Question 1

Audit evidence to support an opinion about the fairness of a client's financial statements consists entirely of written information.

Accepted Answer

A) True 
 B)False

Question 2

The primary purpose of audit procedures is to

Accepted Answer

A) detect all errors or fraudulent activities as well as illegal activities. 
B) comply with auditing standards promulgated by the PCAOB for publicly held clients. 
C) gather corroborative audit evidence about management's assertions regarding the client's financial statements. 
D) determine the amount of errors in the balance sheet accounts in order to adjust the accounts to actual. 
A) detect all errors or fraudulent activities as well as illegal activities. 
B) comply with auditing standards promulgated by the PCAOB for publicly held clients. 
C) gather corroborative audit evidence about management's assertions regarding the client's financial statements. 
D) determine the amount of errors in the balance sheet accounts in order to adjust the accounts to actual.

Question 3

Calculating the gross margin for the current audit year as a percent of sales and comparing it with previous years is what type of evidence?

Accepted Answer

A) physical examination 
B) analytical procedures 
C) observation 
D) inquiry 
A) physical examination 
B) analytical procedures 
C) observation 
D) inquiry

Question 4

The evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data is the definition of

Accepted Answer

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

Question 5

Cost is never an adequate justification for omitting a necessary procedure or not gathering an adequate sample size.

Accepted Answer

A) True 
 B)False

Question 6

Analytical procedures performed during the planning phase of the audit

Accepted Answer

A) are used as a substantive test in support of account balances. 
B) are used to assist in determining the nature,extent,and timing of audit procedures 
C) are used to detect fraud. 
D) are mandatory only for public companies. 
A) are used as a substantive test in support of account balances. 
B) are used to assist in determining the nature,extent,and timing of audit procedures 
C) are used to detect fraud. 
D) are mandatory only for public companies.

Question 7

Audit evidence obtained directly by the auditor will not be reliable if

Accepted Answer

A) the auditor lacks the competence to evaluate the evidence. 
B) it is provided by the client's attorney. 
C) the client denies its veracity. 
D) it is impossible for the auditor to obtain additional corroboratory evidence. 
A) the auditor lacks the competence to evaluate the evidence. 
B) it is provided by the client's attorney. 
C) the client denies its veracity. 
D) it is impossible for the auditor to obtain additional corroboratory evidence.

Question 8

Which of the following statements regarding the relevance of evidence is correct?

Accepted Answer

A) To be relevant,evidence must pertain to the audit objective of the evidence. 
B) To be relevant,evidence must be persuasive. 
C) To be relevant,evidence must relate to multiple audit objectives. 
D) To be relevant,evidence must be derived from a system including effective internal controls. 
A) To be relevant,evidence must pertain to the audit objective of the evidence. 
B) To be relevant,evidence must be persuasive. 
C) To be relevant,evidence must relate to multiple audit objectives. 
D) To be relevant,evidence must be derived from a system including effective internal controls.

Question 9

Which of the following ratios is not a measure of a company's short-term debt paying ability?

Accepted Answer

A) accounts receivable turnover 
B) cash ratio 
C) current ratio 
D) quick ratio 
A) accounts receivable turnover 
B) cash ratio 
C) current ratio 
D) quick ratio

Question 10

What type of supporting schedule is designed to show detailed tests performed,does not tie in to the general ledger,but must state a positive or negative conclusion about the objective of the test?

Accepted Answer

A) outside documentation 
B) reconciliation of amounts 
C) examination of supporting documents 
D) substantive analytical procedures 
A) outside documentation 
B) reconciliation of amounts 
C) examination of supporting documents 
D) substantive analytical procedures

Question 11

Auditors use evidence to help them draw conclusions.

Accepted Answer

A) True 
 B)False

Question 12

The usefulness of analytical procedures as audit evidence depends significantly on appropriate comparison data.

Accepted Answer

A) True 
 B)False

Question 13

Determine which of the following is most correct statement regarding the reliability of audit evidence.

Accepted Answer

A) Information that is indirectly obtained from external sources is the most reliable audit evidence. 
B) Reliability of audit evidence is dependent upon the evidence being subjective. 
C) Reliability of evidence refers to the amount of evidence obtained. 
D) If internal controls are effective,evidence obtained is more reliable than when the controls are not effective. 
A) Information that is indirectly obtained from external sources is the most reliable audit evidence. 
B) Reliability of audit evidence is dependent upon the evidence being subjective. 
C) Reliability of evidence refers to the amount of evidence obtained. 
D) If internal controls are effective,evidence obtained is more reliable than when the controls are not effective.

Question 14

Auditors use trends in the accounts receivable turnover ratio to assess the reasonableness of the company's credit policies.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is not correct?

Accepted Answer

A) It is possible to vary the sample size from one unit to 100% of the items in the population. 
B) Cost is an adequate justification for not gathering an adequate sample size. 
C) The decision of how many items to test must be made by the auditor for each audit procedure. 
D) The sample size for any given procedure is likely to vary from audit to audit. 
A) It is possible to vary the sample size from one unit to 100% of the items in the population. 
B) Cost is an adequate justification for not gathering an adequate sample size. 
C) The decision of how many items to test must be made by the auditor for each audit procedure. 
D) The sample size for any given procedure is likely to vary from audit to audit.

Question 16

Audit documents

Accepted Answer

A) are kept by the client for easy reference for their accounting staff. 
B) should be considered as a substitute for the clients accounting records. 
C) are designed to facilitate the review and supervision of the work performed by the audit team by a reviewing partner. 
D) prepared during the engagement are the property of the client once the audit bill is paid. 
A) are kept by the client for easy reference for their accounting staff. 
B) should be considered as a substitute for the clients accounting records. 
C) are designed to facilitate the review and supervision of the work performed by the audit team by a reviewing partner. 
D) prepared during the engagement are the property of the client once the audit bill is paid.

Question 17

A benefit obtained from using industry averages is that it provides a(n)

Accepted Answer

A) benchmark to compare the company's results. 
B) indication where errors exist in the statements. 
C) benchmark to be used in evaluating a client's budgets. 
D) comparison of "what is" with "what should be." 
A) benchmark to compare the company's results. 
B) indication where errors exist in the statements. 
C) benchmark to be used in evaluating a client's budgets. 
D) comparison of "what is" with "what should be."

Question 18

Which of the following is an accurate statement regarding a company's ability to meet its long-term debt obligations?

Accepted Answer

A) If the debt-to-equity ratio is too high,it may indicate that the company has used up its borrowing capacity. 
B) If the debt-to-equity ratio is too high,it may mean that available leverage is not being used to the owners' benefit. 
C) The times interest earned ratio indicates if a company can make its principal and interest payments. 
D) The key ratios that are used to measure a long-term solvency are debt to equity,return on assets,and times interest earned. 
A) If the debt-to-equity ratio is too high,it may indicate that the company has used up its borrowing capacity. 
B) If the debt-to-equity ratio is too high,it may mean that available leverage is not being used to the owners' benefit. 
C) The times interest earned ratio indicates if a company can make its principal and interest payments. 
D) The key ratios that are used to measure a long-term solvency are debt to equity,return on assets,and times interest earned.

Question 19

When can audit procedures be performed?

Accepted Answer

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

Question 20

Which of the following best describes one of the primary objectives of audit documentation?

Accepted Answer

A) defend against claims of a deficient audit 
B) provide a basis for reviewing the work of subordinates 
C) provide reasonable assurance that the audit was conducted in accordance with auditing standards 
D) provide additional support of recorded amounts to the client 
A) defend against claims of a deficient audit 
B) provide a basis for reviewing the work of subordinates 
C) provide reasonable assurance that the audit was conducted in accordance with auditing standards 
D) provide additional support of recorded amounts to the client

Exam 7: Audit Evidence

Audit evidence to support an opinion about the fairness of a client's financial statements consists entirely of written information.

The primary purpose of audit procedures is to

Calculating the gross margin for the current audit year as a percent of sales and comparing it with previous years is what type of evidence?

The evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data is the definition of

Cost is never an adequate justification for omitting a necessary procedure or not gathering an adequate sample size.

Analytical procedures performed during the planning phase of the audit

Audit evidence obtained directly by the auditor will not be reliable if

Which of the following statements regarding the relevance of evidence is correct?

Which of the following ratios is not a measure of a company's short-term debt paying ability?

What type of supporting schedule is designed to show detailed tests performed,does not tie in to the general ledger,but must state a positive or negative conclusion about the objective of the test?

Auditors use evidence to help them draw conclusions.

The usefulness of analytical procedures as audit evidence depends significantly on appropriate comparison data.

Determine which of the following is most correct statement regarding the reliability of audit evidence.

Auditors use trends in the accounts receivable turnover ratio to assess the reasonableness of the company's credit policies.

Which of the following statements is not correct?

Audit documents

A benefit obtained from using industry averages is that it provides a(n)

Which of the following is an accurate statement regarding a company's ability to meet its long-term debt obligations?

When can audit procedures be performed?

Which of the following best describes one of the primary objectives of audit documentation?

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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