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WorksheetsAudit Evidence
Total questions: 19
Worksheet time: 10mins
Of the following, which is the least persuasive type of audit evidence?
Documents mailed by outsiders to the auditor.
Correspondence between auditor and vendors.
Copies of sales invoices inspected by the auditor.
Computations made by the auditor.
Audit evidence takes different forms and varies in persuasiveness. Which of the following is the least persuasive type of evidence?
Vendor's invoice.
Bank statement obtained from the client.
Computations made by the auditor.
Written representations
Which of the following statements is generally correct about audit evidence?
The auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly from independent outside sources.
To be appropriate, audit evidence must be sufficient.
Accounting data alone may be considered sufficient appropriate audit evidence to issue an unqualified opinion on financial statements.
Appropriateness of audit evidence refers to the amount of corroborative evidence to be obtained and is primarily based on the auditor’s professional judgment and skepticism.
Which of the following is not a valid basis for omitting an audit test?
The difficulty and expense involved in testing a particular item.
The relative risk involved.
The degree of reliance on the relevant internal controls.
The relationship between the cost of obtaining evidence and its usefulness.
Which of the following is a general principle relating to the reliability of audit evidence?
Audit evidence provided by copies is more reliable than that provided by facsimiles.
Audit evidence provided by original documents is more reliable than audit evidence generated through a system of effective controls.
Audit evidence obtained from indirect sources rather than directly is more reliable than evidence obtained directly by the auditor.
Audit evidence obtained from knowledgeable independent sources outside the client company is more reliable than audit evidence obtained from non-independent sources.
Audit documentation serves mainly to:
Provide the principal support for the auditor's report.
Satisfy the auditor's responsibilities concerning the Code of Professional Conduct.
Monitor the effectiveness of the CPA firm's quality control activities.
Document the level of independence maintained by the auditor.
The permanent file of an auditor’s working papers generally would not include
Bond indenture agreements.
Lease agreements.
Working trial balance.
Flowchart of internal control
Which of the following statements is correct regarding an accountant’s working papers?
The accountant owns the working papers and generally may disclose them as the accountant sees fit.
The client owns the working papers but the accountant has custody of them until the accountant’s bill is paid in full.
The accountant owns the working papers but generally may not disclose them without the client’s consent or a court order.
The client owns the working papers but, in the absence of the accountant’s consent, may not disclose them without a court order.
Audit working papers are indexed by means of reference numbers. The primary purpose of indexing is to
Permit cross-referencing and simplify supervisory review.
Support the audit report.
Eliminate the need for follow-up reviews.
Determine that working papers adequately support findings, conclusions, and reports.
Which is the least likely audit procedure to obtain evidence regarding the presentation and disclosure of segment information?
Obtaining an understanding of the methods used by management in determining segment information
Evaluating whether methods are likely to result in disclosure in accordance with the applicable financial reporting framework
Testing the application of methods, where appropriate
Sending of confirmation to the heads or senior executive of the reported segment
Sending confirmation letters to customers for their outstanding balances provide primary evidence on
Completeness and valuation.
Valuation and rights and obligations.
Rights and obligations and existence.
Existence and completeness.
The negative form of accounts receivable confirmation request is useful except when
Internal control surrounding accounts receivable is considered to be effective.
A large number of small balances are involved.
The auditor has reason to believe the persons receiving the requests are likely to give them consideration.
Individual account balances are relatively large.
Which of the following would be least likely to diminish the validity of evidence obtained through the confirmation of accounts receivable?
The confirmations are sent on the client's letterhead.
The confirmations are mailed to customers by the internal auditors.
The client's mailroom personnel closely monitor and inspect confirmations during mailing.
The return address on the envelope used to send the confirmation request is that of the client.
The auditor may consider confirming accounts receivable balances at an interim date if
Collections subsequent to year-end are to be reviewed.
The assessed level of risk of material misstatement relative to financial statement assertions about receivables is acceptably low.
Negative confirmations are to be used for a sample of the accounts.
Cash and accounts receivable are audited at the same time.
Which of the following is least likely to be evidence of operating effectiveness of controls?
Cancelled supporting documents.
Confirmations of accounts receivable.
Records documenting usage of computer programs.
Signatures on authorization forms.
________ is a sample selection approach wherein the higher the amount of an item, the higher its probability of being selected.
Monetary unit sampling
Random selection
Systematic selection
Biased selection
Which of the following is true about alpha and beta errors?
The alpha error is of greater concern to the auditor than the beta error.
The beta error is greater concern to the auditor than the alpha error.
The beta error and the alpha error are of equal importance to the auditor.
Neither the alpha error nor the beta error need be considered by the auditor.
Which statement is correct about sampling risk?
Risk of assessing control risk too low and risk of incorrect acceptance affects audit effectiveness as it would usually lead to additional work to establish that initial conclusions were incorrect.
The mathematical complements of sampling risks are termed sampling deviation.
Risk of assessing control risk too low is the risk that the auditor will conclude, in the case of a test of control, that control risk is higher than it actually is.
Sampling risk arises from the possibility that the auditor's conclusion, based on a sample may be different from the conclusion reached if the entire population were subjected to the same audit procedure.
Auditors who prefer statistical sampling to non-statistical sampling may do so because statistical sampling helps the auditor
Measure the sufficiency of the evidential matter obtained
Minimize the failure to detect errors and irregularities.
Eliminate subjectivity in the evaluation of sampling results
Reduce the level of tolerable error to a relatively low amount.
