Question 1

Which of the following statements regarding the relevance of evidence is correct?

Accepted Answer

A)  To be relevant, evidence must pertain to the audit objective of the evidence. 
B)  To be relevant, evidence must be persuasive. 
C)  To be relevant, evidence must relate to multiple audit objectives. 
D)  To be relevant, evidence must be derived from a system including effective internal controls. 
A)  To be relevant, evidence must pertain to the audit objective of the evidence. 
B)  To be relevant, evidence must be persuasive. 
C)  To be relevant, evidence must relate to multiple audit objectives. 
D)  To be relevant, evidence must be derived from a system including effective internal controls.

Question 2

Which of the following forms of evidence would be least persuasive in forming the auditor's opinion about marketable securities and other investments held by the company?

Accepted Answer

A)  Responses to auditor's questions by the president and controller regarding the investments account. 
B)  Correspondence with a stockbroker regarding the quantity of client's investments held in street name by the broker. 
C)  Minutes of the board of directors authorizing the purchase of stock as an investment. 
D)  The auditor's count of marketable securities. 
A)  Responses to auditor's questions by the president and controller regarding the investments account. 
B)  Correspondence with a stockbroker regarding the quantity of client's investments held in street name by the broker. 
C)  Minutes of the board of directors authorizing the purchase of stock as an investment. 
D)  The auditor's count of marketable securities.

Question 3

What client information is needed by auditors in creating lead schedules?

Accepted Answer

A)  Interim statements prepared by the client for the company's 3rd quarter financial results. 
B)  General ledger information, including unadjusted ending balances and beginning balances for accounts. 
C)  A schedule of adjusting entries made by the client for all balance sheet accounts. 
D)  Detailed transaction information that may explain the changes in balance sheet accounts for the current year under audit. 
A)  Interim statements prepared by the client for the company's 3rd quarter financial results. 
B)  General ledger information, including unadjusted ending balances and beginning balances for accounts. 
C)  A schedule of adjusting entries made by the client for all balance sheet accounts. 
D)  Detailed transaction information that may explain the changes in balance sheet accounts for the current year under audit.

Question 4

Which of the following is not a correct combination of terms and related type of audit evidence?

Accepted Answer

A)  Inquire inquiries of client 
B)  Count physical examination 
C)  Recompute documentation 
D)  Read documentation 
A)  Inquire inquiries of client 
B)  Count physical examination 
C)  Recompute documentation 
D)  Read documentation

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 are more relevant than data developed under unsatisfactory internal control conditions. 
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 are more relevant than data developed under unsatisfactory internal control conditions. 
C)  Oral representations made by management are not reliable evidence. 
D)  Evidence must be both reliable and relevant to be considered appropriate.

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

Audit procedures are concerned with the nature, extent, and timing in gathering audit evidence. Which, of the following, is true as to the timing of audit procedures?

Accepted Answer

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

Question 9

An important benefit of industry comparisons is as:

Accepted Answer

A)  an aid to understanding the client's business. 
B)  an indicator of errors. 
C)  an indicator of fraud. 
D)  a least-cost indicator for audit procedures. 
A)  an aid to understanding the client's business. 
B)  an indicator of errors. 
C)  an indicator of fraud. 
D)  a least-cost indicator for audit procedures.

Question 10

Relevance of evidence can only be considered in terms of specific audit objectives.

Accepted Answer

A) True 
 B)False

Question 11

There are four important purposes of analytical procedures. Identify three of these four purposes and, for each purpose, give a specific example of an analytical procedure that an auditor might perform.

Accepted Answer

Four important purposes of analytical pr

Question 12

The Auditing Standards Board has concluded that analytical procedures are so important that they are required during:

Accepted Answer

A)  planning and test of control phases. 
B)  planning and completion phases. 
C)  test of control and completion phases. 
D)  planning, test of control, and completion phases. 
A)  planning and test of control phases. 
B)  planning and completion phases. 
C)  test of control and completion phases. 
D)  planning, test of control, and completion phases.

Question 13

When the auditor used the audit procedure vouching 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

Question 14

When the auditor develops supporting evidence for amounts posted to account balances with documentary evidence, that process is called:

Accepted Answer

A)  inquiry. 
B)  confirmation. 
C)  vouching. 
D)  physical examination. 
A)  inquiry. 
B)  confirmation. 
C)  vouching. 
D)  physical examination.

Question 15

Which of the following statements is not a correct use of the terminology in relation to 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 16

Discuss three of the following influences on the persuasiveness of evidence.
1. Relevance
2. Independence of provider
3. Effectiveness of client's internal controls
4. Auditor's direct knowledge
5. Degree of objectivity
6. Timeliness

Accepted Answer

1. Relevance - Evidence must pertain to

Question 17

"Physical examination" is the inspection or count by the auditor of items such as:

Accepted Answer

A)  cash, inventory, and payroll timecards. 
B)  cash, inventory, canceled checks, and sales documents. 
C)  cash, inventory, canceled checks, and tangible fixed assets. 
D)  cash, inventory, securities, notes receivable, and tangible fixed assets. 
A)  cash, inventory, and payroll timecards. 
B)  cash, inventory, canceled checks, and sales documents. 
C)  cash, inventory, canceled checks, and tangible fixed assets. 
D)  cash, inventory, securities, notes receivable, and tangible fixed assets.

Question 18

Ordinarily, audit documentation can be provided to someone else only with the express permission of the client.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not one of the major types of analytical procedures?

Accepted Answer

A)  compare client with industry averages 
B)  compare client with prior year 
C)  compare client with budget 
D)  compare client with SEC averages 
A)  compare client with industry averages 
B)  compare client with prior year 
C)  compare client with budget 
D)  compare client with SEC averages

Question 20

Due professional care, the third general standard, is concerned with what is done by the independent auditor and how well it is done. For example, due care in the matter of audit documentation requires that audit documentation of the evidence gathered by the auditor meets which of the following criteria?

Accepted Answer

A)  Workpapers be indexed to the general ledger accounts and include both a permanent file and a general file. 
B)  The content be sufficient to provide support for the auditor's opinion, including the auditor's representation as to compliance with auditing standards. 
C)  Audit evidence is principally gathered to determine if the client's financial statements, as prepared by management, can be relied upon to make managerial decisions about the firm. 
D)  Audit evidence as displayed in the workpapers is primarily performed to protect the auditing firm in the case of a lawsuit by investors. 
A)  Workpapers be indexed to the general ledger accounts and include both a permanent file and a general file. 
B)  The content be sufficient to provide support for the auditor's opinion, including the auditor's representation as to compliance with auditing standards. 
C)  Audit evidence is principally gathered to determine if the client's financial statements, as prepared by management, can be relied upon to make managerial decisions about the firm. 
D)  Audit evidence as displayed in the workpapers is primarily performed to protect the auditing firm in the case of a lawsuit by investors.

Exam 7: Audit Evidence

Which of the following statements regarding the relevance of evidence is correct?

Which of the following forms of evidence would be least persuasive in forming the auditor's opinion about marketable securities and other investments held by the company?

What client information is needed by auditors in creating lead schedules?

Which of the following is not a correct combination of terms and related type of audit evidence?

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

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

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

Audit procedures are concerned with the nature, extent, and timing in gathering audit evidence. Which, of the following, is true as to the timing of audit procedures?

An important benefit of industry comparisons is as:

Relevance of evidence can only be considered in terms of specific audit objectives.

There are four important purposes of analytical procedures. Identify three of these four purposes and, for each purpose, give a specific example of an analytical procedure that an auditor might perform.

The Auditing Standards Board has concluded that analytical procedures are so important that they are required during:

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

When the auditor develops supporting evidence for amounts posted to account balances with documentary evidence, that process is called:

Which of the following statements is not a correct use of the terminology in relation to audit evidence?

Discuss three of the following influences on the persuasiveness of evidence. 1. Relevance 2. Independence of provider 3. Effectiveness of client's internal controls 4. Auditor's direct knowledge 5. Degree of objectivity 6. Timeliness

"Physical examination" is the inspection or count by the auditor of items such as:

Ordinarily, audit documentation can be provided to someone else only with the express permission of the client.

Which of the following is not one of the major types of analytical procedures?

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

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 and Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls and 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 Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters