10. Which of the following would the auditor be most concerned about regarding a heightened risk of intentional misstatement?
(A) Senior management emphasizes that it is very important to beat analyst estimates of earnings every reporting period.
(B) Senior management emphasizes that budgeted amounts for expenses are to be achieved for each reporting period or explained in the variance analysis report.
(C) Senior management emphasizes that job rotation is a worthwhile corporate objective.
(D) Senior management emphasizes that job evaluations are based on performance.

6. The test of details of balances procedure that requires the auditor to foot the outstanding check and electronic payment list and deposits in transit is an attempt to satisfy which audit objective? (A) cutoff (B) presentation and disclosure (C) detail tie-in (D) completeness

7. Which of the following is not a common audit procedure used to search for contingent liabilities? (A) examine letters of credit (B) examine payroll reports (C) review internal revenue agent reports (D) analyze legal expense

8. Which of the following statements is FALSE? (A) It is possible for management to design an ideal and effective system of internal controls for example over the counting of the physical inventory. (B) If an auditor wishes to rely on the work of internal auditors (IA), the auditor must obtain satisfactory evidence related to the IA's competence, integrity, and objectivity. (C) Personnel responsible for performing internal verification procedures must be independent of those originally responsible for preparing the data. (D) Parallel testing is used when old and new systems are operated simultaneously in all locations. 

9. The test of transactions which requires one to "reconcile recorded cash disbursements with the cash disbursements on the bank statement" satisfies the objective of (A) occurrence. (B) completeness. (C) accuracy. (D) posting and summarization.

11. After the balance sheet date, but prior to the issuance of the audit report, the client suffers an uninsured loss of their inventory as a result of a fire. The amount of the loss is material. The auditor should (A) adjust the financial statements for the year under audit. (B) add a paragraph to the audit report. (C) advise the client to disclose the event in the notes to the financial statements. (D) advise the client to delay issuing the financial statements until the economic loss can be determined.

12. In which of the following circumstances would an auditor most likely express an adverse opinion? (A) The CEO refuses to let the auditor have access to the board of director meeting minutes. (B) Tests of controls show that the internal control structure is so poor that the auditor has to assess control risk at the maximum. (C) Information comes to the auditor's attention that raises substantial doubt about the ability for the client to continue as a going concern. (D) The financial statements are not in conformity with the IFRS statement on loss contingencies. 

1. (5%) Which of the following stateme (A) A steady state repres esents a competitive equilibrium of the economy. ents is correct? (B) in a steady state, investment is equal to zero. (C) An economy always converges to a steady state. (D) If two economies are identical, but one economy has a higher saving rate, then the steady-state level of per capita output in the economy with the higher saving rate will be at a higher level than in the steady state of the low-saving economy.

2. (5%) In the Solow growth model, others being equal, an economy with a higher population growth rate: (A) has the same living standard as other countries. (B) tends to be the high-income-producing countries in the world. (C) faces capital dilution, thereby having a lower level of income per worker. (D) has a higher steady-state saving rate.

3. (5%) Which of the following staternents is correct? (A) In a closed economy, introducing a pay-as-you-go social security system increases the incentive of saving, thereby raising the capital stock. (B) In equilibrium, an increase in the marginal tax rate on labor income increases the demand for capital. (C) An increase in the marginal tax rate on asset income reduces investment in the short run and therefore reduces real GDP in the long run. (D) The average income tax is the change in income taxes when income changes one dollar.

4. (5%) Which of the following statem ments is incorrect? (A) The real return on money at hand (cash) is the negative inflation rate. (B) in a closed economy, it is the interest rate adjustment that brings the money market into an equilibrium. (C) If the real interest rate increases, the demand on money declines. (D) The natural rate of interest is the real interest rate at which the demand for goods and services equals the natural rate of output.