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

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

Question 3

Physical examination

Accepted Answer

A)  is a direct means of verifying that an asset really exists. 
B)  is sufficient evidence to verify that the existing assets are owned by the client. 
C)  can be used for both tangible assets and documents. 
D)  is not generally a reliable type of audit evidence. 
A)  is a direct means of verifying that an asset really exists. 
B)  is sufficient evidence to verify that the existing assets are owned by the client. 
C)  can be used for both tangible assets and documents. 
D)  is not generally a reliable type of audit evidence.

Question 4

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 5

The only time anyone else, including the client, has the legal right to examine the audit files is when they are subpoenaed by a court as legal evidence.

Accepted Answer

A) True 
 B)False

Question 6

Factors that determine the auditor's willingness to accept a document as reliable evidence include

Accepted Answer

A)  whether it is internal or external. 
B)  whether it was created and processed under conditions of effective internal control. 
C)  whether it is an original document or a photocopy. 
D)  all of the above. 
A)  whether it is internal or external. 
B)  whether it was created and processed under conditions of effective internal control. 
C)  whether it is an original document or a photocopy. 
D)  all of the above.

Question 7

________ is the auditor's examination of the client's documents and records to substantiate that the information is included in the financial statements.

Accepted Answer

A)  Inspection 
B)  Recalculation 
C)  Observation 
D)  Verification 
A)  Inspection 
B)  Recalculation 
C)  Observation 
D)  Verification

Question 8

Auditors use tick marks, which are symbols adjacent to the detail on the body of the schedule.

Accepted Answer

A) True 
 B)False

Question 9

Auditors of public companies are required to retain email correspondence related to public company audits meeting certain Securities and Exchange Commission rules.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Which of the following is the most objective type of evidence?

Accepted Answer

A)  a letter written by the client's attorney discussing the likely outcome of outstanding lawsuits 
B)  the physical count of securities and cash 
C)  inquiries of the credit manager about the collectability of noncurrent accounts receivable 
D)  observation of cobwebs on some inventory bins 
A)  a letter written by the client's attorney discussing the likely outcome of outstanding lawsuits 
B)  the physical count of securities and cash 
C)  inquiries of the credit manager about the collectability of noncurrent accounts receivable 
D)  observation of cobwebs on some inventory bins

Question 12

Audit evidence has two primary qualities for the auditor; relevance and reliability. Given the choices below, which provides the auditor with the most reliable audit evidence?

Accepted Answer

A)  general ledger account balances 
B)  confirmation of accounts receivable balance received from a customer 
C)  internal memo explaining the issuance of a credit memo 
D)  copy of month-end adjusting entries 
A)  general ledger account balances 
B)  confirmation of accounts receivable balance received from a customer 
C)  internal memo explaining the issuance of a credit memo 
D)  copy of month-end adjusting entries

Question 13

When making audit evidence decisions,

Accepted Answer

A)  the auditor decides which items in the population to test before determining the sample size. 
B)  the sample size for any given procedure must remain constant from audit to audit. 
C)  audit engagement software can assist the auditor in making evidence decisions. 
D)  the auditor is required to use the sample sizes that are determined by the PCAOB. 
A)  the auditor decides which items in the population to test before determining the sample size. 
B)  the sample size for any given procedure must remain constant from audit to audit. 
C)  audit engagement software can assist the auditor in making evidence decisions. 
D)  the auditor is required to use the sample sizes that are determined by the PCAOB.

Question 14

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 15

Which of the following is a correct statement regarding confirmations?

Accepted Answer

A)  Confirmations can be in oral or written form. 
B)  Electronic confirmations are not acceptable under generally accepted auditing standards. 
C)  Confirmations are generally used in the audit of fixed asset additions. 
D)  Auditors consider alternative evidence available when determining if confirmations should be used. 
A)  Confirmations can be in oral or written form. 
B)  Electronic confirmations are not acceptable under generally accepted auditing standards. 
C)  Confirmations are generally used in the audit of fixed asset additions. 
D)  Auditors consider alternative evidence available when determining if confirmations should be used.

Question 16

The type of audit evidence known as inquiry requires the auditor to obtain oral or written information from the client in response to questions.

Accepted Answer

A) True 
 B)False

Question 17

Auditors must make decisions regarding what evidence to gather and how much to accumulate. Which of the following is a decision that must be made by auditors related to evidence?

Accepted Answer

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

Question 18

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 19

Timing is an important factor for the auditor to take into consideration in gathering audit evidence. For example, auditors often prefer to do test counts of the inventory as close as possible to the date of the audit opinion.

Accepted Answer

A) True 
 B)False

Question 20

When the auditor uses the audit procedure vouching, he or she is primarily concerned with which of the following audit objectives when testing classes of transactions?

Accepted Answer

A)  occurrence 
B)  completeness 
C)  authorization 
D)  classification 
A)  occurrence 
B)  completeness 
C)  authorization 
D)  classification

Exam 7: Audit Evidence

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

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

Physical examination

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

The only time anyone else, including the client, has the legal right to examine the audit files is when they are subpoenaed by a court as legal evidence.

Factors that determine the auditor's willingness to accept a document as reliable evidence include

________ is the auditor's examination of the client's documents and records to substantiate that the information is included in the financial statements.

Auditors use tick marks, which are symbols adjacent to the detail on the body of the schedule.

Auditors of public companies are required to retain email correspondence related to public company audits meeting certain Securities and Exchange Commission rules.

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

Which of the following is the most objective type of evidence?

Audit evidence has two primary qualities for the auditor; relevance and reliability. Given the choices below, which provides the auditor with the most reliable audit evidence?

When making audit evidence decisions,

Analytical procedures performed during the planning phase of the audit

Which of the following is a correct statement regarding confirmations?

The type of audit evidence known as inquiry requires the auditor to obtain oral or written information from the client in response to questions.

Auditors must make decisions regarding what evidence to gather and how much to accumulate. Which of the following is a decision that must be made by auditors related to evidence?

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?

Timing is an important factor for the auditor to take into consideration in gathering audit evidence. For example, auditors often prefer to do test counts of the inventory as close as possible to the date of the audit opinion.

When the auditor uses the audit procedure vouching, he or she is primarily concerned with which of the following audit objectives when testing classes of transactions?

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

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