Question 1

Which of the following nonfinancial information would an auditor most likely consider in performing analytical procedures during the planning phase of an audit?

Accepted Answer

A)  Turnover of personnel in the accounting department. 
B)  Objectivity of audit committee members. 
C)  Square footage of selling space. 
D)  Management's plans to repurchase stock. 
A)  Turnover of personnel in the accounting department. 
B)  Objectivity of audit committee members. 
C)  Square footage of selling space. 
D)  Management's plans to repurchase stock. C

Question 2

Auditors obtain evidence about the inventory account through, among other procedures, observing the counting of inventory. What are some limitations "observation" has as an audit procedure?

Accepted Answer

Observation is limited to the point in time at which the observation takes place. In addition, entity personnel may act differently when the auditor is not observing them.

Question 3

Audit documentation

Accepted Answer

A)  Must be in electronic form. 
B)  Must be in paper form only. 
C)  Is not required, but is strongly recommended. 
D)  May be in paper, electronic, or some other form. 
A)  Must be in electronic form. 
B)  Must be in paper form only. 
C)  Is not required, but is strongly recommended. 
D)  May be in paper, electronic, or some other form. D

Question 4

The current audit file usually includes

Accepted Answer

A)  Working trial balance. 
B)  Organizational chart. 
C)  Accounting manual. 
D)  Copies of important contracts. 
A)  Working trial balance. 
B)  Organizational chart. 
C)  Accounting manual. 
D)  Copies of important contracts.

Question 5

An example of audit evidence with a medium level of reliability is

Accepted Answer

A)  Scanning. 
B)  Recalculation. 
C)  Observation. 
D)  All of these. 
A)  Scanning. 
B)  Recalculation. 
C)  Observation. 
D)  All of these.

Question 6

The permanent audit file usually includes

Accepted Answer

A)  Working trial balance. 
B)  Organizational chart. 
C)  Audit plan. 
D)  Audit programs. 
A)  Working trial balance. 
B)  Organizational chart. 
C)  Audit plan. 
D)  Audit programs.

Question 7

In designing written audit programs, an auditor should plan specific audit procedures to test

Accepted Answer

A)  Timing of audit procedures. 
B)  Cost-benefit of gathering evidence. 
C)  Selected audit techniques. 
D)  Management assertions. 
A)  Timing of audit procedures. 
B)  Cost-benefit of gathering evidence. 
C)  Selected audit techniques. 
D)  Management assertions.

Question 8

Discuss the reliability of the types of audit evidence and identify the level of reliability for each type of evidence.

Accepted Answer

Inspection of the tangible assets, reper

Question 9

In creating lead schedules for an audit engagement, what financial information is needed to begin?

Accepted Answer

A)  Interim financial information, such as third quarter sales, net income, and inventory and receivables balances. 
B)  Specialized journal information, such as the invoice and purchase order numbers of the last few sales and purchases of the year. 
C)  General ledger information, such as account numbers, prior-year account balances, and current year unadjusted information. 
D)  Adjusting entry information, such as deferrals and accruals and reclassification journal entries. 
A)  Interim financial information, such as third quarter sales, net income, and inventory and receivables balances. 
B)  Specialized journal information, such as the invoice and purchase order numbers of the last few sales and purchases of the year. 
C)  General ledger information, such as account numbers, prior-year account balances, and current year unadjusted information. 
D)  Adjusting entry information, such as deferrals and accruals and reclassification journal entries.

Question 10

Which of the following elements ultimately determines the amount of audit work that is necessary in the circumstances to afford a reasonable basis for an opinion?

Accepted Answer

A)  Auditor judgment. 
B)  Materiality. 
C)  Relative risk. 
D)  Reasonable assurance. 
A)  Auditor judgment. 
B)  Materiality. 
C)  Relative risk. 
D)  Reasonable assurance.

Question 11

A confirmation is used to

Accepted Answer

A)  Verify the inventory count is correct. 
B)  Verify that a control is being observed. 
C)  Verify a representation from a third party. 
D)  Verify that a specific trend is correct. 
A)  Verify the inventory count is correct. 
B)  Verify that a control is being observed. 
C)  Verify a representation from a third party. 
D)  Verify that a specific trend is correct.

Question 12

The classification assertion refers to transactions and events being recorded in the correct accounting period.

Accepted Answer

A) True 
 B)False

Question 13

Which assertions may be tested for the "account balances" category of management assertions?

Accepted Answer

A)  Existence, accuracy, rights and obligations, completeness. 
B)  Existence, rights and obligations, completeness, valuation and allocation. 
C)  Occurrence, rights and obligations, completeness, valuation and allocation. 
D)  Occurrence, accuracy, rights and obligations, completeness. 
A)  Existence, accuracy, rights and obligations, completeness. 
B)  Existence, rights and obligations, completeness, valuation and allocation. 
C)  Occurrence, rights and obligations, completeness, valuation and allocation. 
D)  Occurrence, accuracy, rights and obligations, completeness.

Question 14

Sarah is auditing the sales of a new client. In one procedure Sarah performs, she begins with the original sales documents and then searches the accounting records to find the corresponding entry. What test is Sarah performing and what management assertion is she testing?

Accepted Answer

Sarah is tracing, which refers to first

Question 15

Which of the following is not a typical analytical procedure?

Accepted Answer

A)  Study of relationships of the financial information with relevant nonfinancial information. 
B)  Comparison of the financial information with similar information regarding the industry in which the entity operates. 
C)  Comparison of recorded amounts of major disbursements with appropriate invoices. 
D)  Comparison of the financial information with budgeted amounts. 
A)  Study of relationships of the financial information with relevant nonfinancial information. 
B)  Comparison of the financial information with similar information regarding the industry in which the entity operates. 
C)  Comparison of recorded amounts of major disbursements with appropriate invoices. 
D)  Comparison of the financial information with budgeted amounts.

Question 16

The following statements were made in a discussion of audit evidence between two CPAs. Which statement is not valid concerning audit evidence?

Accepted Answer

A)  "I am seldom convinced beyond all doubt with respect to all aspects of the statements being examined." 
B)  "I would not undertake that procedure because at best the results would only be persuasive and I'm looking for convincing evidence." 
C)  "I evaluate the degree of risk involved in deciding the kind of evidence I will gather." 
D)  "I evaluate the usefulness of the evidence I can obtain against the cost of obtaining it." 
A)  "I am seldom convinced beyond all doubt with respect to all aspects of the statements being examined." 
B)  "I would not undertake that procedure because at best the results would only be persuasive and I'm looking for convincing evidence." 
C)  "I evaluate the degree of risk involved in deciding the kind of evidence I will gather." 
D)  "I evaluate the usefulness of the evidence I can obtain against the cost of obtaining it."

Question 17

Why is appropriateness important for audit evidence? What qualities must evidence have to be considered appropriate?

Accepted Answer

Appropriateness is a measure of the qual

Question 18

Which of the following is the least persuasive documentation in support of an auditor's opinion?

Accepted Answer

A)  Schedules of details of physical inventory counts conducted by the entity. 
B)  Notation of auditor's inferences drawn from ratios and trends. 
C)  Notation of appraisers' conclusions documented in the auditor's working papers. 
D)  Lists of negative confirmation requests for which no response was received by the auditor. 
A)  Schedules of details of physical inventory counts conducted by the entity. 
B)  Notation of auditor's inferences drawn from ratios and trends. 
C)  Notation of appraisers' conclusions documented in the auditor's working papers. 
D)  Lists of negative confirmation requests for which no response was received by the auditor.

Question 19

The cutoff assertion relates to whether transactions and events have been recorded in the correct accounting period.

Accepted Answer

A) True 
 B)False

Question 20

An auditor's decision either to apply analytical procedures as substantive procedures or to perform tests of transactions and account balances usually is determined by

Accepted Answer

A)  Availability of data aggregated at a high level. 
B)  Relative effectiveness and efficiency of the tests. 
C)  Timing of tests performed after the balance sheet date. 
D)  Auditor's familiarity with industry trends. 
A)  Availability of data aggregated at a high level. 
B)  Relative effectiveness and efficiency of the tests. 
C)  Timing of tests performed after the balance sheet date. 
D)  Auditor's familiarity with industry trends.

Exam 5: Evidence and Documentation

Which of the following nonfinancial information would an auditor most likely consider in performing analytical procedures during the planning phase of an audit?

Auditors obtain evidence about the inventory account through, among other procedures, observing the counting of inventory. What are some limitations "observation" has as an audit procedure?

Audit documentation

The current audit file usually includes

An example of audit evidence with a medium level of reliability is

The permanent audit file usually includes

In designing written audit programs, an auditor should plan specific audit procedures to test

Discuss the reliability of the types of audit evidence and identify the level of reliability for each type of evidence.

In creating lead schedules for an audit engagement, what financial information is needed to begin?

Which of the following elements ultimately determines the amount of audit work that is necessary in the circumstances to afford a reasonable basis for an opinion?

A confirmation is used to

The classification assertion refers to transactions and events being recorded in the correct accounting period.

Which assertions may be tested for the "account balances" category of management assertions?

Sarah is auditing the sales of a new client. In one procedure Sarah performs, she begins with the original sales documents and then searches the accounting records to find the corresponding entry. What test is Sarah performing and what management assertion is she testing?

Which of the following is not a typical analytical procedure?

The following statements were made in a discussion of audit evidence between two CPAs. Which statement is not valid concerning audit evidence?

Why is appropriateness important for audit evidence? What qualities must evidence have to be considered appropriate?

Which of the following is the least persuasive documentation in support of an auditor's opinion?

The cutoff assertion relates to whether transactions and events have been recorded in the correct accounting period.

An auditor's decision either to apply analytical procedures as substantive procedures or to perform tests of transactions and account balances usually is determined by

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

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