Question 1

Which of the following is not a weakness of using industry averages for auditing?

Accepted Answer

A) The industry data are broad averages. 
B) Different companies follow different accounting methods. 
C) They can be helpful in identifying potential misstatements. 
D) All of the above are weaknesses. 
A) The industry data are broad averages. 
B) Different companies follow different accounting methods. 
C) They can be helpful in identifying potential misstatements. 
D) All of the above are weaknesses.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Two determinants of the persuasiveness of evidence are

Accepted Answer

A) competence and sufficiency. 
B) relevance and reliability. 
C) appropriateness and sufficiency. 
D) independence and effectiveness. 
A) competence and sufficiency. 
B) relevance and reliability. 
C) appropriateness and sufficiency. 
D) independence and effectiveness.

Question 4

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 - recalculation 
D) read - documentation 
A) inquire - inquiries of client 
B) count - physical examination 
C) recompute - recalculation 
D) read - documentation

Question 5

Which items affect the sufficiency of evidence when choosing a sample?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 6

Which ratio is computed by dividing operating income by net sales?

Accepted Answer

A) gross profit percent 
B) profit margin 
C) return on sales 
D) return on assets 
A) gross profit percent 
B) profit margin 
C) return on sales 
D) return on assets

Question 7

To be considered reliable evidence,confirmations must be controlled by

Accepted Answer

A) the client's employee responsible for accounts receivable. 
B) the external auditor. 
C) the client's internal audit department. 
D) the client's controller or CFO. 
A) the client's employee responsible for accounts receivable. 
B) the external auditor. 
C) the client's internal audit department. 
D) the client's controller or CFO.

Question 8

An example of an external document that provides reliable information for the auditor is: a(n)

Accepted Answer

A) employees' time report. 
B) bank statement. 
C) purchase order for company purchases. 
D) carbon copies of a check. 
A) employees' time report. 
B) bank statement. 
C) purchase order for company purchases. 
D) carbon copies of a check.

Question 9

Accounts receivable confirmations must be controlled by the client from the time they are prepared until the time they are returned to the auditor.

Accepted Answer

A) True 
 B)False

Question 10

The reliability of evidence refers to the degree to which evidence is considered believable or trustworthy.There are six factors that affect the reliability of audit evidence.One factor is the independence of the provider;i.e.,evidence obtained from a source outside the client company is more reliable than that obtained within.Identify and discuss any two of the remaining five factors.

Accepted Answer

The remaining four factors that affect t

Question 11

Which of the following is an accurate statement regarding audit evidence?

Accepted Answer

A) Responses to the auditor's questions by client employees is considered highly persuasive evidence. 
B) Audit evidence should provide an absolute level of assurance. 
C) The auditor uses evidence to determine whether the statements are fairly presented. 
D) All evidence must be highly persuasive. 
A) Responses to the auditor's questions by client employees is considered highly persuasive evidence. 
B) Audit evidence should provide an absolute level of assurance. 
C) The auditor uses evidence to determine whether the statements are fairly presented. 
D) All evidence must be highly persuasive.

Question 12

A(n)________ is a supporting schedule that supports a specific amount and is normally expected to tie the amount recorded in the client's records to another source of information.

Accepted Answer

A) reconciliation of amounts 
B) analysis 
C) summary of procedures 
D) informational document 
A) reconciliation of amounts 
B) analysis 
C) summary of procedures 
D) informational document

Question 13

Which of the following is not one of the four decisions about what evidence to gather and how much of it to accumulate?

Accepted Answer

A) which audit procedures to use 
B) which accounts must agree to the general ledger 
C) when to perform the procedures 
D) what sample size to select for a given procedure 
A) which audit procedures to use 
B) which accounts must agree to the general ledger 
C) when to perform the procedures 
D) what sample size to select for a given procedure

Question 14

The auditor is concerned that a client is failing to bill customers for shipments.An audit procedure that would gather relevant evidence would be to

Accepted Answer

A) select a sample of duplicate sales invoices and trace each to related shipping documents. 
B) trace a sample of shipping documents to related duplicate sales invoices. 
C) trace a sample of Sales Journal entries to the Accounts Receivable subsidiary ledger. 
D) compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable account in the general ledger. 
A) select a sample of duplicate sales invoices and trace each to related shipping documents. 
B) trace a sample of shipping documents to related duplicate sales invoices. 
C) trace a sample of Sales Journal entries to the Accounts Receivable subsidiary ledger. 
D) compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable account in the general ledger.

Question 15

Which of the following statements is correct regarding the costs involved in obtaining evidence?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 16

All evidence must have the same level of persuasiveness.

Accepted Answer

A) True 
 B)False

Question 17

Which ratio do auditors find useful for assessing misstatements in sales,cost of goods sold,accounts receivable,and inventory?

Accepted Answer

A) earnings per share 
B) profit margin 
C) gross profit percent 
D) current ratio 
A) earnings per share 
B) profit margin 
C) gross profit percent 
D) current ratio

Question 18

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

Question 19

Inquiries of clients and recalculations normally have a low cost associated with them.

Accepted Answer

A) True 
 B)False

Question 20

The auditor must gather sufficient and appropriate evidence during the course of the audit.Sufficient evidence must

Accepted Answer

A) be well documented and cross-referenced in the audit documents. 
B) be based on sources that are external to company. 
C) provide evidence that prove or disprove an audit objective/assertion. 
D) be persuasive enough to enable the auditor to issue an audit report. 
A) be well documented and cross-referenced in the audit documents. 
B) be based on sources that are external to company. 
C) provide evidence that prove or disprove an audit objective/assertion. 
D) be persuasive enough to enable the auditor to issue an audit report.

Exam 7: Audit Evidence

Which of the following is not a weakness of using industry averages for auditing?

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

Two determinants of the persuasiveness of evidence are

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

Which items affect the sufficiency of evidence when choosing a sample?

Which ratio is computed by dividing operating income by net sales?

To be considered reliable evidence,confirmations must be controlled by

An example of an external document that provides reliable information for the auditor is: a(n)

Accounts receivable confirmations must be controlled by the client from the time they are prepared until the time they are returned to the auditor.

Which of the following is an accurate statement regarding audit evidence?

A(n)________ is a supporting schedule that supports a specific amount and is normally expected to tie the amount recorded in the client's records to another source of information.

Which of the following is not one of the four decisions about what evidence to gather and how much of it to accumulate?

The auditor is concerned that a client is failing to bill customers for shipments.An audit procedure that would gather relevant evidence would be to

Which of the following statements is correct regarding the costs involved in obtaining evidence?

All evidence must have the same level of persuasiveness.

Which ratio do auditors find useful for assessing misstatements in sales,cost of goods sold,accounts receivable,and inventory?

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

Inquiries of clients and recalculations normally have a low cost associated with them.

The auditor must gather sufficient and appropriate evidence during the course of the audit.Sufficient evidence must

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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