Audit Techniques Quiz

In respect of which of the following activities would the use of audit software be most relevant?

• Tests of online passwords

• Testing of computerised in-put controls on sales invoices

• Totalling of the purchase ledger

• Testing controls over computerised credit-limits

Is the following statement regarding audit software true or false? Audit software is used to assist with substantive procedures.

• True

• False

Which of the following statements is true regarding an auditor's expert? (1) The expert must be a partner or member of staff of the audit firm. (2) Provided that the auditor has assessed the expert to be competent audit evidence provided by the expert can be relied upon. (3) Unless required to do so by law or regulation the auditor must not refer to the expert in an auditor's report which contains an unmodified opinion.

• (1) only

• (2) only

• (3) only

• (1), (2) and (3)

X Co has an internal audit function. The external auditor has concluded that the internal audit function does not apply a systematic and disciplined approach to its work. How does this affect the extent to which the external auditor can rely on the work of the internal audit function?

• The external auditor must not use the work of the internal audit function.

• The external auditor can use the work of the internal audit function provided the individuals have been assessed as competent.

• The external auditor can use the work of the internal audit function provided the organisational status of the function supports its objectivity.

• The external auditor can use work performed by the internal audit function which relates to low risk areas of the external audit only.

Is the following statement regarding the use of internal audit work by the external auditor true or false? The external auditor must reperform some of the work carried out by the internal audit function if the work of the internal auditor is to be relied on.

• True

• False

The auditor of G Co is performing audit procedures to confirm the company's ownership of motor vehicles. Which of the following would provide the most persuasive evidence of this?

• Physical inspection of the motor vehicles

• Inspection of vehicle registration documents

• Checking that the motor vehicles are recorded in the non-current asset register

• Review of vehicle insurance documentation

Which of the following audit procedures would provide the auditor with evidence of completeness of inventory?

• Tracing test counts performed at the inventory count to the detailed inventory listing

• Reviewing the physical condition of inventory when attending the inventory count

• Casting the inventory listing

• Vouching the cost of a sample of inventory items to suppliers' invoices

Which two of the following statements are true regarding the auditor's attendance at the inventory count?

(1) It is the auditor's responsibility to organise the inventory count.

(2) The auditor observes client staff to determine whether inventory count procedures are being followed.

(3) The auditor reviews procedures for identifying damaged, obsolete and slow-moving inventory.

(4) If the results of the auditors' test counts are not satisfactory, the auditor should arrange for the inventory to be recounted.

• (1) and (2)

• (1) and (4)

• (2) and (3)

• (3) and (4)

The auditor of Q Co has performed purchases cut-off procedures and has identified that in two material instances goods received prior to the inventory count have not been included on the schedule of 'goods received not invoiced'. At the period end purchase invoices have not been received. What is the auditor's conclusion based on this evidence?

• Inventory is overstated and liabilities are understated.

• Inventory is understated and liabilities are understated.

• Inventory is overstated and liabilities are overstated.

• Inventory is understated and liabilities are overstated.

Which of the following statements is/are true regarding direct confirmation of accounts receivable? (1) Responses from the customer must be returned directly to the client. (2) Under the positive method the customer only replies if the amount stated is agrees with the customer's records.

• (1) only

• (2) only

• (1) and (2)

• Neither (1) nor (2)