ACC653 Ch 5-Arens

• Which of the following forms of information should the auditor consider to be the most reliable?

• 1. A sales invoice issued by the client and supported by a delivery receipt from an outside trucker

• • An electronic confirmation of an account payable balance mailed by and returned directly to the auditor

• • A cheque, issued by the company and bearing the payee’s endorsement, that is included with the bank statements mailed directly to the auditor

• • An estimate of warranty provision prepared by the client’s controller and reviewed by the client’s treasurer

• Which of the following is the least reliable type of evidence?

• 1. Vendor’s invoice

• • Bank statement obtained from the client

• • Computations made by the auditor

• • Pre-numbered sales invoices

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

• 1. Information obtained indirectly from outside sources is the most reliable audit evidence.

• • To be reliable, audit evidence should be convincing rather than merely persuasive.

• • Reliability of audit evidence refers to the amount of corroborative evidence obtained.

• • Effective internal control provides more assurance about the reliability of audit evidence.

• Which of the following is not a primary purpose of audit documentation?

• • To coordinate the audit

• • To assist in preparation of the audit report

• • To support the financial statements

• • To provide evidence of the audit work performed

2. During an audit engagement, pertinent data are compiled and included in the audit files. The audit files primarily are considered to be

• • a client-owned record of conclusions reached by the auditors who performed the engagement.

• • evidence supporting financial statements.

• • support for the auditor’s representations as to compliance with auditing standards.

• • a record to be used as a basis for the following year’s engagement.

An audit program is

• a set of specifications of audit standards relevant to the financial statements being audited.

• a set of documentation of the assertions under audit, the evidence obtained, and the conclusions reached

• a set of reconciliations of the account balances in the financial statements with the account balances in the auditee's general ledger.

• a set of detailed instructions for the entire collection of evidence for an audit area.

When the auditor examines the client's documents and records to support recorded transactions or amounts, it is commonly referred to as

• inquiry.

• confirmation.

• vouching.

• physical examination.

The two most important factors that determine the appropriate sample size in audits are

• the auditor's expectation of errors and the effectiveness of the client's internal controls.

• the auditor's expectation of errors and materiality.

• the effectiveness of the client's internal controls and materiality.

• materiality and the type of audit procedure to be applied to the population.

Last year, the client's internal controls were weak. This year, the internal controls are stronger. This means that information recorded on internal documentation is

• more timely.

• less reliable.

• more reliable.

• less timely.