Question 1

Discuss three of the following influences on the persuasiveness of evidence.
1.Relevance
2.Independence of provider
3.Effectiveness of client's internal controls
4.Auditor's direct knowledge
5.Degree of objectivity
6.Timeliness

Accepted Answer

The answer of Discuss three of the following influences on...

Question 2

An example of a document the auditor receives from the client,but which was prepared by someone outside the client's organization,is a:

Accepted Answer

A)  confirmation. 
B)  sales invoice. 
C)  vendor invoice. 
D)  bank reconciliation.

Question 3

A(n)________ is the detailed instruction that explains the audit evidence to be obtained during the audit.

Accepted Answer

A)  audit objectives 
B)  audit procedure 
C)  audit assertion 
D)  audit program

Question 4

When analytical procedures reveal unusual fluctuations in an account balance,the auditor will probably perform fewer tests of details for that account and increase the tests of controls related to the account.

Accepted Answer

A) True 
 B)False

Question 5

Auditing standards require that records for audits of private companies be retained for a minimum of seven years.

Accepted Answer

A) True 
 B)False

Question 6

Match nine of the terms (a-k)with the definitions provided below (1-9):
a.Foot
b.Compute
c.Scan
d.Inquire
e.Count
f.Trace
g.Reperform
h.Read
i.Examine
j.Observe
k.Compare
________ 1.A calculation done by the auditor independent of the client.
________ 2.Addition of a column of numbers to determine if the total is the same as the client's.
________ 3.A comparison of information in two different locations.
________ 4.A use of the senses to assess certain activities.
________ 5.Following details of transactions from original documents to journals.
________ 6.A less detailed examination of a document or record to determine if there is something unusual warranting further investigation.
________ 7.Obtaining information from the client in response to specific questions.
________ 8.A determination of assets on hand at a given time.
________ 9.An examination of written information to determine facts pertinent to the audit.

Accepted Answer

The answer of Match nine of the terms (a-k)with the...

Question 7

Auditors must make decisions regarding what evidence to gather and how much to accumulate.Which of the following is a decision that must be made by auditors related to evidence?

Accepted Answer

A)   
B)   
C)   
D)

Question 8

Indicate whether confirmation of accounts receivable and accounts payable,provided they each are significant accounts,is required or optional:

Accepted Answer

A)   
B)   
C)   
D)

Question 9

You are auditing the company's purchasing process for goods and services.You are primarily concerned with the company not recording all purchase transactions.Which audit procedure below would be the most effective audit procedure in this case?

Accepted Answer

A)  Vouching from the accounts payable account to the vendor invoices 
B)  Tracing vendor invoices to recorded amounts in the accounts payable account 
C)  Confirmation accounts payable recorded amounts 
D)  Reconciling the accounts payable subsidiary ledger to the accounts payable account

Question 10

When determining sufficient and appropriate audit evidence in order to form an opinion on the client's financial statements the auditor compiles audit documentation to support the opinion.The largest portion of audit documentation will include detailed supporting schedules prepared by the client or the auditor in support of specific accounts on the financial statements.The major types of supporting schedules include analysis schedules and tests of reasonableness.Discuss those two schedules and give an example for each schedule.

Accepted Answer

The answer of When determining sufficient and appropriate audit evidence...

Question 11

Which of the following is not a correct combination of terms and related type of audit evidence?

Accepted Answer

A)  Inquire - inquiries of client 
B)  Count - physical examination 
C)  Recompute - documentation 
D)  Read - documentation

Question 12

Which of the following generally provides the most reliable evidence?

Accepted Answer

A)  Confirmations 
B)  Recalculation 
C)  Reperformance 
D)  Observations

Question 13

When preparing and organizing audit files:

Accepted Answer

A)  The rules established by the SEC and PCAOB must be followed. 
B)  A lead schedule contains the detailed accounts from the general ledger making up the line item on the trial balance. 
C)  A working trial balance is considered part of the permanent file. 
D)  The audit program is not part of the audit files.

Question 14

Evidence is generally considered appropriate when:

Accepted Answer

A)  it has been obtained by random selection. 
B)  there is enough of it to afford a reasonable basis for an opinion on financial statements. 
C)  it is relevant to the audit objective being tested. 
D)  it consists of written statements made by managers of the company under audit.

Question 15

Which of the following discoveries through the use of analytical procedures would most likely indicate a relatively high risk of financial failure?

Accepted Answer

A)  A decline in gross margin percentages 
B)  An increase in the balance in fixed assets 
C)  An increase in the ratio of allowance for uncollectible accounts to gross accounts receivable, while at the same time accounts receivable turnover also decreased 
D)  A higher than normal ratio of long-term debt to net worth as well as a lower than average ratio of profits to total assets

Question 16

For audit evidence to be compelling to the auditor it must be sufficient and appropriate.Which statement below is not correct regarding the appropriateness of audit evidence?

Accepted Answer

A)  The more effective the internal control system, the more assurance it provides the auditor about the reliability of financial reporting by the client. 
B)  An auditor's opinion, to be economically useful and profitable to the auditing firm needs to be formed within a reasonable time and based on evidence obtained that assures profits for the auditing firm. 
C)  Evidence obtained from independent sources outside the entity is generally more reliable than evidence secured solely within the entity. 
D)  The independent auditor's direct personal knowledge, obtained through inquiry, observation and inspection, is generally more persuasive than information obtained indirectly.

Question 17

Which of the following is a correct statement regarding audit evidence?

Accepted Answer

A)  A large sample of evidence provided by an independent party is always considered persuasive evidence. 
B)  A small sample of only one or two pieces of highly appropriate evidence is always considered persuasive evidence. 
C)  The auditor must obtain a sufficient amount of relevant and reliable evidence to form an opinion on the fairness of the financial statements. 
D)  Evidence is usually more reliable for balance sheet accounts when it is obtained within six months of the balance sheet date.

Question 18

The permanent audit file would usually include the following:

Accepted Answer

A)  client's working trial balance 
B)  summary of the risk assessment procedures performed 
C)  organizational chart of the company's employees 
D)  summary of the auditors test of controls for the current years audit

Question 19

Whenever practical and reasonable,the confirmation of accounts receivable is required of CPAs.

Accepted Answer

A) True 
 B)False

Question 20

An auditor can use engagement management software to facilitate tracking audit progress.

Accepted Answer

A) True 
 B)False

Exam 7: Nature and Type of Audit Evidence

Discuss three of the following influences on the persuasiveness of evidence. 1.Relevance 2.Independence of provider 3.Effectiveness of client's internal controls 4.Auditor's direct knowledge 5.Degree of objectivity 6.Timeliness

An example of a document the auditor receives from the client,but which was prepared by someone outside the client's organization,is a:

A(n) ________ is the detailed instruction that explains the audit evidence to be obtained during the audit.

When analytical procedures reveal unusual fluctuations in an account balance,the auditor will probably perform fewer tests of details for that account and increase the tests of controls related to the account.

Auditing standards require that records for audits of private companies be retained for a minimum of seven years.

Auditors must make decisions regarding what evidence to gather and how much to accumulate.Which of the following is a decision that must be made by auditors related to evidence?

Indicate whether confirmation of accounts receivable and accounts payable,provided they each are significant accounts,is required or optional:

You are auditing the company's purchasing process for goods and services.You are primarily concerned with the company not recording all purchase transactions.Which audit procedure below would be the most effective audit procedure in this case?

Which of the following is not a correct combination of terms and related type of audit evidence?

Which of the following generally provides the most reliable evidence?

When preparing and organizing audit files:

Evidence is generally considered appropriate when:

Which of the following discoveries through the use of analytical procedures would most likely indicate a relatively high risk of financial failure?

For audit evidence to be compelling to the auditor it must be sufficient and appropriate.Which statement below is not correct regarding the appropriateness of audit evidence?

Which of the following is a correct statement regarding audit evidence?

The permanent audit file would usually include the following:

Whenever practical and reasonable,the confirmation of accounts receivable is required of CPAs.

An auditor can use engagement management software to facilitate tracking audit progress.