Question 1

Which of the following generally provides the most reliable evidence?

Accepted Answer

A) Confirmations 
B) Recalculation 
C) Reperformance 
D) Observations 
A) Confirmations 
B) Recalculation 
C) Reperformance 
D) Observations

Question 2

Which of the following statements is true?

Accepted Answer

A) Evidence must be relevant to all of the audit objectives. 
B) If evidence is subjective, it cannot be reliable. 
C) Evidence obtained directly by the auditor may not be reliable if the auditor lacks the qualifications to evaluate the evidence. 
D) The persuasiveness of evidence can be evaluated after considering its sufficiency. 
A) Evidence must be relevant to all of the audit objectives. 
B) If evidence is subjective, it cannot be reliable. 
C) Evidence obtained directly by the auditor may not be reliable if the auditor lacks the qualifications to evaluate the evidence. 
D) The persuasiveness of evidence can be evaluated after considering its sufficiency.

Question 3

Audit procedures can result in significant, unexpected differences.The auditor should investigate further if:

Accepted Answer

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

Question 4

An example of a supporting schedule is a reconciliation of amounts, which consists of the details that make up a year-end balance.

Accepted Answer

A) True 
 B)False

Question 5

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 6

For audit evidence to be compelling to the auditor it must be sufficient and appropriate.Which statement below is not correct regarding the appropriateness of audit evidence?

Accepted Answer

A) The more effective the internal control system, the more assurance it provides the auditor about the reliability of financial reporting by the client. 
B) An auditor's opinion, to be economically useful and profitable to the auditing firm needs to be formed within a reasonable time and based on evidence obtained that assures profits for the auditing firm. 
C) Evidence obtained from independent sources outside the entity is generally more reliable than evidence secured solely within the entity. 
D) The independent auditor's direct personal knowledge, obtained through inquiry, observation and inspection, is generally more persuasive than information obtained indirectly. 
A) The more effective the internal control system, the more assurance it provides the auditor about the reliability of financial reporting by the client. 
B) An auditor's opinion, to be economically useful and profitable to the auditing firm needs to be formed within a reasonable time and based on evidence obtained that assures profits for the auditing firm. 
C) Evidence obtained from independent sources outside the entity is generally more reliable than evidence secured solely within the entity. 
D) The independent auditor's direct personal knowledge, obtained through inquiry, observation and inspection, is generally more persuasive than information obtained indirectly.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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 9

The basis for preparing financial statements for companies is the general ledger.As soon as possible the auditor obtains the general ledger accounts of the client and prepares a working trial balance.Discuss the audit documentation in the current file that relates to the working trial balance.Include a description of lead and support schedules in your answer.

Accepted Answer

Lead Schedules-each line item on the wor

Question 10

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 11

The Auditing Standards Board has concluded that analytical procedures are so important that they are required during:

Accepted Answer

A) planning and test of control phases. 
B) planning and completion phases. 
C) test of control and completion phases. 
D) planning, test of control, and completion phases. 
A) planning and test of control phases. 
B) planning and completion phases. 
C) test of control and completion phases. 
D) planning, test of control, and completion phases.

Question 12

There are four important purposes of analytical procedures.Identify three of these four purposes and, for each purpose, give a specific example of an analytical procedure that an auditor might perform.

Accepted Answer

Four important purposes of analytical pr

Question 13

Audit documentation is the joint property of the auditor and the audit client.

Accepted Answer

A) True 
 B)False

Question 14

When auditors use documentation to support recorded transactions and amounts, the process is usually called:

Accepted Answer

A) tracing. 
B) confirmations. 
C) vouching. 
D) reperformance. 
A) tracing. 
B) confirmations. 
C) vouching. 
D) reperformance.

Question 15

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 16

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 17

Below are 10 documents typically examined during an audit.Classify each document as either internal or external.

Accepted Answer

1. External 6. Internal
2. Int

Question 18

When determining sufficient and appropriate audit evidence in order to form an opinion on the client's financial statements the auditor compiles audit documentation to support the opinion.The largest portion of audit documentation will include detailed supporting schedules prepared by the client or the auditor in support of specific accounts on the financial statements.The major types of supporting schedules include analysis schedules and tests of reasonableness.Discuss those two schedules and give an example for each schedule.

Accepted Answer

Analysis: designed to show the activity

Question 19

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 20

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

Exam 7: Audit Evidence

Which of the following generally provides the most reliable evidence?

Which of the following statements is true?

Audit procedures can result in significant, unexpected differences.The auditor should investigate further if:

An example of a supporting schedule is a reconciliation of amounts, which consists of the details that make up a year-end balance.

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:

For audit evidence to be compelling to the auditor it must be sufficient and appropriate.Which statement below is not correct regarding the appropriateness of audit evidence?

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

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

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

The Auditing Standards Board has concluded that analytical procedures are so important that they are required during:

There are four important purposes of analytical procedures.Identify three of these four purposes and, for each purpose, give a specific example of an analytical procedure that an auditor might perform.

Audit documentation is the joint property of the auditor and the audit client.

When auditors use documentation to support recorded transactions and amounts, the process is usually called:

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

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

Below are 10 documents typically examined during an audit.Classify each document as either internal or external.

To be considered reliable evidence, confirmations must be controlled by:

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

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

Internal Control, Control Risk, and Section 404 Audits

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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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