Question 1

Which of the following types of audit evidence is the most persuasive?

Accepted Answer

A)  Prenumbered internal purchase order forms. 
B)  Auditee worksheets supporting cost allocations. 
C)  Bank statements obtained from the auditee. 
D)  Auditee personnel responses to auditor inquiries. 
A)  Prenumbered internal purchase order forms. 
B)  Auditee worksheets supporting cost allocations. 
C)  Bank statements obtained from the auditee. 
D)  Auditee personnel responses to auditor inquiries.

Question 2

Analytical procedures performed in the overall review stage of an audit suggest that several accounts have unexpected relationships.The results of these procedures most likely would indicate that

Accepted Answer

A)  Fraud exists within the relevant accounts. 
B)  Internal control activities are not operating effectively. 
C)  Additional tests of details are required. 
D)  The communication with the audit committee should be revised. 
A)  Fraud exists within the relevant accounts. 
B)  Internal control activities are not operating effectively. 
C)  Additional tests of details are required. 
D)  The communication with the audit committee should be revised.

Question 3

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,reperf

Question 4

Your audit client is under intense pressure to meet an earnings target.Which transaction assertion for transactions within the purchasing process are you most concerned with?

Accepted Answer

A)  Existence or occurrence. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Presentation and disclosure. 
A)  Existence or occurrence. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Presentation and disclosure.

Question 5

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 6

Which of the following best describes the primary purpose of audit procedures?

Accepted Answer

A)  To detect all errors or fraudulent activities. 
B)  To comply with generally accepted accounting principles. 
C)  To gather corroborative evidence about management's assertions. 
D)  To verify the accuracy of the balance sheet account balances. 
A)  To detect all errors or fraudulent activities. 
B)  To comply with generally accepted accounting principles. 
C)  To gather corroborative evidence about management's assertions. 
D)  To verify the accuracy of the balance sheet account balances.

Question 7

To test for unsupported entries in the ledger,the direction of audit testing should start from the

Accepted Answer

A)  Ledger entries. 
B)  Journal entries. 
C)  Externally generated documents. 
D)  Original source documents. 
A)  Ledger entries. 
B)  Journal entries. 
C)  Externally generated documents. 
D)  Original source documents.

Question 8

The auditor gathers audit evidence to test management's assertions.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Name two management assertions pertaining to the inventory account balance and explain why they are considered in an audit.

Accepted Answer

Answers should include two of the follow

Question 11

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 12

Procedures specifically outlined in an audit program are designed primarily to

Accepted Answer

A)  Assess risk for planning purposes. 
B)  Detect all errors or fraudulent activities. 
C)  Test internal control systems. 
D)  Gather evidence about management's assertions. 
A)  Assess risk for planning purposes. 
B)  Detect all errors or fraudulent activities. 
C)  Test internal control systems. 
D)  Gather evidence about management's assertions.

Question 13

Analytical procedures may be classified as being primarily which of the following?

Accepted Answer

A)  Tests of controls. 
B)  Substantive procedures. 
C)  Tests of ratios. 
D)  Detailed tests of balances. 
A)  Tests of controls. 
B)  Substantive procedures. 
C)  Tests of ratios. 
D)  Detailed tests of balances.

Question 14

The auditor notices significant fluctuations in key elements of the company's financial statements.If management is unable to provide an acceptable explanation,the auditor should

Accepted Answer

A)  Consider the matter a scope limitation. 
B)  Perform additional audit procedures to investigate the matter further. 
C)  Intensify the examination with the expectation of detecting management fraud. 
D)  Withdraw from the engagement. 
A)  Consider the matter a scope limitation. 
B)  Perform additional audit procedures to investigate the matter further. 
C)  Intensify the examination with the expectation of detecting management fraud. 
D)  Withdraw from the engagement.

Question 15

Audit evidence includes only written information used by the auditor in arriving at an opinion about the fairness of financial statements.

Accepted Answer

A) True 
 B)False

Question 16

The auditor must use his or her professional judgment to determine the amount of audit evidence to be gathered.

Accepted Answer

A) True 
 B)False

Question 17

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.

Question 18

Audit documents record the results of the auditor's evidence-gathering procedures.When preparing audit documents,the auditor should remember that

Accepted Answer

A)  Audit documents should be kept on the client's premises so that the client can have access to them for reference purposes. 
B)  Audit documents should be the primary support for the financial statements being examined. 
C)  Audit documents should be considered as a substitute for the company's accounting records. 
D)  Audit documents should be designed to facilitate the review and supervision of work done by auditors assigned to the engagement. 
A)  Audit documents should be kept on the client's premises so that the client can have access to them for reference purposes. 
B)  Audit documents should be the primary support for the financial statements being examined. 
C)  Audit documents should be considered as a substitute for the company's accounting records. 
D)  Audit documents should be designed to facilitate the review and supervision of work done by auditors assigned to the engagement.

Question 19

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of

Accepted Answer

A)  Tests of transactions and balances. 
B)  A preliminary review of internal controls. 
C)  Specialized audit programs. 
D)  Analytical procedures. 
A)  Tests of transactions and balances. 
B)  A preliminary review of internal controls. 
C)  Specialized audit programs. 
D)  Analytical procedures.

Question 20

The relevance of audit evidence or specific audit procedures depends on the assertion being tested.

Accepted Answer

A) True 
 B)False

Exam 5: Evidence and Documentation

Which of the following types of audit evidence is the most persuasive?

Analytical procedures performed in the overall review stage of an audit suggest that several accounts have unexpected relationships.The results of these procedures most likely would indicate that

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

Your audit client is under intense pressure to meet an earnings target.Which transaction assertion for transactions within the purchasing process are you most concerned with?

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

Which of the following best describes the primary purpose of audit procedures?

To test for unsupported entries in the ledger,the direction of audit testing should start from the

The auditor gathers audit evidence to test management's assertions.

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

Name two management assertions pertaining to the inventory account balance and explain why they are considered in an audit.

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

Procedures specifically outlined in an audit program are designed primarily to

Analytical procedures may be classified as being primarily which of the following?

The auditor notices significant fluctuations in key elements of the company's financial statements.If management is unable to provide an acceptable explanation,the auditor should

Audit evidence includes only written information used by the auditor in arriving at an opinion about the fairness of financial statements.

The auditor must use his or her professional judgment to determine the amount of audit evidence to be gathered.

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

Audit documents record the results of the auditor's evidence-gathering procedures.When preparing audit documents,the auditor should remember that

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of

The relevance of audit evidence or specific audit procedures depends on the assertion being tested.

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 Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting 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

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

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