Question 1

When may audit procedures be performed? I - on the balance sheet date.
II - prior to the balance sheet date.
III - subsequent to the balance sheet date.
A)I only.
B)I and III only.
C)II only.
D)I,II,and III.

Accepted Answer

Audit procedures may be performed on the balance sheet date, prior to the balance sheet date, or subsequent to the balance sheet date. Auditors need to perform procedures on a range of dates in order to obtain sufficient and appropriate audit evidence. For example, procedures performed on the balance sheet date help the auditor ensure that the financial statements are fairly presented as of that date, while procedures performed subsequent to the balance sheet date help the auditor evaluate the financial statements' completeness and accuracy.

Question 2

Sufficient evidence gathered by the auditor involves which of the following?
A)The amount of evidence to be obtained.
B)The type of evidence to be obtained.
C)Obtaining limited evidence to achieve efficiency.
D)The use of an audit program to obtain evidence.

Accepted Answer

The answer of Sufficient evidence gathered by the auditor involves...

Question 3

Which of the following is the primary source for evidence to corroborate the existence of pending litigation?
A)vendor confirmations
B)disclosures in financial statements
C)management representation letters
D)attorney confirmations

Accepted Answer

Attorney confirmations are the primary source for evidence to corroborate the existence of pending litigation, as they provide direct information from legal counsel regarding the status and details of legal matters.

Question 4

Which one of the following original documents would most likely be found in the audit working papers?
A)Vendor invoices
B)Check registers
C)Returned confirmation requests
D)Payroll time cards

Accepted Answer

Returned confirmation requests are often part of the audit evidence that auditors obtain from third parties, and are therefore likely to be found in the audit working papers. Vendor invoices and check registers may be useful in verifying transactions but are not necessarily considered original documents. Payroll time cards may be useful in testing the accuracy of payroll expenses, but are not necessarily considered original documents.

Question 5

Conclusions are typically documented by auditors in which type of work paper?
A)audit planning memo
B)audit program
C)audit memoranda
D)representation letter

Accepted Answer

Conclusions are typically documented by auditors in audit memoranda, which summarizes the findings, conclusions, and recommendations of the audit. Audit planning memo and audit program are used in the planning phase, while the representation letter is obtained from management towards the end of the audit.

Question 6

The reliability of a client's internal documentation is most affected by which of the following?
A)the auditor's independence.
B)management's motivation to misstate accounts.
C)the type of audit report that will be issued.
D)management's ability to understand generally accepted audit standards.

Accepted Answer

The reliability of a client's internal documentation can be affected by management's motivation to intentionally misstate accounts, which would undermine the accuracy and completeness of the information available to the auditor. Other factors may also impact reliability, but B is the best choice in this case.

Question 7

Directional testing is important to an auditor because of which of the following factors?
A)Certain accounts are more prone to be misstated by overstatement than others.
B)The auditor must remain organized when conducting an audit.
C)The primary concern of the auditor is the understatement of asset and revenue accounts.
D)It tests for existence and completeness simultaneously.

Accepted Answer

Directional testing is important because certain accounts, such as revenue and inventory, are more prone to be misstated by overstatement. Directional testing helps the auditor focus on the areas that are more likely to contain material misstatements, which allows for a more efficient audit. The other options are not relevant to the importance of directional testing.

Question 8

How would an auditor most likely test the mechanical accuracy of a 6,000 page inventory report?
A)Examine a random sample of inventory documents.
B)Use generalized audit software to foot and recalculate.
C)Send confirmations to vendors.
D)Inquire of the inventory manager as to the accuracy.

Accepted Answer

Using generalized audit software to foot and recalculate the entire inventory report is the most efficient and effective way to test the mechanical accuracy of a 6,000 page inventory report. This will ensure that all calculations are correct and consistent throughout the report. Examining a random sample of inventory documents or inquiring of the inventory manager may not provide a comprehensive enough analysis, while sending confirmations to vendors may not be relevant to testing the mechanical accuracy of the report.

Question 9

Which of the following provides the primary support of an audit?
A)the financial statements.
B)the audit working papers.
C)the audit report.
D)the confirmation documentation.

Accepted Answer

The audit working papers provide the primary support for an audit as they contain the evidence and documentation of the audit procedures performed and the conclusions reached by the auditor.

Question 10

An auditor selects a sample of items recorded and traces them back to the supporting documentation.This is an example of which of the following?
A)directional testing for existence.
B)directional testing for completeness.
C)direct testing for valuation.
D)direct testing for rights.

Accepted Answer

Tracing items from the records to the supporting documentation tests for existence, ensuring that recorded transactions actually occurred.

Question 11

External documentation may lack reliability.Which of the following is the most probable reason for that?
A)the external party may be competent in performing duties.
B)the documentation may be properly understood by the client in the response.
C)the auditor may decide not to use the documentation and replace it with other documents.
D)the documentation may have been altered if the process is not controlled from inception.

Accepted Answer

If the process of creating and controlling the external documentation is not properly managed from the beginning, there is a higher risk that the documentation may have been altered or is not accurate. This can decrease the reliability of the external documentation. Options A and B are factors that can increase the reliability of external documentation, while option C is a decision made by the auditor and does not directly impact the reliability of the external documentation.

Question 12

An audit program is created to specify which of the following?
A)the type of audit opinion to be rendered based upon procedures performed.
B)the audit procedures that will be performed every year for the client.
C)how an auditor should think while performing audit procedures.
D)audit objectives and procedures to be followed during the audit process.

Accepted Answer

An audit program is a written plan that outlines the audit objectives and procedures to be followed during the audit process. It helps ensure that all necessary audit procedures are performed, and that audit evidence obtained is sufficient and appropriate to support the auditor's opinion. Choice A is incorrect because the type of audit opinion is determined based on the evaluation of audit evidence, not the audit program itself. Choice B is incorrect because the audit procedures may vary from year to year based on changes in the client's circumstances or risk factors. Choice C is incorrect because thinking patterns are not typically specified in an audit program.

Question 13

The audit firm of Lake and South,LLP is wrapping up its audit of Brycestone,Inc.The evidence has been relatively easy to obtain except in one case.Which of the following would represent a balance or transaction that would be most difficult for Lake and South to obtain evidence?
A)prepaid expenses
B)cash
C)accrued wages and salaries
D)accrued warranties

Accepted Answer

Accrued warranties would be the most difficult balance to obtain evidence for because they are often estimated by management and may involve judgments about the likelihood of future warranty claims. This requires extensive testing and analysis to determine if the estimates are reliable and accurate. Meanwhile, prepaid expenses, cash, and accrued wages and salaries are typically easier to verify through bank statements, invoices, and employee records.

Question 14

Which of the following is an example of poorly-developed audit documentation?
A)clear communication as to how testing was performed,the results and conclusions.
B)organization and assembly of documentation in an orderly fashion.
C)headings that include the name and signature of the client representative that the auditor interacted with while performing testing.
D)authenticated identification of the person responsible for completing the procedure and conclusions.

Accepted Answer

Including the name and signature of the client representative is not relevant to the audit documentation and does not provide any useful information. The other options listed are important elements of well-developed audit documentation.

Question 15

The audit team asks the client to pull a sample of vendor files and examines the invoices supporting the purchases of inventory items during the year.What is the most probable reason for the use of this evidence?
A)Confirmation of vendors supplying inventory for existence.
B)Analytical procedures to determine completeness of inventory.
C)Testing for the valuation of inventory using the FIFO cost flow assumption.
D)Reading the terms of the arrangements with vendors for disclosure.

Accepted Answer

The answer of The audit team asks the client to...

Question 16

Performance of audit procedures at an interim date causes the risk of material misstatement occurring between the interim date and the end of the year to
A)decrease.
B)increase.
C)remain the same.
D)become more difficult to ascertain.

Accepted Answer

Performing audit procedures at an interim date may provide some assurance about the financial statements at that point in time, but it does not necessarily address the risk of material misstatement occurring between the interim date and the end of the year. This risk may increase due to changes in the business or economic environment, new transactions or events, or other factors. Therefore, auditors need to perform additional procedures near the end of the year to address this risk and obtain sufficient evidence to support the opinion on the financial statements as a whole.

Question 17

Reprocessing of transactions helps establish that all valid items have been recorded.Reprocessing tests which of the following assertions?
A)occurrence.
B)rights.
C)existence.
D)completeness.

Accepted Answer

Reprocessing tests the completeness assertion, as it ensures that all valid items have been recorded in the accounting system.

Question 18

Which of the following assertions is the primary assertion that is satisfied by physically observing the client's count of inventory?
A)rights.
B)valuation.
C)completeness.
D)existence.

Accepted Answer

Physically observing the client's count of inventory ensures the existence assertion is satisfied. This is because observing the physical inventory confirms that the assets are physically present and therefore exist.

Question 19

Which one of the following is the primary reason for documenting audit work?
A)to prevent litigation by other parties that question the audit performance.
B)to provide a stand-alone medium that gives audit conclusions and supports the opinion.
C)to give the client a full reporting of all work performed on their behalf.
D)to supply a point of reference for all auditors performing the work subsequently.

Accepted Answer

Documenting audit work primarily serves as a stand-alone medium that gives audit conclusions and supports the opinion. It provides evidence of the auditor's work performed in compliance with auditing standards and allows for transparency and accountability of the audit process. While preventing litigation and providing a point of reference for subsequent auditors may be benefits of documentation, they are not the primary reasons for it.

Question 20

The extent of procedures is affected mostly by which of the following factors?
A)the sheer volume of procedures to be applied by the auditor.
B)the time of year in which the client takes a physical inventory in the warehouse.
C)the auditor's judgment that misstatements are probable in certain balances.
D)the availability of the client's staff at or near the balance sheet date.

Accepted Answer

The extent of audit procedures is primarily influenced by the auditor's assessment of the risk of material misstatement. If the auditor judges that misstatements are probable in certain balances, they will increase the extent of procedures to address those risks.

Quiz 7: A Framework for Audit Evidence

When may audit procedures be performed? I - on the balance sheet date. II - prior to the balance sheet date. III - subsequent to the balance sheet date.

Sufficient evidence gathered by the auditor involves which of the following?

Which of the following is the primary source for evidence to corroborate the existence of pending litigation?

Which one of the following original documents would most likely be found in the audit working papers?

Conclusions are typically documented by auditors in which type of work paper?

The reliability of a client's internal documentation is most affected by which of the following?

Directional testing is important to an auditor because of which of the following factors?

How would an auditor most likely test the mechanical accuracy of a 6,000 page inventory report?

Which of the following provides the primary support of an audit?

An auditor selects a sample of items recorded and traces them back to the supporting documentation.This is an example of which of the following?

External documentation may lack reliability.Which of the following is the most probable reason for that?

An audit program is created to specify which of the following?

The audit firm of Lake and South,LLP is wrapping up its audit of Brycestone,Inc.The evidence has been relatively easy to obtain except in one case.Which of the following would represent a balance or transaction that would be most difficult for Lake and South to obtain evidence?

Which of the following is an example of poorly-developed audit documentation?

The audit team asks the client to pull a sample of vendor files and examines the invoices supporting the purchases of inventory items during the year.What is the most probable reason for the use of this evidence?

Performance of audit procedures at an interim date causes the risk of material misstatement occurring between the interim date and the end of the year to

Reprocessing of transactions helps establish that all valid items have been recorded.Reprocessing tests which of the following assertions?

Which of the following assertions is the primary assertion that is satisfied by physically observing the client's count of inventory?

Which one of the following is the primary reason for documenting audit work?

The extent of procedures is affected mostly by which of the following factors?