
groups (termed clusters in data science) of similar items in a set
of data; items in the same group are similar, while items in
different groups are not as similar. Common law -
ANSWER//Law based on justice, reason, and common sense,
rather than on absolute rules. Common-size analysis -
ANSWER//A comparison of account balances to a single line
item. Compilation engagement - ANSWER//An engagement in
which a CPA applies accounting and financial expertise to assist
management in the presentation of financial statements
without undertaking to obtain or provide any assurance that
there are no material modifications that should be made to the
financial statements for them to be in accordance with the
applicable financial reporting framework. Compilation of
inventory values - ANSWER//The client's documentation behind
the value for inventory in the general ledger; this shows the
quantity of each item in inventory and the values assigned to
each item in inventory. Compliance audit - ANSWER//An audit
to determine whether the entity has conformed with
regulations, rules, or processes. Component - ANSWER//An
entity or business activity whose financial information is
required by an applicable financial reporting framework to be
included in group financial statements. Component auditor -
ANSWER//An audit firm that performs work on the financial
information of a component that will be used as audit evidence
COMPLETE 100 QUESTIONS AND
CORRECT DETAILED ANSWERS
WITH RATIONALES (VERIFIED
ANSWERS) |ALREADY GRADED A+
Client's records of the initial accounting entry and supporting
documents. Acid-test (quick) ratio - ANSWER//Measures ability
to meet short-term obligations with liquid assets such as cash,
short-term investments, and receivables. Advance shipping
notice (ASN) - ANSWER//An electronic acknowledgement of a
transaction by a supplier indicating goods shipped, prices, and
other information such as freight costs or taxes. Adverse
interest threat - ANSWER//The threat that a CPA will not act
with objectivity because the CPA's interests are opposed to the
client's interests. Adverse opinion - ANSWER//Auditors state
the financial statements are not fairly presented due to a
pervasively material departure from the applicable financial
reporting framework. Advocacy threat - ANSWER//The threat
that a CPA will promote a client's interests or position to the
point that his or her objectivity or independence is
compromised. Allowance for sampling risk (ASR) - ANSWER//A
measure of the uncertainty associated with not sampling the
entire population. Analytical procedures -
ANSWER//Evaluations of financial information through analysis
of plausible relationships among both financial and nonfinancial
data; analytical procedures also encompass such investigation,
as is necessary, of identified fluctuations or relationships that
are inconsistent with other relevant information or that differ
from expected values by a significant amount. Appropriate -
ANSWER//Refers to the quality of audit evidence gathered.
Assertions - ANSWER//Statements or representations, explicit
or implied, made by management regarding the recognition,
,measurement, presentation, and disclosure of items included in
the financial statements. Assurance services -
ANSWER//Independent professional services that improve the
quality of information, or its context, for decision makers.
Attestation services - ANSWER//Services performed when an
independent practitioner, or CPA, is engaged to issue a report
on subject matter that is the responsibility of another party.
Attribute sampling - ANSWER//A sampling technique used to
reach a conclusion about a population in terms of a rate
(frequency) of occurrence. Audit committee - ANSWER//A
committee of the board of directors responsible for oversight
of internal controls, financial reporting and disclosure in the
financial statements, regulatory compliance, and the
company's independent auditors. Audit data analytics (ADA) -
ANSWER//The science and art of discovering and analyzing
patterns, identifying anomalies, and extracting other useful
information in data underlying or related to the subject matter
of an audit through analysis, modeling, and visualization for
planning and performing the audit. Audit evidence -
ANSWER//Information gathered by the auditor that is used
when forming an opinion on the fair presentation of a client's
financial statements. Audit program - ANSWER//A listing of
details of the audit procedures to be used when testing
controls, conducting detailed substantive audit procedures, and
completing the audit. Audit risk - ANSWER//The risk that an
auditor expresses an inappropriate audit opinion when the
financial statements are materially misstated. Audit sampling -
ANSWER//The selection and evaluation of less than 100% of
the population of audit relevance such that the auditor expects
the items selected (the sample) to be representative of the
population and, thus, likely to provide a reasonable basis for
conclusions about the population. Audit services -
ANSWER//Services by an independent CPA that provide
financial statement users with (1) an opinion on whether the
financial statements are presented fairly, in all material
,respects, in accordance with an applicable financial reporting
framework and, in some cases, (2) an opinion on the
effectiveness of ICFR, which enhances the degree of confidence
that intended users can place in the financial statements. Audit
strategy - ANSWER//The determination of the amount of time
spent testing the client's internal controls and conducting
detailed testing of transactions and account balances. Bank
confirmation - ANSWER//Correspondence sent directly by the
auditors to their client's bank requesting information such as
cash held in the bank and details of any loans with the bank
and interest rates charged. Basic precision (BP) - ANSWER//The
amount of estimated misstatement in the population, even if
no misstatements are detected in the sample. Benchmarking -
ANSWER//An audit testing strategy that can be used to allow
evidence obtained in prior audit periods to support a
conclusion about IT application controls in the current audit
period. Bid rigging - ANSWER//An employee assists a vendor in
winning a competitive bid for a contract; employee is
compensated, usually in the form of a cash payment. Bill-and-
hold transactions - ANSWER//A customer is billed for goods,
but goods are not shipped; accounting principles have very
narrow criteria for when revenue can be recognized for a bill-
and-hold transaction; the transaction must be initiated by the
customer, and the customer must have a sound economic
reason for purchasing the goods and asking the seller to
continue to hold the goods. Board of directors - ANSWER//A
group that represents the shareholders and is responsible for
ensuring the company is being run to benefit the shareholders.
Bond trustee - ANSWER//A bond trustee is usually a
commercial bank or a trust company that is given fiduciary
powers by a bond issuer to enforce the terms of a bond
indenture; the trustee sees that bond interest payments are
made as scheduled and protects the interests of the
bondholders if the issuer defaults. Breach of contract -
ANSWER//A binding agreement is not honored by one or more
, parties to a contract. Cash earnings per share (CEPS) ratio -
ANSWER//Shows cash flow capacity of a company for each
common share issued. Classical variables sampling -
ANSWER//A sampling method that uses normal distribution
theory to select a sample from a population and evaluate the
characteristics of a population based on the results of the
sample. Close relative - ANSWER//A covered member's parents,
nondependent children, brothers and sisters, or stepbrothers
or stepsisters. Closing procedures - ANSWER//Processes used
by a client when finalizing the accounts for an accounting
period. Cluster analysis - ANSWER//The process of discovering
groups (termed clusters in data science) of similar items in a set
of data; items in the same group are similar, while items in
different groups are not as similar. Common law -
ANSWER//Law based on justice, reason, and common sense,
rather than on absolute rules. Common-size analysis -
ANSWER//A comparison of account balances to a single line
item. Compilation engagement - ANSWER//An engagement in
which a CPA applies accounting and financial expertise to assist
management in the presentation of financial statements
without undertaking to obtain or provide any assurance that
there are no material modifications that should be made to the
financial statements for them to be in accordance with the
applicable financial reporting framework. Compilation of
inventory values - ANSWER//The client's documentation behind
the value for inventory in the general ledger; this shows the
quantity of each item in inventory and the values assigned to
each item in inventory. Compliance audit - ANSWER//An audit
to determine whether the entity has conformed with
regulations, rules, or processes. Component - ANSWER//An
entity or business activity whose financial information is
required by an applicable financial reporting framework to be
included in group financial statements. Component auditor -
ANSWER//An audit firm that performs work on the financial
information of a component that will be used as audit evidence
