Question 1

Liquidity activity ratios are useless to auditors in determining how quickly an entity can convert current assets into cash.

Accepted Answer

A) True 
 B)False

Question 2

Physical examination is normally more reliable than observation.

Accepted Answer

A) True 
 B)False

Question 3

Objective evidence is more reliable, and hence more persuasive, than subjective evidence.

Accepted Answer

A) True 
 B)False

Question 4

If most companies in the industry use FIFO inventory valuation and straight-line depreciation, and the audit client uses weighted average and double-declining balance, comparisons of client and industry data:

Accepted Answer

A)  will be a meaningful highlight of the result of these differences in accounting methods. 
B)  may not be meaningful. 
C)  will enable the auditor to spot irregularities but not errors. 
D)  will enable the auditor to spot errors but not irregularities. 
A)  will be a meaningful highlight of the result of these differences in accounting methods. 
B)  may not be meaningful. 
C)  will enable the auditor to spot irregularities but not errors. 
D)  will enable the auditor to spot errors but not irregularities.

Question 5

The absence of no fluctuations when applying analytical procedures implies:

Accepted Answer

A)  there are no material irregularities. 
B)  there are no material errors. 
C)  there are no material errors or irregularities. 
D)  the possibility of a material error or irregularity is minimised. 
A)  there are no material irregularities. 
B)  there are no material errors. 
C)  there are no material errors or irregularities. 
D)  the possibility of a material error or irregularity is minimised.

Question 6

The type of audit evidence known as documentation involves the auditor's examination of tangible assets with the results of the examination being recorded, or 'documented', in the auditor's work papers.

Accepted Answer

A) True 
 B)False

Question 7

What audit procedures are used to evaluate the client's going concern assumption?

Accepted Answer

Analytical procedures are often useful a

Question 8

A cancelled cheque written by the client, made payable to a local vendor, and drawn on the client's bank account is one type of internal document.

Accepted Answer

A) True 
 B)False

Question 9

According to ASA 500, what is required of the auditor?

Accepted Answer

A)  appropriate evidence to support the opinion issued 
B)  appropriately qualified evidence to support the opinion issued 
C)  sufficiently qualified evidence to support the opinion issued 
D)  sufficiently appropriate evidence to support the opinion issued 
A)  appropriate evidence to support the opinion issued 
B)  appropriately qualified evidence to support the opinion issued 
C)  sufficiently qualified evidence to support the opinion issued 
D)  sufficiently appropriate evidence to support the opinion issued

Question 10

Which of the statements regarding persuasiveness of audit evidence is correct?

Accepted Answer

A)  The auditor must measure the degree to which evidence is either appropriate or sufficient. 
B)  A large sample of evidence from an independent source is always persuasive. 
C)  A large sample of evidence that is relevant but not objective is not persuasive. 
D)  A small sample of a small number of highly appropriate evidence is persuasive. 
A)  The auditor must measure the degree to which evidence is either appropriate or sufficient. 
B)  A large sample of evidence from an independent source is always persuasive. 
C)  A large sample of evidence that is relevant but not objective is not persuasive. 
D)  A small sample of a small number of highly appropriate evidence is persuasive.

Question 11

Which of the following, when discovered through the use of analytical procedures, would indicate a relatively high risk of financial failure?

Accepted Answer

A)  an increase in the balance in fixed assets 
B)  a decline in gross margin percentages 
C)  an increase in the ratio of allowance for uncollectible accounts to gross accounts receivable, while at the same time accounts receivable turnover decreases 
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 
A)  an increase in the balance in fixed assets 
B)  a decline in gross margin percentages 
C)  an increase in the ratio of allowance for uncollectible accounts to gross accounts receivable, while at the same time accounts receivable turnover decreases 
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 12

Ratios and other analytical procedures need to be recalculated manually by the auditor each time an adjusting entry is made to the client's statements.

Accepted Answer

A) True 
 B)False

Question 13

How can the appropriateness of audit evidence be improved?

Accepted Answer

A)  by selecting different population items 
B)  by selecting more relevant audit procedures 
C)  by selecting a larger sample size 
D)  all of the above 
A)  by selecting different population items 
B)  by selecting more relevant audit procedures 
C)  by selecting a larger sample size 
D)  all of the above

Question 14

For a given audit procedure, the evidence obtained from a sample of 200 would ordinarily be:

Accepted Answer

A)  more sufficient than from a sample of 100. 
B)  less competent than from a sample of 100. 
C)  less sufficient than from a sample of 100. 
D)  more competent than from a sample of 100. 
A)  more sufficient than from a sample of 100. 
B)  less competent than from a sample of 100. 
C)  less sufficient than from a sample of 100. 
D)  more competent than from a sample of 100.

Question 15

An auditor has determined that the appropriate sample size for a particular audit procedure is 50.Which of the following methods can the auditor use to select the 50 items?

Accepted Answer

A)  Select the 50 items with the largest dollar amounts. 
B)  Select the 50 items randomly. 
C)  Select one week and examine the first 50 items. 
D)  Use any combination of the above three methods. 
A)  Select the 50 items with the largest dollar amounts. 
B)  Select the 50 items randomly. 
C)  Select one week and examine the first 50 items. 
D)  Use any combination of the above three methods.

Question 16

The timing of audit procedures depends on:

Accepted Answer

A)  when the client needs the audit to be completed. 
B)  when audit staff is available. 
C)  when the auditor believes the audit evidence will be most effective. 
D)  all of the above 
A)  when the client needs the audit to be completed. 
B)  when audit staff is available. 
C)  when the auditor believes the audit evidence will be most effective. 
D)  all of the above

Question 17

Match between columns
                        Premises: a less detailed examination of a document or record to determine if there is something unusual that warrants further investigation
a reasonably detailed study of a document or record to determine if there is something unusual that warrants further investigation
addition of a column of figures to determine if the total is the same as the client's
a comparison of information in two different locations
a determination of assets on hand at a given time
a calculation done to determine whether a client's calculation is correct
a use of the senses to assess certain activities
an examination of written information to determine facts pertinent to the audit
a calculation done by the auditor independent of the client

Accepted Answer

The Answer of read and compute and inquire and foot is...

Question 18

Negative confirmations of accounts receivable are less effective than positive confirmations because when using negative confirmations:

Accepted Answer

A)  the auditor cannot infer that all nonrespondents have verified their account information. 
B)  they do not produce evidential matter that is statistically quantifiable. 
C)  some recipients may report incorrect balances that require extensive follow-up. 
D)  a majority of recipients usually lacks the willingness to respond objectively. 
A)  the auditor cannot infer that all nonrespondents have verified their account information. 
B)  they do not produce evidential matter that is statistically quantifiable. 
C)  some recipients may report incorrect balances that require extensive follow-up. 
D)  a majority of recipients usually lacks the willingness to respond objectively.

Question 19

Which of the following statements is NOT true? The evidence-gathering technique of inquiry:

Accepted Answer

A)  is the auditor's principal method of evaluating the client's internal control. 
B)  cannot be regarded as conclusive. 
C)  does not provide evidence from an independent source. 
D)  requires the gathering of corroborative evidence. 
A)  is the auditor's principal method of evaluating the client's internal control. 
B)  cannot be regarded as conclusive. 
C)  does not provide evidence from an independent source. 
D)  requires the gathering of corroborative evidence.

Question 20

Inquiries of the client are rarely sufficient by themselves to provide competent evidence to satisfy an audit objective.

Accepted Answer

A) True 
 B)False

Liquidity activity ratios are useless to auditors in determining how quickly an entity can convert current assets into cash.

Physical examination is normally more reliable than observation.

Objective evidence is more reliable, and hence more persuasive, than subjective evidence.

If most companies in the industry use FIFO inventory valuation and straight-line depreciation, and the audit client uses weighted average and double-declining balance, comparisons of client and industry data:

The absence of no fluctuations when applying analytical procedures implies:

The type of audit evidence known as documentation involves the auditor's examination of tangible assets with the results of the examination being recorded, or 'documented', in the auditor's work papers.

What audit procedures are used to evaluate the client's going concern assumption?

A cancelled cheque written by the client, made payable to a local vendor, and drawn on the client's bank account is one type of internal document.

According to ASA 500, what is required of the auditor?

Which of the statements regarding persuasiveness of audit evidence is correct?

Which of the following, when discovered through the use of analytical procedures, would indicate a relatively high risk of financial failure?

Ratios and other analytical procedures need to be recalculated manually by the auditor each time an adjusting entry is made to the client's statements.

How can the appropriateness of audit evidence be improved?

For a given audit procedure, the evidence obtained from a sample of 200 would ordinarily be:

An auditor has determined that the appropriate sample size for a particular audit procedure is 50.Which of the following methods can the auditor use to select the 50 items?

The timing of audit procedures depends on:

Negative confirmations of accounts receivable are less effective than positive confirmations because when using negative confirmations:

Which of the following statements is NOT true? The evidence-gathering technique of inquiry:

Inquiries of the client are rarely sufficient by themselves to provide competent evidence to satisfy an audit objective.

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit planning and documentation

Materiality and risk

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances I

Audit of transaction cycles and financial statement balances II

Completing the audit

Audit reporting

Other auditing and assurance engagements

Filters

Exam 5: Audit evidence

Liquidity activity ratios are useless to auditors in determining how quickly an entity can convert current assets into cash.

Physical examination is normally more reliable than observation.

Objective evidence is more reliable, and hence more persuasive, than subjective evidence.

If most companies in the industry use FIFO inventory valuation and straight-line depreciation, and the audit client uses weighted average and double-declining balance, comparisons of client and industry data:

The absence of no fluctuations when applying analytical procedures implies:

The type of audit evidence known as documentation involves the auditor's examination of tangible assets with the results of the examination being recorded, or 'documented', in the auditor's work papers.

What audit procedures are used to evaluate the client's going concern assumption?

A cancelled cheque written by the client, made payable to a local vendor, and drawn on the client's bank account is one type of internal document.

According to ASA 500, what is required of the auditor?

Which of the statements regarding persuasiveness of audit evidence is correct?

Which of the following, when discovered through the use of analytical procedures, would indicate a relatively high risk of financial failure?

Ratios and other analytical procedures need to be recalculated manually by the auditor each time an adjusting entry is made to the client's statements.

How can the appropriateness of audit evidence be improved?

For a given audit procedure, the evidence obtained from a sample of 200 would ordinarily be:

An auditor has determined that the appropriate sample size for a particular audit procedure is 50.Which of the following methods can the auditor use to select the 50 items?

The timing of audit procedures depends on:

Negative confirmations of accounts receivable are less effective than positive confirmations because when using negative confirmations:

Which of the following statements is NOT true? The evidence-gathering technique of inquiry:

Inquiries of the client are rarely sufficient by themselves to provide competent evidence to satisfy an audit objective.

Demand for audit and assurance services

Auditors’ legal environment

Audit quality and ethics

Audit responsibilities and objectives

Audit planning and documentation

Materiality and risk

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances I

Audit of transaction cycles and financial statement balances II

Completing the audit

Audit reporting

Other auditing and assurance engagements

Filters