Question 1

To improve the appropriateness of audit evidence, the auditor should

Accepted Answer

A)  be sure to select a larger sample size for the items being tested. 
B)  add additional population items into the sample to improve sample variety. 
C)  select audit procedures that improve the reliability of the evidence. 
D)  select a smaller sample size that is statistically valid. 
A)  be sure to select a larger sample size for the items being tested. 
B)  add additional population items into the sample to improve sample variety. 
C)  select audit procedures that improve the reliability of the evidence. 
D)  select a smaller sample size that is statistically valid.

Question 2

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

Accepted Answer

A)  recalculate a whole class of transactions, helping to quantify dollar errors. 
B)  determine on a test basis whether posting and summarization is performed accurately. 
C)  confirm whether evidence has been recorded for the entire period under audit. 
D)  select a sample of transactions for recalculation. 
A)  recalculate a whole class of transactions, helping to quantify dollar errors. 
B)  determine on a test basis whether posting and summarization is performed accurately. 
C)  confirm whether evidence has been recorded for the entire period under audit. 
D)  select a sample of transactions for recalculation.

Question 3

"Use of comparisons and relationships to determine whether account balances or other data appear reasonable" is a definition of

Accepted Answer

A)  auditing. 
B)  tests of balances. 
C)  tests of controls. 
D)  analytical procedures. 
A)  auditing. 
B)  tests of balances. 
C)  tests of controls. 
D)  analytical procedures.

Question 4

The following are audit procedures in the sales and collection cycle.
1. Inspect a sample of shipping documents to determine if each has a sales invoice number included on it.
2. Discuss with the sales manager whether any sales allowances have been granted after the balance sheet date that may apply to the current period.
3. Add the columns on the aged trial balance and compare the total with the general ledger.
4. Observe whether the controller makes an independent comparison of the total in the general ledger with the trial balance of accounts receivable.
5. For the month of May, count the approximate number of shipping documents filed in the shipping department and compare the total with the number of sales invoices in the sales journal.
6. Compare the date on a sample of shipping documents throughout the year with related duplicate sales invoices and the accounts receivable master file.
7. Examine a sample of customer orders and see if each has a credit authorization.
8. Send letters directly to former customers whose accounts have been written off as uncollectible to determine if any have actually been paid.
9. Examine the master file of accounts receivable to see if each has an indication of "C" for a regular customer, "N" for interest-bearing receivables, and "R" for related parties.
10. Compare the date on a sample of shipping documents a few days before and after the balance sheet date with related sales journal transactions.
Required:
For each procedure, identify the type of evidence being used. For each procedure, identify either the transaction-related audit objective(s) being met or the balance-related audit objective(s) being met.

Accepted Answer

The answer of The following are audit procedures in the...

Question 5

Ordinarily, the working papers can be provided to someone else only with the express permission of the client. This is the case even if the papers are

Accepted Answer

A)  subpoenaed by a court. 
B)  used as a part of a provincial institute practice inspection. 
C)  requested as evidence in a provincial institute disciplinary hearing. 
D)  transferred as a result of a public accountant selling his/her practice to another public accounting firm. 
A)  subpoenaed by a court. 
B)  used as a part of a provincial institute practice inspection. 
C)  requested as evidence in a provincial institute disciplinary hearing. 
D)  transferred as a result of a public accountant selling his/her practice to another public accounting firm.

Question 6

In addition to including on each working paper the name of the client, the period covered, the date of preparation, and an index code, each working paper should clearly include

Accepted Answer

A)  the name of the preparer and a description of the contents. 
B)  symbols used and a reconciliation to the general ledger balance. 
C)  audit working paper steps that were completed. 
D)  the nature of the transaction-based risk that is being audited. 
A)  the name of the preparer and a description of the contents. 
B)  symbols used and a reconciliation to the general ledger balance. 
C)  audit working paper steps that were completed. 
D)  the nature of the transaction-based risk that is being audited.

Question 7

Which of the following is an example of subjective evidence?

Accepted Answer

A)  a positive confirmation of an account receivable 
B)  a bank confirmation 
C)  inquiries of the credit manager about the collectability of noncurrent accounts receivable 
D)  the physical count of securities and cash 
A)  a positive confirmation of an account receivable 
B)  a bank confirmation 
C)  inquiries of the credit manager about the collectability of noncurrent accounts receivable 
D)  the physical count of securities and cash

Question 8

The working papers are

Accepted Answer

A)  the property of client. 
B)  prepared by the client's internal auditors. 
C)  the primary means of documenting that an adequate audit was conducted in accordance with GAAS. 
D)  used primarily as a basis for the partners to review and reward the work of the managers, seniors, and staff. 
A)  the property of client. 
B)  prepared by the client's internal auditors. 
C)  the primary means of documenting that an adequate audit was conducted in accordance with GAAS. 
D)  used primarily as a basis for the partners to review and reward the work of the managers, seniors, and staff.

Question 9

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)

Accepted Answer

A)  external confirmation. 
B)  copy of sales invoice. 
C)  copy of a bank note payable. 
D)  inventory receiving report. 
A)  external confirmation. 
B)  copy of sales invoice. 
C)  copy of a bank note payable. 
D)  inventory receiving report.

Question 10

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

Accepted Answer

A)  physical examination. 
B)  analytical procedures. 
C)  observation. 
D)  enquiries of client. 
A)  physical examination. 
B)  analytical procedures. 
C)  observation. 
D)  enquiries of client.

Question 11

Which of the following types of evidence would be considered most reliable in the audit of accounts payable?

Accepted Answer

A)  review of internal budgets for the period under audit 
B)  inquiry of management with respect to recent purchases 
C)  inspection of client purchase orders 
D)  inspection of supplier invoices 
A)  review of internal budgets for the period under audit 
B)  inquiry of management with respect to recent purchases 
C)  inspection of client purchase orders 
D)  inspection of supplier invoices

Question 12

When the current year's unaudited trial balance amounts are compared to the prior year's audited trial balance amounts,

Accepted Answer

A)  errors are identified. 
B)  discrepancies are discovered. 
C)  irregularities become apparent. 
D)  significant changes in balances are highlighted. 
A)  errors are identified. 
B)  discrepancies are discovered. 
C)  irregularities become apparent. 
D)  significant changes in balances are highlighted.

Question 13

Confirmations from outside organizations such as banks and law firms are

Accepted Answer

A)  a highly regarded and often-used type of evidence. 
B)  expensive and rarely used during the audit. 
C)  difficult to obtain and infrequently required. 
D)  internal documents that provide low-quality evidence. 
A)  a highly regarded and often-used type of evidence. 
B)  expensive and rarely used during the audit. 
C)  difficult to obtain and infrequently required. 
D)  internal documents that provide low-quality evidence.

Question 14

An auditor is conducting the audit of the financial statements of a retail department store. The auditor is aware that he must obtain sufficient appropriate evidence with respect to various audit assertions associated with management assertions and thus with material financial statement amounts.
The following is a list of specific audit procedures the auditor plans to perform:
1. Send negative external confirmation requests to a large sample of the store's customers who have balances due on account at year end.
2. Perform test counts of goods on hand during the company's normal physical inventory taking, one month prior to the year end.
3. Examine receiving reports dated prior to the year end that have not been matched to vendor invoices.
4. Review paid invoices and supporting documents for amounts classified as repair and maintenance expense for large or unusual items.
5. Examine audited financial statements of several foreign companies in which the client owns shares, and which are being held as temporary investments.
Required:
For each of the five audit procedures listed, describe only the PRIMARY management assertion being tested, the PRIMARY audit assertion being tested, and the quality of evidence (high, medium, low) obtained, explaining WHY the evidence is the quality level you specify.

Accepted Answer

The answer of An auditor is conducting the audit of...

Question 15

When comparing the reliability of external versus internal documents, the external documents are generally considered

Accepted Answer

A)  more reliable. 
B)  less reliable. 
C)  equally reliable. 
D)  unreliable. 
A)  more reliable. 
B)  less reliable. 
C)  equally reliable. 
D)  unreliable.

Question 16

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

Accepted Answer

A)  the junior staff assigned to the engagement. 
B)  an old-fashioned rubber stamp on each printed page. 
C)  cut and paste tools in word processing or spreadsheet software. 
D)  automated working paper software. 
A)  the junior staff assigned to the engagement. 
B)  an old-fashioned rubber stamp on each printed page. 
C)  cut and paste tools in word processing or spreadsheet software. 
D)  automated working paper software.

Question 17

A common comparison occurs when the auditor calculates the expected balance and compares it with the actual balance. The auditor's expected account balance may be determined by

Accepted Answer

A)  using industry standards. 
B)  using credit bureau reports. 
C)  relating it to some other balance sheet or income statement account or accounts. 
D)  inquiring with the client. 
A)  using industry standards. 
B)  using credit bureau reports. 
C)  relating it to some other balance sheet or income statement account or accounts. 
D)  inquiring with the client.

Question 18

The audit of Simcoe Transports Inc. was completed three months ago, so the PA firm proceeded to the file archive stage in accordance with Canadian Audit Standards. If the audit firm receives additional information related to the audit but the information does not affect the audit conclusions, the information should be

Accepted Answer

A)  disregarded, as the file archive was already done. 
B)  added to the audit file in the section to which it pertains. 
C)  separately identified and added at the front of the audit file. 
D)  added to the audit file with a request that the reviewing partner review the new information. 
A)  disregarded, as the file archive was already done. 
B)  added to the audit file in the section to which it pertains. 
C)  separately identified and added at the front of the audit file. 
D)  added to the audit file with a request that the reviewing partner review the new information.

Question 19

Below are 12 audit procedures. Classify each procedure according to the following types of audit evidence: 1) inspection, 2) external confirmation, 3) recalculation, 4) observation, 5) inquiry of the client, 6) reperformance, and 7) analytical procedure.

Accepted Answer

1. Observation 7. Inspection
2. Inspecti

Question 20

During final review of working papers and financial statements, possible oversights in the audit can be identified by

Accepted Answer

A)  the partner's knowledge of the client's business combined with effective analytical procedures. 
B)  conducting a closing interview with management of the client. 
C)  conducting a meeting with the audit team. 
D)  reviewing the minutes from the board meetings. 
A)  the partner's knowledge of the client's business combined with effective analytical procedures. 
B)  conducting a closing interview with management of the client. 
C)  conducting a meeting with the audit team. 
D)  reviewing the minutes from the board meetings.

To improve the appropriateness of audit evidence, the auditor should

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

"Use of comparisons and relationships to determine whether account balances or other data appear reasonable" is a definition of

Ordinarily, the working papers can be provided to someone else only with the express permission of the client. This is the case even if the papers are

In addition to including on each working paper the name of the client, the period covered, the date of preparation, and an index code, each working paper should clearly include

Which of the following is an example of subjective evidence?

The working papers are

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)

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

Which of the following types of evidence would be considered most reliable in the audit of accounts payable?

When the current year's unaudited trial balance amounts are compared to the prior year's audited trial balance amounts,

Confirmations from outside organizations such as banks and law firms are

When comparing the reliability of external versus internal documents, the external documents are generally considered

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

A common comparison occurs when the auditor calculates the expected balance and compares it with the actual balance. The auditor's expected account balance may be determined by

Below are 12 audit procedures. Classify each procedure according to the following types of audit evidence: 1) inspection, 2) external confirmation, 3) recalculation, 4) observation, 5) inquiry of the client, 6) reperformance, and 7) analytical procedure.

During final review of working papers and financial statements, possible oversights in the audit can be identified by

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Strategy and Audit Program

Audit Sampling Concepts

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

Other Assurance and Nonassurance Services

Filters

Exam 9: Audit Evidence

To improve the appropriateness of audit evidence, the auditor should

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

"Use of comparisons and relationships to determine whether account balances or other data appear reasonable" is a definition of

Ordinarily, the working papers can be provided to someone else only with the express permission of the client. This is the case even if the papers are

In addition to including on each working paper the name of the client, the period covered, the date of preparation, and an index code, each working paper should clearly include

Which of the following is an example of subjective evidence?

The working papers are

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)

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

Which of the following types of evidence would be considered most reliable in the audit of accounts payable?

When the current year's unaudited trial balance amounts are compared to the prior year's audited trial balance amounts,

Confirmations from outside organizations such as banks and law firms are

When comparing the reliability of external versus internal documents, the external documents are generally considered

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

A common comparison occurs when the auditor calculates the expected balance and compares it with the actual balance. The auditor's expected account balance may be determined by

Below are 12 audit procedures. Classify each procedure according to the following types of audit evidence: 1) inspection, 2) external confirmation, 3) recalculation, 4) observation, 5) inquiry of the client, 6) reperformance, and 7) analytical procedure.

During final review of working papers and financial statements, possible oversights in the audit can be identified by

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Strategy and Audit Program

Audit Sampling Concepts

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

Other Assurance and Nonassurance Services

Filters