A confirmation is used to:

C) verify a representation from a third party.

A) verify the inventory count is correct.

B) verify that a control is being observed.

D) verify that a specific trend is correct.

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

Existence, rights and obligations, completeness, accuracy, valuation, allocation, classification, and presentation.

Existence, cutoff, rights and obligations, completeness.

Occurrence, rights and obligations, completeness, valuation and allocation.

Occurrence, accuracy, rights and obligations, completeness.

Which assertions may be tested for the "transactions and events" category of management assertions?

Occurrence, completeness, authorization, accuracy, cutoff, classification, and presentation.

Existence, completeness, rights and obligations, accuracy, cutoff, classification, and presentation.

Occurrence, completeness, rights and obligations, accuracy, cutoff, and classification.

Existence, rights and obligations, accuracy, authorization, and completeness.

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

B) Cost-benefit of gathering evidence

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

B) Sales invoices or shipping documents

C) Externally generated documents

Which of the following presumptions does not relate to the appropriateness of audit evidence?

B) An auditor's opinion, to be economically useful, is formed within a reasonable time and based on evidence obtained at a reasonable cost.

A) The more effective the internal control system, the more assurance it provides about the accounting data and financial statements.

C) Evidence obtained from independent sources outside the entity is more reliable than evidence secured solely within the entity.

D) The independent auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly.

Of the following, which is the least reliable type of audit evidence?

C) Asking the controller about an end of period adjustment.

A) Documents mailed by outsiders to the auditor

B) Correspondence between the auditor and third party vendors.

D) Computations made by the auditor.

Audit documentation is the principal record of the audit and provides the principal support for the representations in the auditor's report. Because of this, audit documentation should do all of the following except for:

B) support the audit firm's human resource department in employee retention decisions.

A) demonstrate how the audit complied with auditing and related professional practice standards.

C) support the basis for the auditor's conclusions concerning each material financial statement assertion.

D) demonstrate that the underlying accounting records agreed or reconciled with the financial. statements/.

Audit documentation prepared on audits of public entities is the property of the:

C) Management of the entity being audited.

Which of the following procedures would an auditor most likely perform to verify management's assertion of completeness?

A) Compare a sample of shipping documents to related sales invoices

B) Observe the entity's distribution of payroll checks

C) Confirm a sample of recorded receivables by direct communication with the debtors.

D) Review standard bank confirmations for indications of kiting

Each of the following might, by itself, form a valid basis for an auditor to reduce substantive testing except for the:

A) difficulty and expense involved in testing a particular item

B) assessment of control risk at a low level.

D) high quality of the evidence gathered

Of the following, the most reliable type of evidence typically is:

B) Inspection of records and documents

Which of the following presumptions is correct about the reliability of audit evidence?

D) An effective internal control system provides more reliable audit evidence.

A) Information obtained indirectly from outside sources is the most reliable audit evidence.

B) To be reliable, audit evidence should be convincing rather than persuasive

C) Reliability of audit evidence refers to the amount of corroborative evidence obtained

Which of the following types of documentary evidence should the auditor consider to be the most reliable?

B) Confirmation of an account payable balance mailed by and returned directly to the auditor

A) A sales invoice issued by the entity and supported by a delivery receipt from an outside trucker

C) A check issued by the company and bearing the payee's endorsement that is included with the bank statement mailed directly to the auditor.

D) A working paper prepared by the entity's controller and reviewed by the entity's treasurer

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

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 an independent appraiser's conclusions documented in the auditor's working papers.

D) Lists of negative confirmation requests for which no response was received by the auditor.

Which of the following statements is generally correct about the appropriateness of audit evidence?

A) The more effective the internal control, the more assurance it provides about the reliability of the accounting data and financial statements

B) Appropriateness of audit evidence refers to the amount of corroborative evidence obtained.

C) Information obtained indirectly from independent outside sources is more persuasive than the auditor's direct personal knowledge obtained through observation and inspection

D) Appropriateness of audit evidence refers only to audit evidence obtained from outside the entity.

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

C) Bank statements obtained from the auditee

A) Prenumbered internal purchase order forms.

B) Auditee worksheets supporting cost allocations

D) Auditee personnel responses to auditor inquiries

Following are several statements regarding accounting records or audit documentation. Which of the statements is correct?

A) Accounting records belong to the auditee

B) Documentation of an auditor's understanding of the entity's internal control system is not necessary

C) Audit documents may be regarded as a substitute for the company's accounting records

D) The independent auditor may discard audit documents after two years

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

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

Audit documents that record the procedures used by the auditor to gather evidence should be:

C) designed in an orderly fashion to facilitate the review of audit work by the senior, manager, and partner on the engagement

A) considered the primary support for the financial statements being examined

B) viewed as the connecting link between the accounting records and the financial statements.

D) retained until the audited entity ceases to be a client.

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

C) General ledger information, such as account numbers, prior-year account balances, and current year unadjusted information.

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.

D) Adjusting entry information, such as deferrals and accruals and reclassification journal entries

D) may be in paper, electronic, or some other medium

C) is not required, but is strongly recommended

You are concerned with unrecorded transactions in the purchasing cycle. Which audit procedure are you most likely to use when auditing purchases?

B) Tracing vendor invoices to accounting records

A) Vouching transactions in accounting records to vendor invoices

C) Recalculation of vendor invoice amounts

D) Confirmation of customer accounts

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

B) "I would not undertake that procedure because at best the results would only be persuasive and I'm looking for convincing evidence."

A) "I am seldom convinced beyond all doubt with respect to all aspects of the statements being examined."

C) "I evaluate the degree of risk involved in deciding the kind of evidence I will gather."

D) "I evaluate the quality of the evidence I can obtain, prior to choosing evidence."

Which of the following statements concerning audit evidence is correct?

D) A company's accounting data cannot be considered sufficient audit evidence to support the financial statements.

A) Appropriate evidence supporting management's assertions should be convincing rather than persuasive.

B) Effective internal controls contribute little to the reliability of the evidence created within the entity

C) The cost of obtaining evidence is not an important consideration to an auditor in deciding what evidence should be obtained

The current audit file usually includes:

C) Documentation of internal control (e.g., flowcharts).

D) Copies of important contracts.

Chapter 5

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Chapter 5

70 questions

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

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

Management assertions fall into four main categories.

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

The completeness assertion refers to ensuring that transactions and events that should have
been recorded actually have been recorded.

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

Audit procedures are designed to test management assertions.

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

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

The sufficiency of evidence refers to the quality of audit evidence.

Access all questions and much more by creating a free account

Similar Resources on Wayground

Popular Resources on Wayground

Discover more resources for English

Chapter 5

70 questions

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

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

Management assertions fall into four main categories.

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

The completeness assertion refers to ensuring that transactions and events that should havebeen recorded actually have been recorded.

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

Audit procedures are designed to test management assertions.

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

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

The sufficiency of evidence refers to the quality of audit evidence.

Access all questions and much more by creating a free account

Similar Resources on Wayground

Popular Resources on Wayground

Discover more resources for English

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

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

The completeness assertion refers to ensuring that transactions and events that should have
been recorded actually have been recorded.

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

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

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