Question 1

The permanent audit file usually includes:

Accepted Answer

A)  Working trial balance.
B)  Organizational chart.
C)  Audit plan.
D)  Audit programs.E) B) and C)
F) All of the above

Question 2

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

Accepted Answer

A)  Ledger entries.
B)  Sales invoices or shipping documents.
C)  Externally generated documents.
D)  Original source documents.E) A) and B)
F) C) and D)

Question 3

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

Accepted Answer

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.
D)  An effective internal control system provides more reliable audit evidence.E) A) and B)
F) All of the above

Question 4

Analytical procedures may be classified as being primarily which of the following?

Accepted Answer

A)  Tests of controls.
B)  Substantive procedures.
C)  Tests of ratios.
D)  Detailed tests of balances.E) A) and B)
F) A) and C)

Question 5

You are auditing a store that sells merchandise. Some of the store merchandise is held on consignment. Which account balance assertion for inventory should you be most concerned about verifying?

Accepted Answer

A)  Existence or occurrence.
B)  Completeness.
C)  Rights and obligations.
D)  Valuation or allocation.E) B) and C)
F) All of the above

Question 6

An example of an analytical procedure is the comparison of:

Accepted Answer

A)  financial information with similar information regarding the industry in which the entity operates.
B)  recorded amounts of major disbursements with appropriate invoices.
C)  results of a statistical sample with the expected characteristics of the actual population.
D)  EDP generated data with similar data generated by a manual accounting system.E) B) and C)
F) A) and D)

Question 7

Which of the following is not a typical analytical procedure?

Accepted Answer

A)  Study of relationships of the financial information with relevant nonfinancial information.
B)  Comparison of the financial information with similar information regarding the industry in which the entity operates.
C)  Comparison of recorded amounts of major disbursements with appropriate invoices.
D)  Comparison of the financial information with budgeted amounts.E) B) and C)
F) A) and D)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of:

Accepted Answer

A)  tests of transactions and balances.
B)  a preliminary review of internal controls.
C)  specialized audit programs.
D)  analytical procedures.E) B) and D)
F) A) and C)

Question 10

Footing is an example of:

Accepted Answer

A)  Recalculation.
B)  Confirmation.
C)  Inquiries.
D)  Analytical procedures.E) A) and C)
F) B) and D)

Question 11

In testing plant and equipment balances, an auditor may physically inspect new additions listed on the summary of plant and equipment transactions for the year. This procedure is designed to obtain evidence concerning management's assertions about classes of transactions and events, and specifically, which assertion?

Accepted Answer

A)  Occurrence.
B)  Cutoff.
C)  Authorization.
D)  Classification.E) None of the above
F) B) and C)

Question 12

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

Accepted Answer

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.E) A) and D)
F) None of the above

Question 13

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

Accepted Answer

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.
C)  designed in an orderly fashion to facilitate the review of audit work by the senior, manager, and partner on the engagement.
D)  retained until the audited entity ceases to be a client.E) A) and D)
F) B) and C)

Question 14

Which of the following elements ultimately determines the amount of audit work that is necessary in the circumstances to afford a reasonable basis for an opinion?

Accepted Answer

A)  Auditor judgment.
B)  Materiality.
C)  Relative risk.
D)  Reasonable assurance.E) C) and D)
F) A) and D)

Question 15

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

Accepted Answer

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.
D)  audit documents should be designed to facilitate the review and supervision of work done by auditors assigned to the engagement.E) B) and D)
F) B) and C)

Question 16

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

Accepted Answer

A)  Existence, cutoff, rights and obligations, completeness.
B)  Existence, rights and obligations, completeness, accuracy, valuation, allocation, and presentation.
C)  Occurrence, rights and obligations, completeness, valuation and allocation.
D)  Occurrence, accuracy, rights and obligations, completeness.E) C) and D)
F) A) and B)

Question 17

Vouching is used primarily to test which of the following assertions about classes of transaction?

Accepted Answer

A)  Occurrence.
B)  Completeness.
C)  Authorization.
D)  Classification.E) A) and C)
F) None of the above

Question 18

For each of the following specific audit procedures, indicate the type of audit evidence it is gathering: (1)inspection of records or documents, (2)inspection of tangible assets, (3)observation, (4)inquiry, (5)confirmation, (6)recalculation, (7)reperformance, (8)analytical procedures, and (9)scanning. The audit evidences can be used more than once.
a. Discussing the recording of sales discounts in the fourth quarter with the accounts receivable manager.
b. Examining sales invoices for supporting customer order and shipping documents.
c. Reviewing the accounts payable subsidiary ledger for debit balances or interest-bearing payables.
d. Sending a written request to the entity's bank requesting the cash balances in the entity's accounts and any other liability balances that the entity owes the bank.
e. Comparing the current-year accounts receivable turnover with the accounts receivable turnover for the industry.
f. Examining a new piece of equipment to ensure that a major acquisition was received and is operational.
g. Watching the entity's accounting personnel while they prelist cash receipts.
h. Footing the entity's bank reconciliation and tracing the balance per the books to the general ledger.
i. Recomputing sales price and extensions on sales invoices.
j. For a sample of sales transactions recorded in the sales journal, tracing the sales invoices back to customer orders and shipping documents.

Accepted Answer

a. Inquiry
b. Inspection of Records or D...

Question 19

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

Accepted Answer

A)  Documents mailed by outsiders to the auditor.
B)  Correspondence between the auditor and third party vendors.
C)  Asking the controller about an end of period adjustment.
D)  Computations made by the auditor.E) None of the above
F) A) and B)

Question 20

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

Accepted Answer

A)  Confirmation.
B)  Inspection of records and documents.
C)  Reperformance.
D)  Observation.E) A) and D)
F) All of the above

Exam 5: Evidence and Documentation

Footing is an example of:

Correct Answer
verified

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

Correct Answer
verified

Which of the following is not a typical analytical procedure?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following elements ultimately determines the amount of audit work that is necessary in the circumstances to afford a reasonable basis for an opinion?

Correct Answer
verified

The permanent audit file usually includes:

Correct Answer
verified

You are auditing a store that sells merchandise. Some of the store merchandise is held on consignment. Which account balance assertion for inventory should you be most concerned about verifying?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of:

Correct Answer
verified

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

Correct Answer
verified

Analytical procedures may be classified as being primarily which of the following?

Correct Answer
verified

Correct Answer
verified
a. Inquiry
b. Inspection of Records or D...
View Answer

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

Correct Answer
verified

Vouching is used primarily to test which of the following assertions about classes of transaction?

Correct Answer
verified

An example of an analytical procedure is the comparison of:

Correct Answer
verified

Correct Answer
verified

Exam 5: Evidence and Documentation

Footing is an example of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not a typical analytical procedure?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following elements ultimately determines the amount of audit work that is necessary in the circumstances to afford a reasonable basis for an opinion?

Correct AnswerverifiedShow Answer

The permanent audit file usually includes:

Correct AnswerverifiedShow Answer

You are auditing a store that sells merchandise. Some of the store merchandise is held on consignment. Which account balance assertion for inventory should you be most concerned about verifying?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Analytical procedures may be classified as being primarily which of the following?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Inquiryb. Inspection of Records or D...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Vouching is used primarily to test which of the following assertions about classes of transaction?

Correct AnswerverifiedShow Answer

An example of an analytical procedure is the comparison of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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a. Inquiry
b. Inspection of Records or D...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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