Question 1

Substantive analytical procedures performed during the testing phase of the audit

Accepted Answer

A) are required under generally accepted auditing standards. 
B) are always done independently from other audit procedures. 
C) are used as a substantive test in support of account balances. 
D) do not need to be documented in the working papers. 
A) are required under generally accepted auditing standards. 
B) are always done independently from other audit procedures. 
C) are used as a substantive test in support of account balances. 
D) do not need to be documented in the working papers.

Question 2

When preparing and organizing audit files,

Accepted Answer

A) the rules established by the SEC and PCAOB must be followed. 
B) a lead schedule contains the detailed accounts from the general ledger making up the line item on the trial balance. 
C) a working trial balance is considered part of the permanent file. 
D) the audit program is not part of the audit files. 
A) the rules established by the SEC and PCAOB must be followed. 
B) a lead schedule contains the detailed accounts from the general ledger making up the line item on the trial balance. 
C) a working trial balance is considered part of the permanent file. 
D) the audit program is not part of the audit files.

Question 3

One substantive analytical procedure involves the auditor calculating an expected balance for an account and then comparing it to the actual account balance.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements relating to the competence of evidential matter is always True?

Accepted Answer

A) Evidence from outside an enterprise is always reliable. 
B) Accounting data developed under satisfactory conditions of internal control is not reliable. 
C) Oral representations made by management are not reliable evidence. 
D) Evidence must be both reliable and relevant to be considered appropriate. 
A) Evidence from outside an enterprise is always reliable. 
B) Accounting data developed under satisfactory conditions of internal control is not reliable. 
C) Oral representations made by management are not reliable evidence. 
D) Evidence must be both reliable and relevant to be considered appropriate.

Question 5

When comparing client data with similar prior-period data,

Accepted Answer

A) if there has been no significant changes in the client's operations in the current year,much of the detail making up the totals in the financial statements should remain unchanged. 
B) comparison of details must take the form of details over time. 
C) comparing totals with previous years considers growth in the business activity. 
D) percent relationships fail to consider declines in the business activity. 
A) if there has been no significant changes in the client's operations in the current year,much of the detail making up the totals in the financial statements should remain unchanged. 
B) comparison of details must take the form of details over time. 
C) comparing totals with previous years considers growth in the business activity. 
D) percent relationships fail to consider declines in the business activity.

Question 6

Confirmations are among the most expensive type of evidence to obtain.

Accepted Answer

A) True 
 B)False

Question 7

Auditors use trends in the inventory turnover ratio to identify potential inventory obsolescence.

Accepted Answer

A) True 
 B)False

Question 8

State the three phases of the audit where analytical procedures can be performed and describe the specific procedures performed in each phase.

Accepted Answer

Analytical procedures: can be performed

Question 9

Whenever practical and reasonable,the confirmation of accounts receivable is required of CPAs.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following discoveries through the use of analytical procedures would most likely indicate a relatively high risk of financial failure?

Accepted Answer

A) a decline in gross margin percentages 
B) an increase in the balance in fixed assets 
C) an increase in the ratio of allowance for uncollectible accounts to gross accounts receivable,while at the same time accounts receivable turnover also decreased 
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) a decline in gross margin percentages 
B) an increase in the balance in fixed assets 
C) an increase in the ratio of allowance for uncollectible accounts to gross accounts receivable,while at the same time accounts receivable turnover also decreased 
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 11

Which of the following statements is not a correct statement regarding audit evidence?

Accepted Answer

A) Evidence obtained from an independent source outside the client organization is more reliable than that obtained from within. 
B) Documentary evidence is more reliable when it is received by the auditor indirectly rather than directly. 
C) Documents that originate outside the company are considered more reliable than those that originate within the client's organization. 
D) External evidence,such as communications from banks,is generally regarded as more reliable than answers obtained from inquiries of the client. 
A) Evidence obtained from an independent source outside the client organization is more reliable than that obtained from within. 
B) Documentary evidence is more reliable when it is received by the auditor indirectly rather than directly. 
C) Documents that originate outside the company are considered more reliable than those that originate within the client's organization. 
D) External evidence,such as communications from banks,is generally regarded as more reliable than answers obtained from inquiries of the client.

Question 12

Which of the following is not a characteristic of the reliability of evidence?

Accepted Answer

A) effectiveness of client internal controls 
B) education of auditor 
C) independence of information provider 
D) timeliness 
A) effectiveness of client internal controls 
B) education of auditor 
C) independence of information provider 
D) timeliness

Question 13

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

Accepted Answer

1.observation
2.physical examination
3.r

Question 14

Indicate whether confirmation of accounts receivable and accounts payable,provided they each are significant accounts,is required or optional.

Accepted Answer

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

Question 15

Which of the following forms of evidence would be least persuasive in forming the auditor's opinion about marketable securities and other investments held by the company?

Accepted Answer

A) responses to auditor's questions by the president and controller regarding the investments account 
B) correspondence with a stockbroker regarding the quantity of client's investments held in street name by the broker 
C) minutes of the board of directors authorizing the purchase of stock as an investment 
D) the auditor's count of marketable securities 
A) responses to auditor's questions by the president and controller regarding the investments account 
B) correspondence with a stockbroker regarding the quantity of client's investments held in street name by the broker 
C) minutes of the board of directors authorizing the purchase of stock as an investment 
D) the auditor's count of marketable securities

Exam 7: Audit Evidence

Substantive analytical procedures performed during the testing phase of the audit

When preparing and organizing audit files,

One substantive analytical procedure involves the auditor calculating an expected balance for an account and then comparing it to the actual account balance.

Which of the following statements relating to the competence of evidential matter is always True?

When comparing client data with similar prior-period data,

Confirmations are among the most expensive type of evidence to obtain.

Auditors use trends in the inventory turnover ratio to identify potential inventory obsolescence.

State the three phases of the audit where analytical procedures can be performed and describe the specific procedures performed in each phase.

Whenever practical and reasonable,the confirmation of accounts receivable is required of CPAs.

Which of the following discoveries through the use of analytical procedures would most likely indicate a relatively high risk of financial failure?

Which of the following statements is not a correct statement regarding audit evidence?

Which of the following is not a characteristic of the reliability of evidence?

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

Indicate whether confirmation of accounts receivable and accounts payable,provided they each are significant accounts,is required or optional.

Which of the following forms of evidence would be least persuasive in forming the auditor's opinion about marketable securities and other investments held by the company?

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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