Question 1

The auditor normally considers both underlying accounting data and corroborating information in the audit process.Underlying accounting data does not include which of the following items?
A)evidence of controls.
B)minutes of meetings.
C)checks,invoices,and contracts.
D)general and subsidiary ledger.

Accepted Answer

While minutes of meetings may provide information about the company's operations, they are not part of the underlying accounting data. The other options are all part of the accounting data that the auditor would consider during the audit process.

Question 2

Audit assertions and objectives - accounts receivable
Based on management assertions implicit in the accounts receivable account,explain the audit objectives for the accounts receivable and related balances.

Accepted Answer

The answer of Audit assertions and objectives - accounts receivable
Based...

Question 3

Recalculations of the client's computations would not include which of the following types of evidence?
A)cutoff.
B)footing.
C)extension.
D)cross-footing.

Accepted Answer

Recalculations of the client's computations would not include cutoff as it is a procedure used to verify that all transactions for a certain period have been recorded in the appropriate accounting period. It does not involve the computation of numbers or totals.

Question 4

Proper audit documentation
Audit documentation serves as the primary support of an audit.Give at least six examples of the components of proper working paper documentation.

Accepted Answer

The answer of Proper audit documentation
Audit documentation serves as the...

Question 5

Directional testing
Explain the meaning of "directional testing" and identify the reasons why directional testing leads to audit efficiency.Give examples of directional testing for the existence and completeness assertions.

Accepted Answer

The answer of Directional testing
Explain the meaning of "directional testing"...

Question 6

Audit procedures for accounts receivable
In the process of gathering and evaluating evidence,documentation is derived in various forms.Rank the following types of evidence in the audit of Accounts Receivable from most persuasive to least persuasive and provide explanations for your decision.
 oral st atement s from management that the accountsre cervable are faifly presentec confirmations receivedfrom customers
deposit slips subsequent to ye ar end showing deposits by cust omer name copies of sales invoices

Accepted Answer

The answer of Audit procedures for accounts receivable
In the process...

Question 7

Which of the following types of audit evidence is the least reliable?
A)evidence from the client's organization.
B)evidence derived from a well-controlled system.
C)evidence from independent outside sources.
D)original documents.

Accepted Answer

Evidence from the client's organization is considered the least reliable as it may be biased or manipulated by the client. It is therefore important for auditors to corroborate such evidence with evidence obtained from independent outside sources or original documents. Evidence derived from a well-controlled system, independent outside sources, and original documents are considered more reliable.

Question 8

Shelfco,Inc.has an inventory report that is approximately 4,000 pages.The audit program requires James Morris,the staff auditor,to test the report for accuracy.What is the most efficient and effective means for James to perform the procedure?
A)Ask the client to foot and extend the report and return the results of the test to the auditor for concluding.
B)Foot and extend every 100th page and extrapolate the results of footing to the total of the report.
C)Obtain an electronic copy of the file and use generalized audit software in footing and extending.
D)Skip the procedure as the cost of footing and extending exceeds the benefit derived from the audit test.

Accepted Answer

Obtaining an electronic copy of the file and using generalized audit software in footing and extending would be the most efficient and effective means for James to perform the procedure. This would save a significant amount of time and effort compared to manually footing and extending the entire 4,000-page report. Additionally, using audit software would increase the accuracy of the test results.

Question 9

Vouching of transactions deals with which of the following?
A)testing forward.
B)testing backward.
C)testing at a point in time.
D)directional testing either forward or backward.

Accepted Answer

Vouching involves tracing transactions from the accounting records back to the supporting documents, which is a backward testing process.

Question 10

Sufficient appropriate evidential matter
Discuss the source of the phrase "sufficient appropriate evidential matter is to be obtained..."
What is the importance of obtaining sufficient appropriate evidential matter? Contrast sufficiency to competency as it relates to such audit evidence.

Accepted Answer

The answer of Sufficient appropriate evidential matter
Discuss the source of...

Question 11

Which of the following characteristics are not normally included in good audit documentation?
A)initials of the person preparing and reviewing the document.
B)an index.
C)a cross-reference.
D)all are included in good audit documentation.

Accepted Answer

All of the listed characteristics are normally included in good audit documentation. The initials of the person preparing and reviewing the document can help identify responsibility and accountability. An index can aid in locating relevant sections of the documentation. A cross-reference can help link related information and show the relationships between different parts of the documentation. Overall, clear and comprehensive documentation is essential for effective and efficient audits.

Question 12

Reliability of audit evidence
The Auditing Standards Board established guidelines to assist auditors in evaluating the reliability of audit evidence.Discuss the criteria for the more reliable types of evidence and include an example for each.

Accepted Answer

The answer of Reliability of audit evidence
The Auditing Standards Board...

Question 13

Empire Business Machines,Inc.(EBM)is audited by Flintstone and Sigmond Co.Empire utilizes the FIFO cost flow assumption at the lower of cost or market for its inventory and has ten locations throughout Wyoming,Utah and Idaho.The audit program of Flintstone and Sigmond requires that the following procedures be performed by the senior auditor:  Procedure B-1 and B-2 of Flintstone and Sigmond primarily relates to which management's assertion?
A)existence
B)valuation
C)rights and obligations
D)presentation and disclosure

Accepted Answer

Procedure B-1 and B-2 of Flintstone and Sigmond relate to the valuation assertion, as they require the auditor to evaluate the lower of cost or market inventory valuation method used by EBM.

Question 14

Empire Business Machines,Inc.(EBM)is audited by Flintstone and Sigmond Co.Empire utilizes periodic inventory and has ten locations throughout Wyoming,Utah and Idaho.The audit program of Flintstone and Sigmond requires that the following procedure be performed by the senior auditor,manager and four other auditors:  Procedure A-1 of Flintstone and Sigmond primarily relates to which management's assertion?
A)existence
B)valuation
C)observation
D)rights

Accepted Answer

Procedure A-1 primarily relates to the existence assertion, as it involves physically counting the inventory at each of the ten locations to ensure that it actually exists.

Question 15

Directional testing creates audit efficiency by taking advantage of the double-entry bookkeeping system.Which of the following is not a primary reason for this effect?
A)misstatement of some accounts are more likely to occur in one direction than the other.
B)increase the persuasiveness of the evidence.
C)provides evidence on a complementary set of accounts.
D)some assertions are directional by nature.

Accepted Answer

Directional testing focuses on testing only one direction of a transaction, which allows auditors to efficiently cover a significant portion of the financial statements. Misstatements can occur in any direction, so it is not a primary reason for why directional testing creates audit efficiency. Instead, directional testing creates efficiency by providing evidence on a complementary set of accounts, as well as by testing assertions that are directional by nature. Although directional testing may increase the persuasiveness of the evidence, this is not a primary reason for audit efficiency.

Question 16

Which of the following is not an estimate that requires significant auditor judgment and skepticism?
A)Obligations for pension plans.
B)Valuation of goodwill.
C)Allowance for bad debt.
D)Common stock and related additional paid-in capital.

Accepted Answer

Common stock and related additional paid-in capital are typically based on objective information such as the issuance of shares and the price paid by investors. The other options require significant auditor judgment and skepticism in determining the appropriate amounts to be recorded on the financial statements.

Question 17

What is the role of a concurring partner in an audit engagement?
A)to provide a "fresh",quality review of the audit documentation and conclusions and its relationship to the opinion.
B)to go back over the staff,senior and manager work and redo the more difficult areas of the audit.
C)to work as a liaison between the audit committee and the audit team should there be disagreements.
D)to act as an advocate of the client in order to ensure quality customer service has been given.

Accepted Answer

The role of a concurring partner in an audit engagement is to provide a "fresh" quality review of the audit documentation and conclusions and its relationship to the opinion. This helps ensure that the audit was performed in accordance with professional standards and the opinion is appropriate. Option B is not correct as a concurring partner is not responsible for doing the work of lower levels of staff. Option C could be a role of the concurring partner, but not the main one. Option D is incorrect as the purpose of the audit is to provide an independent and objective review of the financial statements, and a concurring partner's role is to ensure the audit was performed in accordance with professional standards, not to act as an advocate for the client.

Question 18

Which of the following types of audit evidence is the most reliable?
A)evidence from the client's organization.
B)evidence from a poorly controlled system.
C)directly observable evidence.
D)facsimiles of documents.

Accepted Answer

Directly observable evidence is the most reliable type of audit evidence because it is firsthand and can be independently verified by the auditor through observation or examination. Evidence from the client's organization may be biased or manipulated, evidence from a poorly controlled system may be unreliable or incomplete, and facsimiles of documents may be altered or inaccurate.

Question 19

Dual purpose audit tests are useful as which of the following types of tests?
A)tests of controls
B)tests of account balances.
C)tests of controls or tests of account balances
D)tests of controls and tests of account balances.

Accepted Answer

Dual purpose audit tests are designed to serve as both tests of controls and tests of account balances, allowing auditors to efficiently gather evidence for both aspects simultaneously.

Question 20

Reprocessing of transactions involves which of the following?
A)testing forward.
B)testing backward.
C)test at a point in time.
D)directional testing either forward or backward.

Accepted Answer

The answer of Reprocessing of transactions involves which of the...

Quiz 7: A Framework for Audit Evidence

The auditor normally considers both underlying accounting data and corroborating information in the audit process.Underlying accounting data does not include which of the following items?

Audit assertions and objectives - accounts receivable Based on management assertions implicit in the accounts receivable account,explain the audit objectives for the accounts receivable and related balances.

Recalculations of the client's computations would not include which of the following types of evidence?

Proper audit documentation Audit documentation serves as the primary support of an audit.Give at least six examples of the components of proper working paper documentation.

Directional testing Explain the meaning of "directional testing" and identify the reasons why directional testing leads to audit efficiency.Give examples of directional testing for the existence and completeness assertions.

Which of the following types of audit evidence is the least reliable?

Shelfco,Inc.has an inventory report that is approximately 4,000 pages.The audit program requires James Morris,the staff auditor,to test the report for accuracy.What is the most efficient and effective means for James to perform the procedure?

Vouching of transactions deals with which of the following?

Sufficient appropriate evidential matter Discuss the source of the phrase "sufficient appropriate evidential matter is to be obtained..." What is the importance of obtaining sufficient appropriate evidential matter? Contrast sufficiency to competency as it relates to such audit evidence.

Which of the following characteristics are not normally included in good audit documentation?

Reliability of audit evidence The Auditing Standards Board established guidelines to assist auditors in evaluating the reliability of audit evidence.Discuss the criteria for the more reliable types of evidence and include an example for each.

Directional testing creates audit efficiency by taking advantage of the double-entry bookkeeping system.Which of the following is not a primary reason for this effect?

Which of the following is not an estimate that requires significant auditor judgment and skepticism?

What is the role of a concurring partner in an audit engagement?

Which of the following types of audit evidence is the most reliable?

Dual purpose audit tests are useful as which of the following types of tests?

Reprocessing of transactions involves which of the following?