Question 1

When can audit procedures be performed?

Accepted Answer

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

Question 2

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  True

Question 3

The two characteristics of the appropriateness of evidence are

Accepted Answer

A)  relevance and timeliness. 
B)  relevance and accuracy. 
C)  relevance and reliability. 
D)  reliability and accuracy. 
A)  relevance and timeliness. 
B)  relevance and accuracy. 
C)  relevance and reliability. 
D)  reliability and accuracy. C

Question 4

Appropriateness of evidence is a measure of the

Accepted Answer

A)  quantity of evidence. 
B)  quality of evidence. 
C)  sufficiency of evidence. 
D)  meaning of evidence. 
A)  quantity of evidence. 
B)  quality of evidence. 
C)  sufficiency of evidence. 
D)  meaning of evidence.

Question 5

In addition to sample size, the individual population items tested affect the sufficiency of audit evidence gathered by the auditor.

Accepted Answer

A) True 
 B)False

Question 6

The most important benefits of industry comparisons are to aid in understanding the client's business and as an indication of the likelihood of financial failure.

Accepted Answer

A) True 
 B)False

Question 7

Analytical procedures must be used during which phase(s) of the audit?

Accepted Answer

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

Question 8

You are auditing the company's purchasing process for goods and services. You are primarily concerned with the company not recording all purchase transactions. Which audit procedure below would be the most effective audit procedure in this case?

Accepted Answer

A)  vouching from the accounts payable account to the vendor invoices 
B)  tracing vendor invoices to recorded amounts in the accounts payable account 
C)  confirming accounts payable recorded amounts 
D)  reconciling the accounts payable subsidiary ledger to the accounts payable account 
A)  vouching from the accounts payable account to the vendor invoices 
B)  tracing vendor invoices to recorded amounts in the accounts payable account 
C)  confirming accounts payable recorded amounts 
D)  reconciling the accounts payable subsidiary ledger to the accounts payable account

Question 9

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 10

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

Accepted Answer

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

Question 11

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.

Question 12

Analytical procedures

Accepted Answer

A)  performed during the audit planning phase generally use aggregated data at a high level. 
B)  are never performed during the testing phase of an audit. 
C)  are declining in importance as a type of audit evidence. 
D)  performed during the audit planning stage help the auditor take a final objective look at the audited financial statements. 
A)  performed during the audit planning phase generally use aggregated data at a high level. 
B)  are never performed during the testing phase of an audit. 
C)  are declining in importance as a type of audit evidence. 
D)  performed during the audit planning stage help the auditor take a final objective look at the audited financial statements.

Question 13

When the auditor foots the journals and the subsidiary ledgers, it is considered reperformance.

Accepted Answer

A) True 
 B)False

Question 14

The law makes the knowing and willing destruction of audit documentation for audits of public companies within the 7-year required retention period a criminal offense subject to financial fines and imprisonment up to 10 years.

Accepted Answer

A) True 
 B)False

Question 15

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 16

An example of an analytical procedure performed by the auditor includes an inventory pricing test which may identify the need for special care while performing substantive audit procedures on the inventory account balance.

Accepted Answer

A) True 
 B)False

Question 17

To determine accounts receivable turnover, net sales are divided by

Accepted Answer

A)  beginning net accounts receivable. 
B)  average gross receivables. 
C)  cost of goods sold. 
D)  365 days. 
A)  beginning net accounts receivable. 
B)  average gross receivables. 
C)  cost of goods sold. 
D)  365 days.

Question 18

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 19

Objective evidence is more reliable, and hence more persuasive, than subjective evidence.

Accepted Answer

A) True 
 B)False

Question 20

After deciding on the sample size for a particular audit procedure, the auditor is then restricted in deciding which items in the population to test.

Accepted Answer

A) True 
 B)False

Exam 7: Audit Evidence

When can audit procedures be performed?

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

The two characteristics of the appropriateness of evidence are

Appropriateness of evidence is a measure of the

In addition to sample size, the individual population items tested affect the sufficiency of audit evidence gathered by the auditor.

The most important benefits of industry comparisons are to aid in understanding the client's business and as an indication of the likelihood of financial failure.

Analytical procedures must be used during which phase(s) of the audit?

You are auditing the company's purchasing process for goods and services. You are primarily concerned with the company not recording all purchase transactions. Which audit procedure below would be the most effective audit procedure in this case?

Two determinants of the persuasiveness of evidence are

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

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

Analytical procedures

When the auditor foots the journals and the subsidiary ledgers, it is considered reperformance.

The law makes the knowing and willing destruction of audit documentation for audits of public companies within the 7-year required retention period a criminal offense subject to financial fines and imprisonment up to 10 years.

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

An example of an analytical procedure performed by the auditor includes an inventory pricing test which may identify the need for special care while performing substantive audit procedures on the inventory account balance.

To determine accounts receivable turnover, net sales are divided by

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

Objective evidence is more reliable, and hence more persuasive, than subjective evidence.

After deciding on the sample size for a particular audit procedure, the auditor is then restricted in deciding which items in the population to test.

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

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, 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

Filters