Exam 9: Audit Evidence

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

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Question 1

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The working papers prepared during the engagement are the property of the

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Question 2

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For each of the following audit procedures, state and describe the type of audit evidence, state the audit assertion that it applies to, and describe the reliability of the evidence (with reasons). A) Watch staff scan products and enter cash received. B) Reconcile daily cash drawer receipts (cash, debit card sales, credit card sales) with daily sales for one week. C) Calculate daily gross profit and gross profit by product line. D) Account for a sequence of sales documents.

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A)Watch staff scan products and enter cash received.
$\begin{array} { | l | l | l | } \hline \begin{array} { l } \text { Type of audit evidence } \\\text { (with reason) }\end{array} & \begin{array} { l } \text { Applicable audit } \\\text { assertion }\end{array} & \begin{array} { l } \text { Reliability of evidence } \\\text { (higedium, or low, } \\\text { with reason) }\end{array} \\\hline \text { Observation, as the auditor is } & & \text { Medium. Although it is being } \\\text { using a sense (vision) to } & \text { Occurrence } & \text { performed by the auditor, this } \\\text { assess the activity of } & & \begin{array} { l } \text { is point-in-time test and is } \\\text { limited to the actual duration } \\\text { of the observation. }\end{array} \\\hline \text { recording sales } & & \\\hline\end{array}$
B)Reconcile daily cash drawer receipts (cash, debit card sales, credit card sales)with daily sales for one week.
$A)Watch staff scan products and enter cash received. \begin{array} { | l | l | l | } \hline \begin{array} { l } \text { Type of audit evidence } \\ \text { (with reason) } \end{array} & \begin{array} { l } \text { Applicable audit } \\ \text { assertion } \end{array} & \begin{array} { l } \text { Reliability of evidence } \\ \text { (higedium, or low, } \\ \text { with reason) } \end{array} \\ \hline \text { Observation, as the auditor is } & & \text { Medium. Although it is being } \\ \text { using a sense (vision) to } & \text { Occurrence } & \text { performed by the auditor, this } \\ \text { assess the activity of } & & \begin{array} { l } \text { is point-in-time test and is } \\ \text { limited to the actual duration } \\ \text { of the observation. } \end{array} \\ \hline \text { recording sales } & & \\ \hline \end{array} B)Reconcile daily cash drawer receipts (cash, debit card sales, credit card sales)with daily sales for one week. C)Calculate daily gross profit and gross profit by product line. D)Account for a sequence of sales documents. \begin{array} { l | l | l } \begin{array} { l } \text { Type of audit evidence } \\ \text { (with reason) } \end{array} & \begin{array} { l } \text { Applicable audit } \\ \text { assertion } \end{array} & \begin{array} { l } \text { Reliability of evidence } \\ \text { (high, medium, or low, } \\ \text { with reason) } \end{array} \\ \hline \text { Inspection, as the auditor is } & & \\ \text { examining client } & & \text { High, as it is being } \\ \text { documentation for the } \\ \text { continuity, or } & & \text { performed by the auditor } \\ \text { reperformance, as the } & \text { Completeness } & \text { and is substantiated by client } \\ \text { auditor is re-doing and } & & \text { documentation. } \\ \text { checking the issuance of an } & & \\ \text { ascending sequence for } & & \\ \text { sales documents. } & & \\ \hline \end{array}$
C)Calculate daily gross profit and gross profit by product line.
$A)Watch staff scan products and enter cash received. \begin{array} { | l | l | l | } \hline \begin{array} { l } \text { Type of audit evidence } \\ \text { (with reason) } \end{array} & \begin{array} { l } \text { Applicable audit } \\ \text { assertion } \end{array} & \begin{array} { l } \text { Reliability of evidence } \\ \text { (higedium, or low, } \\ \text { with reason) } \end{array} \\ \hline \text { Observation, as the auditor is } & & \text { Medium. Although it is being } \\ \text { using a sense (vision) to } & \text { Occurrence } & \text { performed by the auditor, this } \\ \text { assess the activity of } & & \begin{array} { l } \text { is point-in-time test and is } \\ \text { limited to the actual duration } \\ \text { of the observation. } \end{array} \\ \hline \text { recording sales } & & \\ \hline \end{array} B)Reconcile daily cash drawer receipts (cash, debit card sales, credit card sales)with daily sales for one week. C)Calculate daily gross profit and gross profit by product line. D)Account for a sequence of sales documents. \begin{array} { l | l | l } \begin{array} { l } \text { Type of audit evidence } \\ \text { (with reason) } \end{array} & \begin{array} { l } \text { Applicable audit } \\ \text { assertion } \end{array} & \begin{array} { l } \text { Reliability of evidence } \\ \text { (high, medium, or low, } \\ \text { with reason) } \end{array} \\ \hline \text { Inspection, as the auditor is } & & \\ \text { examining client } & & \text { High, as it is being } \\ \text { documentation for the } \\ \text { continuity, or } & & \text { performed by the auditor } \\ \text { reperformance, as the } & \text { Completeness } & \text { and is substantiated by client } \\ \text { auditor is re-doing and } & & \text { documentation. } \\ \text { checking the issuance of an } & & \\ \text { ascending sequence for } & & \\ \text { sales documents. } & & \\ \hline \end{array}$
D)Account for a sequence of sales documents.
$\begin{array} { l | l | l } \begin{array} { l } \text { Type of audit evidence } \\\text { (with reason) }\end{array} & \begin{array} { l } \text { Applicable audit } \\\text { assertion }\end{array} & \begin{array} { l } \text { Reliability of evidence } \\\text { (high, medium, or low, } \\\text { with reason) }\end{array} \\\hline \text { Inspection, as the auditor is } & & \\\text { examining client } & & \text { High, as it is being } \\\text { documentation for the } \\\text { continuity, or } & & \text { performed by the auditor } \\\text { reperformance, as the } & \text { Completeness } & \text { and is substantiated by client } \\\text { auditor is re-doing and } & & \text { documentation. } \\\text { checking the issuance of an } & & \\\text { ascending sequence for } & & \\\text { sales documents. } & & \\\hline\end{array}$

Question 19

Observation is an important audit technique where the auditor can use sight, hearing, touch, and smell. Observation needs to be used together with other audit techniques because

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Question 20

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

The working papers prepared during the engagement are the property of the

Mary is entering a fictitious transaction in the sales data entry system to see if the system will reject the order for a client that is already exceeding its credit limit. Mary is using

An example of an internal document is

To facilitate the working paper preparation process, defaults can be established to automatically insert client name, period covered, and preparer. This can best be done using

Last year, the client's internal controls were weak. This year, the internal controls are stronger. This means that information recorded on internal documentation is

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

Which of the following types of evidence is most appropriate in the audit of fixed assets?

Gina is performing the audit of the payables section of Reno Inc. She wants to confirm the payables from an independent source. Which of the following actions would achieve this?

When an auditor calculates the gross margin as a percent of sales and compares it with previous periods, this type of evidence is called

Evidence is generally considered appropriate when

Which one of the following forms of evidence would be least reliable?

An important benefit of industry comparisons is as

CAS 330, the auditor's response to assessed risks, explains that the auditor needs to link completed audit work to the assessed risks at the assertion level and

Inquiry is a valuable technique during the planning phase of the audit because it

The decision of how many items to test must be made by the auditor for each audit procedure. The sample size for any given procedure

Reperformance is often conducted using computer-assisted audit techniques. The most effective use of generalized audit software for reperformance would be to

Which of the following characteristics of samples would make the sample more sufficient?

Observation is an important audit technique where the auditor can use sight, hearing, touch, and smell. Observation needs to be used together with other audit techniques because

The Demand for Audit and Other Assurance Services

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Legal Liability

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Client Acceptance and Planning the Audit

Materiality and Risk

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Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

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