Question 1

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 2

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 3

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 4

An audit program is the list of audit procedures for an audit area or an entire audit.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Audit evidence is often available only in electronic form,and auditors must evaluate how this affects their ability to gather sufficient,appropriate evidence.

Accepted Answer

A) True 
 B)False

Question 7

Auditors may decide to replace tests of details with analytical procedures when possible because the:

Accepted Answer

A)  analytical procedures are more reliable. 
B)  analytical procedures are considerably less expensive. 
C)  analytical procedures are more persuasive. 
D)  tests of details are more difficult to interpret. 
A)  analytical procedures are more reliable. 
B)  analytical procedures are considerably less expensive. 
C)  analytical procedures are more persuasive. 
D)  tests of details are more difficult to interpret.

Question 8

Audit documentation should possess certain characteristics.Which of the following is true regarding those characteristics?

Accepted Answer

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

Question 9

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 10

One purpose of performing analytical procedures in the planning phase of an audit is to assess the client's financial condition.Explain how the assessment of a client's financial condition can affect the auditor's decisions concerning evidence accumulation in later phases of the audit.

Accepted Answer

Auditors must obtain knowledge about a c

Question 11

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)  The decision of how many items to test should not be influenced by the increased costs of performing the additional tests. 
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)  The decision of how many items to test should not be influenced by the increased costs of performing the additional tests. 
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 12

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 13

Evidence is usually more persuasive for balance sheet accounts when it is obtained:

Accepted Answer

A)  as close to the balance sheet date as possible. 
B)  only from transactions occurring on the balance sheet date. 
C)  from various times throughout the client's year. 
D)  from the time period when transactions in that account were most numerous during the fiscal period. 
A)  as close to the balance sheet date as possible. 
B)  only from transactions occurring on the balance sheet date. 
C)  from various times throughout the client's year. 
D)  from the time period when transactions in that account were most numerous during the fiscal period.

Question 14

Audit documentation:

Accepted Answer

A)  should identify the items tested when the audit procedures involve sampling of transactions or balances. 
B)  does not aid in the preparation of the tax return since accounting and tax rules differ. 
C)  is another term for the audit program. 
D)  should not be given to anyone outside the audit firm, even if a subpoena has been issued. 
A)  should identify the items tested when the audit procedures involve sampling of transactions or balances. 
B)  does not aid in the preparation of the tax return since accounting and tax rules differ. 
C)  is another term for the audit program. 
D)  should not be given to anyone outside the audit firm, even if a subpoena has been issued.

Question 15

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 16

Determine which of the following is most correct 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 17

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 18

Calculating the gross margin for the current year under audit 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 19

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 20

A canceled check written by the client,made payable to a local supplier and drawn on the client's bank account is one type of internal document.

Accepted Answer

A) True 
 B)False

Exam 7: Nature and Type of Audit Evidence

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

To be considered reliable evidence,confirmations must be controlled 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:

An audit program is the list of audit procedures for an audit area or an entire audit.

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

Audit evidence is often available only in electronic form,and auditors must evaluate how this affects their ability to gather sufficient,appropriate evidence.

Auditors may decide to replace tests of details with analytical procedures when possible because the:

Audit documentation should possess certain characteristics.Which of the following is true regarding those characteristics?

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

One purpose of performing analytical procedures in the planning phase of an audit is to assess the client's financial condition.Explain how the assessment of a client's financial condition can affect the auditor's decisions concerning evidence accumulation in later phases of the audit.

Which of the following statements is not correct?

Two determinants of the persuasiveness of evidence are:

Evidence is usually more persuasive for balance sheet accounts when it is obtained:

Audit documentation:

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.

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

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

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

Which of the following is a correct statement regarding confirmations?

A canceled check written by the client,made payable to a local supplier and drawn on the client's bank account is one type of internal document.

The Assurance Services Market

The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Audit Planning

Considering Materiality and Audit Risk

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan 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 Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Audit Completion

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters