Question 1

The relevance of audit evidence or specific audit procedures depends on the assertion being tested.

Accepted Answer

A) True 
 B)False

Question 2

In creating lead schedules for an audit engagement,what client information is needed to begin?

Accepted Answer

A)  Interim financial information, such as third quarter sales, net income, and inventory and receivables balances. 
B)  Specialized journal information, such as the invoice and purchase order numbers of the last few sales and purchases of the year. 
C)  General ledger information, such as account numbers, prior-year account balances, and current year unadjusted information. 
D)  Adjusting entry information, such as deferrals and accruals and reclassification journal entries. 
A)  Interim financial information, such as third quarter sales, net income, and inventory and receivables balances. 
B)  Specialized journal information, such as the invoice and purchase order numbers of the last few sales and purchases of the year. 
C)  General ledger information, such as account numbers, prior-year account balances, and current year unadjusted information. 
D)  Adjusting entry information, such as deferrals and accruals and reclassification journal entries.

Question 3

An auditor's decision either to apply analytical procedures as substantive procedures or to perform tests of transactions and account balances usually is determined by

Accepted Answer

A)  Availability of data aggregated at a high level. 
B)  Relative effectiveness and efficiency of the tests. 
C)  Timing of tests performed after the balance sheet date. 
D)  Auditor's familiarity with industry trends. 
A)  Availability of data aggregated at a high level. 
B)  Relative effectiveness and efficiency of the tests. 
C)  Timing of tests performed after the balance sheet date. 
D)  Auditor's familiarity with industry trends.

Question 4

Each of the following might,by itself,form a valid basis for an auditor to reduce substantive testing except for the:

Accepted Answer

A)  Difficulty and expense involved in testing a particular item. 
B)  Assessment of control risk at a low level. 
C)  Low inherent risk involved. 
D)  Relationship between the cost of obtaining evidence and its usefulness. 
A)  Difficulty and expense involved in testing a particular item. 
B)  Assessment of control risk at a low level. 
C)  Low inherent risk involved. 
D)  Relationship between the cost of obtaining evidence and its usefulness.

Question 5

An example of an analytical procedure is the comparison of

Accepted Answer

A)  Financial information with similar information regarding the industry in which the entity operates. 
B)  Recorded amounts of major disbursements with appropriate invoices. 
C)  Results of a statistical sample with the expected characteristics of the actual population. 
D)  EDP generated data with similar data generated by a manual accounting system. 
A)  Financial information with similar information regarding the industry in which the entity operates. 
B)  Recorded amounts of major disbursements with appropriate invoices. 
C)  Results of a statistical sample with the expected characteristics of the actual population. 
D)  EDP generated data with similar data generated by a manual accounting system.

Question 6

You are concerned with unrecorded transactions in the purchasing cycle.Which audit procedure are you most likely to use when auditing purchases?

Accepted Answer

A)  Vouching transactions in accounting records to vendor invoices. 
B)  Tracing vendor invoices to accounting records. 
C)  Recalculation of vendor invoice amounts. 
D)  Confirmation of customer accounts. 
A)  Vouching transactions in accounting records to vendor invoices. 
B)  Tracing vendor invoices to accounting records. 
C)  Recalculation of vendor invoice amounts. 
D)  Confirmation of customer accounts.

Question 7

The auditor gathers audit evidence to test management's assertions.

Accepted Answer

A) True 
 B)False

Question 8

Audit documentation prepared on audits of public clients is the property of the

Accepted Answer

A)  Shareholders. 
B)  Auditor. 
C)  Management of the entity being audited. 
D)  SEC. 
A)  Shareholders. 
B)  Auditor. 
C)  Management of the entity being audited. 
D)  SEC.

Question 9

Which statement concerning audit evidence is not valid?

Accepted Answer

A)  The auditor is seldom convinced beyond all doubt with respect to all aspects of the financial statements being audited. 
B)  The auditor performs tests to collect convincing evidence that the financial statements are not misstated. 
C)  The auditor weighs the cost of obtaining evidence with its usefulness. 
D)  The auditor considers the amount of risk present in deciding the nature and extent of evidence to be collected. 
A)  The auditor is seldom convinced beyond all doubt with respect to all aspects of the financial statements being audited. 
B)  The auditor performs tests to collect convincing evidence that the financial statements are not misstated. 
C)  The auditor weighs the cost of obtaining evidence with its usefulness. 
D)  The auditor considers the amount of risk present in deciding the nature and extent of evidence to be collected.

Question 10

The text discusses three main purposes for performing audit procedures.List and describe these three main categories of audit procedures and describe their purpose.

Accepted Answer

Risk assessment procedures: Risk assessm

Question 11

Which of the following are ordinarily designed to detect possible material monetary errors in the financial statements?

Accepted Answer

A)  Tests of controls. 
B)  Analytical procedures. 
C)  Computer controls. 
D)  Post-audit review of audit documents. 
A)  Tests of controls. 
B)  Analytical procedures. 
C)  Computer controls. 
D)  Post-audit review of audit documents.

Question 12

Which of the following presumptions does not relate to the appropriateness of audit evidence?

Accepted Answer

A)  The more effective the internal control system, the more assurance it provides about the accounting data and financial statements. 
B)  An auditor's opinion, to be economically useful, is formed within a reasonable time and based on evidence obtained at a reasonable cost. 
C)  Evidence obtained from independent sources outside the entity is more reliable than evidence secured solely within the entity. 
D)  The independent auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly. 
A)  The more effective the internal control system, the more assurance it provides about the accounting data and financial statements. 
B)  An auditor's opinion, to be economically useful, is formed within a reasonable time and based on evidence obtained at a reasonable cost. 
C)  Evidence obtained from independent sources outside the entity is more reliable than evidence secured solely within the entity. 
D)  The independent auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly.

Question 13

Which of the following presumptions is correct about the reliability of audit evidence?

Accepted Answer

A)  Information obtained indirectly from outside sources is the most reliable audit evidence. 
B)  To be reliable, audit evidence should be convincing rather than persuasive. 
C)  Reliability of audit evidence refers to the amount of corroborative evidence obtained. 
D)  An effective internal control system provides more reliable audit evidence. 
A)  Information obtained indirectly from outside sources is the most reliable audit evidence. 
B)  To be reliable, audit evidence should be convincing rather than persuasive. 
C)  Reliability of audit evidence refers to the amount of corroborative evidence obtained. 
D)  An effective internal control system provides more reliable audit evidence.

Question 14

The permanent (continuing)file of an auditor's working papers most likely would include copies of the

Accepted Answer

A)  Bank statements. 
B)  Debt agreements. 
C)  Lead schedules. 
D)  Attorney's letters. 
A)  Bank statements. 
B)  Debt agreements. 
C)  Lead schedules. 
D)  Attorney's letters.

Question 15

In designing written audit programs,an auditor should plan specific audit procedures to test

Accepted Answer

A)  Timing of audit procedures. 
B)  Cost-benefit of gathering evidence. 
C)  Selected audit techniques. 
D)  Management assertions. 
A)  Timing of audit procedures. 
B)  Cost-benefit of gathering evidence. 
C)  Selected audit techniques. 
D)  Management assertions.

Question 16

Which of the following procedures would an auditor most likely perform to verify management's assertion of completeness?

Accepted Answer

A)  Compare a sample of shipping documents to related sales invoices. 
B)  Observe the client's distribution of payroll checks. 
C)  Confirm a sample of recorded receivables by direct communication with the debtors. 
D)  Review standard bank confirmations for indications of kiting. 
A)  Compare a sample of shipping documents to related sales invoices. 
B)  Observe the client's distribution of payroll checks. 
C)  Confirm a sample of recorded receivables by direct communication with the debtors. 
D)  Review standard bank confirmations for indications of kiting.

Question 17

Which of the following types of documentary evidence should the auditor consider to be the most reliable?

Accepted Answer

A)  A sales invoice issued by the client and supported by a delivery receipt from an outside trucker. 
B)  Confirmation of an account payable balance mailed by and returned directly to the auditor. 
C)  A check issued by the company and bearing the payee's endorsement that is included with the bank statement mailed directly to the auditor. 
D)  A working paper prepared by the client's controller and reviewed by the client's treasurer. 
A)  A sales invoice issued by the client and supported by a delivery receipt from an outside trucker. 
B)  Confirmation of an account payable balance mailed by and returned directly to the auditor. 
C)  A check issued by the company and bearing the payee's endorsement that is included with the bank statement mailed directly to the auditor. 
D)  A working paper prepared by the client's controller and reviewed by the client's treasurer.

Question 18

The completeness assertion refers to ensuring that transactions and events that should have been recorded actually have been recorded.

Accepted Answer

A) True 
 B)False

Question 19

Audit documentation

Accepted Answer

A)  Must be in electronic form. 
B)  Must be in paper form only. 
C)  Is not required, but is strongly recommended. 
D)  May be in paper, electronic, or some other form. 
A)  Must be in electronic form. 
B)  Must be in paper form only. 
C)  Is not required, but is strongly recommended. 
D)  May be in paper, electronic, or some other form.

Question 20

Which of the following is an essential factor in evaluating the sufficiency of evidence? The evidence must

Accepted Answer

A)  Be well documented and cross-referenced in the audit documents. 
B)  Be based on sources that are considered reliable. 
C)  Bear a direct relationship to the audit assertion. 
D)  Be persuasive enough to enable the auditor to form an opinion. 
A)  Be well documented and cross-referenced in the audit documents. 
B)  Be based on sources that are considered reliable. 
C)  Bear a direct relationship to the audit assertion. 
D)  Be persuasive enough to enable the auditor to form an opinion.

Exam 5: Evidence and Documentation

The relevance of audit evidence or specific audit procedures depends on the assertion being tested.

In creating lead schedules for an audit engagement,what client information is needed to begin?

An auditor's decision either to apply analytical procedures as substantive procedures or to perform tests of transactions and account balances usually is determined by

Each of the following might,by itself,form a valid basis for an auditor to reduce substantive testing except for the:

An example of an analytical procedure is the comparison of

You are concerned with unrecorded transactions in the purchasing cycle.Which audit procedure are you most likely to use when auditing purchases?

The auditor gathers audit evidence to test management's assertions.

Audit documentation prepared on audits of public clients is the property of the

Which statement concerning audit evidence is not valid?

The text discusses three main purposes for performing audit procedures.List and describe these three main categories of audit procedures and describe their purpose.

Which of the following are ordinarily designed to detect possible material monetary errors in the financial statements?

Which of the following presumptions does not relate to the appropriateness of audit evidence?

Which of the following presumptions is correct about the reliability of audit evidence?

The permanent (continuing)file of an auditor's working papers most likely would include copies of the

In designing written audit programs,an auditor should plan specific audit procedures to test

Which of the following procedures would an auditor most likely perform to verify management's assertion of completeness?

Which of the following types of documentary evidence should the auditor consider to be the most reliable?

The completeness assertion refers to ensuring that transactions and events that should have been recorded actually have been recorded.

Audit documentation

Which of the following is an essential factor in evaluating the sufficiency of evidence? The evidence must

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning,Types of Audit Tests,and Materiality

Risk Assessment

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,and Internal Auditing Services

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