Question 1

Analytical procedures are a type of substantive evidence and the results form part of the auditor's documentation.

Accepted Answer

Analytical procedures are used by auditors to evaluate financial information and form part of the substantive evidence documented during an audit.

Question 2

The auditing standards do not require the auditor to document the nature, timing and extent of audit procedures.

Accepted Answer

The auditing standards require the auditor to document the nature, timing, and extent of audit procedures performed to provide evidence of the auditor's basis for a conclusion about the achievement of the overall objectives of the auditor, and evidence that the audit was planned and performed in accordance with auditing standards and applicable legal and regulatory requirements.

Question 3

Which of the following would not be considered part of the audit documentation?&#10;A) evidence of planning including the audit program&#10;B) the client's trial balance and any recommended audit adjustments to it&#10;C) results of analytical procedures and tests of clients records&#10;D) copies of rough notes and suggestions

Accepted Answer

Audit documentation typically includes formal records such as evidence of planning, the client's trial balance and any recommended audit adjustments, and results of analytical procedures and tests of clients' records. Copies of rough notes and suggestions are generally considered informal and preliminary, and thus, not part of the formal audit documentation.

Question 4

Examining the repairs and maintenance expense account may uncover costs that should have been capitalised. Which management assertion is the auditor testing?&#10;A) rights&#10;B) completeness&#10;C) existence&#10;D) valuation

Accepted Answer

The auditor is testing the completeness assertion because they are examining the repairs and maintenance expense account to uncover costs that should have been capitalized. This means that the auditor is trying to ensure that all costs that should have been capitalized have been included in the financial statements.

Question 5

Which of the following type(s) of evidence is considered substantive evidence?&#10;A) tests of controls&#10;B) analytical procedures&#10;C) direct tests of account balances and transactions&#10;D) both analytical procedures and direct tests of account balances and transactions

Accepted Answer

Substantive evidence includes both analytical procedures and direct tests of account balances and transactions, as these methods directly verify the accuracy and completeness of the financial statements.

Question 6

In evaluating cost of evidence, which of the following phases of the audit usually has the lowest cost?&#10;A) test transactions and account balances&#10;B) understanding of client and industry&#10;C) assessing risk of material misstatement&#10;D) both test transactions and account balances and understanding client and industry

Accepted Answer

Understanding the client and industry typically incurs the lowest cost because it involves preliminary activities such as reviewing industry reports and conducting inquiries, which are generally less resource-intensive than detailed testing or in-depth risk assessments.

Question 7

Auditors have traditionally focused most audit procedures on the direct tests of assets and liability account balances, as opposed to examining transactions during the year, because:&#10;A) there are usually fewer items in ending balances&#10;B) less reliable evidence usually exists for ending balances&#10;C) there is a preference to focus on transactions in account balances&#10;D) there are usually more items in ending balances

Accepted Answer

Auditors traditionally focus on direct tests of assets and liability account balances rather than transactions because there are usually fewer items in ending balances, making the audit process more efficient and manageable.

Deck 7: Audit Evidence: A Framework