Question 1

Directional testing involves testing transactions or balances primarily for which type of error?

Accepted Answer

A) overstatement 
B) understatement 
C) either overstatement or understatement 
D) neither overstatement nor understatement 
A) overstatement 
B) understatement 
C) either overstatement or understatement 
D) neither overstatement nor understatement

Question 2

Directional testing
Explain the meaning of "directional testing" and identify the reasons why directional testing leads to audit efficiency.Give examples of directional testing for the existence and completeness assertions.

Accepted Answer

Directional testing involves testing tra

Question 3

Shelfco,Inc.has an inventory report that is approximately 4,000 pages.The audit program requires James Morris,the staff auditor,to test the report for accuracy.What is the most efficient and effective means for James to perform the procedure?

Accepted Answer

A) Ask the client to foot and extend the report and return the results of the test to the auditor for concluding. 
B) Foot and extend every 100th page and extrapolate the results of footing to the total of the report. 
C) Obtain an electronic copy of the file and use generalized audit software in footing and extending. 
D) Skip the procedure as the cost of footing and extending exceeds the benefit derived from the audit test. 
A) Ask the client to foot and extend the report and return the results of the test to the auditor for concluding. 
B) Foot and extend every 100th page and extrapolate the results of footing to the total of the report. 
C) Obtain an electronic copy of the file and use generalized audit software in footing and extending. 
D) Skip the procedure as the cost of footing and extending exceeds the benefit derived from the audit test.

Question 4

Audit procedures for accounts receivable
In the process of gathering and evaluating evidence,documentation is derived in various forms.Rank the following types of evidence in the audit of Accounts Receivable from most persuasive to least persuasive and provide explanations for your decision.
 oral st atement s from management that the accountsre cervable are faifly presentec confirmations receivedfrom customers
deposit slips subsequent to ye ar end showing deposits by cust omer name copies of sales invoices

Accepted Answer

The ranking of these pieces of evidence

Question 5

Sufficient evidence gathered by the auditor involves which of the following?

Accepted Answer

A) The amount of evidence to be obtained. 
B) The type of evidence to be obtained. 
C) Obtaining limited evidence to achieve efficiency. 
D) The use of an audit program to obtain evidence. 
A) The amount of evidence to be obtained. 
B) The type of evidence to be obtained. 
C) Obtaining limited evidence to achieve efficiency. 
D) The use of an audit program to obtain evidence.

Question 6

The audit team asks the client to pull a sample of vendor files and examines the invoices supporting the purchases of inventory items during the year.What is the most probable reason for the use of this evidence?

Accepted Answer

A) Confirmation of vendors supplying inventory for existence. 
B) Analytical procedures to determine completeness of inventory. 
C) Testing for the valuation of inventory using the FIFO cost flow assumption. 
D) Reading the terms of the arrangements with vendors for disclosure. 
A) Confirmation of vendors supplying inventory for existence. 
B) Analytical procedures to determine completeness of inventory. 
C) Testing for the valuation of inventory using the FIFO cost flow assumption. 
D) Reading the terms of the arrangements with vendors for disclosure.

Question 7

Audit documentation should include either manual or electronic initials in order to identify the audit personnel responsible for the work and the managers and partners reviewing the work.

Accepted Answer

A) True 
 B)False

Question 8

Which one of the following would be considered the most persuasive type of audit evidence?

Accepted Answer

A) purchase orders from vendors 
B) customer accounts receivable files 
C) computerized general ledger 
D) confirmations from banks 
A) purchase orders from vendors 
B) customer accounts receivable files 
C) computerized general ledger 
D) confirmations from banks

Question 9

The extent of evidence gathered during an audit is affected by the auditor's assessment of detection risk.

Accepted Answer

A) True 
 B)False

Question 10

The auditor's concern for potential fraud in the financial statements will most likely result in increased testing for the overstatement of revenues.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an example of poorly-developed audit documentation?

Accepted Answer

A) clear communication as to how testing was performed,the results and conclusions. 
B) organization and assembly of documentation in an orderly fashion. 
C) headings that include the name and signature of the client representative that the auditor interacted with while performing testing. 
D) authenticated identification of the person responsible for completing the procedure and conclusions. 
A) clear communication as to how testing was performed,the results and conclusions. 
B) organization and assembly of documentation in an orderly fashion. 
C) headings that include the name and signature of the client representative that the auditor interacted with while performing testing. 
D) authenticated identification of the person responsible for completing the procedure and conclusions.

Question 12

In the performance of audit procedures there is a preference by auditors to focus on changes in account balances during the year if the opening balances were audited the previous year.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following characteristics are not normally included in good audit documentation?

Accepted Answer

A) initials of the person preparing and reviewing the document. 
B) an index. 
C) a cross-reference. 
D) all are included in good audit documentation. 
A) initials of the person preparing and reviewing the document. 
B) an index. 
C) a cross-reference. 
D) all are included in good audit documentation.

Question 14

Directional testing creates audit efficiency by taking advantage of the double-entry bookkeeping system.Which of the following is not a primary reason for this effect?

Accepted Answer

A) misstatement of some accounts are more likely to occur in one direction than the other. 
B) increase the persuasiveness of the evidence. 
C) provides evidence on a complementary set of accounts. 
D) some assertions are directional by nature. 
A) misstatement of some accounts are more likely to occur in one direction than the other. 
B) increase the persuasiveness of the evidence. 
C) provides evidence on a complementary set of accounts. 
D) some assertions are directional by nature.

Question 15

External documentation may lack reliability.Which of the following is the most probable reason for that?

Accepted Answer

A) the external party may be competent in performing duties. 
B) the documentation may be properly understood by the client in the response. 
C) the auditor may decide not to use the documentation and replace it with other documents. 
D) the documentation may have been altered if the process is not controlled from inception. 
A) the external party may be competent in performing duties. 
B) the documentation may be properly understood by the client in the response. 
C) the auditor may decide not to use the documentation and replace it with other documents. 
D) the documentation may have been altered if the process is not controlled from inception.

Question 16

For an auditor to test the existence assertion of assets,testing will be performed beginning with the recorded asset and ending with the source documents.

Accepted Answer

A) True 
 B)False

Question 17

Assertions are not relevant to an audit because they relate to the auditor and financial statements are management's responsibility instead of the auditor's.

Accepted Answer

A) True 
 B)False

Question 18

What is the role of a concurring partner in an audit engagement?

Accepted Answer

A) to provide a "fresh",quality review of the audit documentation and conclusions and its relationship to the opinion. 
B) to go back over the staff,senior and manager work and redo the more difficult areas of the audit. 
C) to work as a liaison between the audit committee and the audit team should there be disagreements. 
D) to act as an advocate of the client in order to ensure quality customer service has been given. 
A) to provide a "fresh",quality review of the audit documentation and conclusions and its relationship to the opinion. 
B) to go back over the staff,senior and manager work and redo the more difficult areas of the audit. 
C) to work as a liaison between the audit committee and the audit team should there be disagreements. 
D) to act as an advocate of the client in order to ensure quality customer service has been given.

Question 19

The extent of procedures is affected mostly by which of the following factors?

Accepted Answer

A) the sheer volume of procedures to be applied by the auditor. 
B) the time of year in which the client takes a physical inventory in the warehouse. 
C) the auditor's judgment that misstatements are probable in certain balances. 
D) the availability of the client's staff at or near the balance sheet date. 
A) the sheer volume of procedures to be applied by the auditor. 
B) the time of year in which the client takes a physical inventory in the warehouse. 
C) the auditor's judgment that misstatements are probable in certain balances. 
D) the availability of the client's staff at or near the balance sheet date.

Question 20

An auditor may test an account balance by testing the transactions that comprise the balance,by directly testing the final account balance,or a combination of both.

Accepted Answer

A) True 
 B)False

Directional testing involves testing transactions or balances primarily for which type of error?

Directional testing Explain the meaning of "directional testing" and identify the reasons why directional testing leads to audit efficiency.Give examples of directional testing for the existence and completeness assertions.

Shelfco,Inc.has an inventory report that is approximately 4,000 pages.The audit program requires James Morris,the staff auditor,to test the report for accuracy.What is the most efficient and effective means for James to perform the procedure?

Sufficient evidence gathered by the auditor involves which of the following?

The audit team asks the client to pull a sample of vendor files and examines the invoices supporting the purchases of inventory items during the year.What is the most probable reason for the use of this evidence?

Audit documentation should include either manual or electronic initials in order to identify the audit personnel responsible for the work and the managers and partners reviewing the work.

Which one of the following would be considered the most persuasive type of audit evidence?

The extent of evidence gathered during an audit is affected by the auditor's assessment of detection risk.

The auditor's concern for potential fraud in the financial statements will most likely result in increased testing for the overstatement of revenues.

Which of the following is an example of poorly-developed audit documentation?

In the performance of audit procedures there is a preference by auditors to focus on changes in account balances during the year if the opening balances were audited the previous year.

Which of the following characteristics are not normally included in good audit documentation?

Directional testing creates audit efficiency by taking advantage of the double-entry bookkeeping system.Which of the following is not a primary reason for this effect?

External documentation may lack reliability.Which of the following is the most probable reason for that?

For an auditor to test the existence assertion of assets,testing will be performed beginning with the recorded asset and ending with the source documents.

Assertions are not relevant to an audit because they relate to the auditor and financial statements are management's responsibility instead of the auditor's.

What is the role of a concurring partner in an audit engagement?

The extent of procedures is affected mostly by which of the following factors?

An auditor may test an account balance by testing the transactions that comprise the balance,by directly testing the final account balance,or a combination of both.

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Auditing Revenue and Related Accounts

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters

Exam 7: A Framework for Audit Evidence

Directional testing involves testing transactions or balances primarily for which type of error?

Directional testing Explain the meaning of "directional testing" and identify the reasons why directional testing leads to audit efficiency.Give examples of directional testing for the existence and completeness assertions.

Shelfco,Inc.has an inventory report that is approximately 4,000 pages.The audit program requires James Morris,the staff auditor,to test the report for accuracy.What is the most efficient and effective means for James to perform the procedure?

Sufficient evidence gathered by the auditor involves which of the following?

The audit team asks the client to pull a sample of vendor files and examines the invoices supporting the purchases of inventory items during the year.What is the most probable reason for the use of this evidence?

Audit documentation should include either manual or electronic initials in order to identify the audit personnel responsible for the work and the managers and partners reviewing the work.

Which one of the following would be considered the most persuasive type of audit evidence?

The extent of evidence gathered during an audit is affected by the auditor's assessment of detection risk.

The auditor's concern for potential fraud in the financial statements will most likely result in increased testing for the overstatement of revenues.

Which of the following is an example of poorly-developed audit documentation?

In the performance of audit procedures there is a preference by auditors to focus on changes in account balances during the year if the opening balances were audited the previous year.

Which of the following characteristics are not normally included in good audit documentation?

Directional testing creates audit efficiency by taking advantage of the double-entry bookkeeping system.Which of the following is not a primary reason for this effect?

External documentation may lack reliability.Which of the following is the most probable reason for that?

For an auditor to test the existence assertion of assets,testing will be performed beginning with the recorded asset and ending with the source documents.

Assertions are not relevant to an audit because they relate to the auditor and financial statements are management's responsibility instead of the auditor's.

What is the role of a concurring partner in an audit engagement?

The extent of procedures is affected mostly by which of the following factors?

An auditor may test an account balance by testing the transactions that comprise the balance,by directly testing the final account balance,or a combination of both.

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Auditing Revenue and Related Accounts

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters