Question 1

When testing for accuracy, an auditor searchfor evidence:

Accepted Answer

Accuracy in auditing refers to ensuring that transactions and events have been recorded at appropriate amounts, which is what option C addresses.

Question 2

Assessing an expert's report involvthe auditor:

Accepted Answer

The auditor assesses the consistency of the expert's report with their understanding of the client to ensure that the expert's findings align with the auditor's knowledge and expectations.

Question 3

Which of the following is not an assertion used for transactions and events?

Accepted Answer

The answer of Which of the following is not an...

Question 4

Evan Contador was reviewing ways of obtaining electronic evidence at Enbridge Inc. He was considering the different sourcof evidence that might qualify and be defined as electronic evidence. Which elements are considered electronic evidence?

Accepted Answer

The answer of Evan Contador was reviewing ways of obtaining...

Question 5

Which of the following statements regarding a legal representation letter is incorrect?

Accepted Answer

The legal representation letter is sent by the client's lawyer directly to the auditor, not the other way around. Therefore, option B is the incorrect statement. Option A, C, and D are all correct statements regarding a legal representation letter.

Question 6

Steven Marinaro, CPA is performing complex calculations to help him determine reservin the Alberta Oil Sands. Which of the following evidence gathering procedurwill Steve use when using the work of another auditor?

Accepted Answer

When using the work of another auditor, Steve may use a combination of recalculation, observation, and confirmations to gather sufficient and appropriate evidence.

Question 7

Fran Zora has been auditing Manitoba Telecom Servicfor the past five years. She has gathered a lot of externally generated evidence because of its persuasiveness and reliability as evidence. Which one of the following evidenclacks trustworthiness and independence from the client?

Accepted Answer

Purchase requisitions are internally generated documents and thus lack the independence and trustworthiness of externally generated evidence.

Question 8

Internally generated evidence held by the client includes:

Accepted Answer

Internally generated evidence is created within the organization, such as copies of invoices sent to customers. Bank statements, correspondence with lawyers, and expert valuations are typically generated by external parties, making them external evidence.

Question 9

Which broad category of corroborating evidence is the least persuasive to an auditor?

Accepted Answer

Internally generated evidence is considered the least persuasive to an auditor because it is produced within the client's organization, making it more susceptible to manipulation or error compared to evidence that is generated externally and sent directly to the auditor or even external evidence held by the client.

Question 10

Marianne Gilespie, the senior auditor at Manulife Financial was sorting out several sourcof internally generated evidence. Which one of the following would not qualify as internally generated evidence?

Accepted Answer

Bank confirmations are considered externally generated evidence, as they are obtained directly from third-party sources such as banks. Minutes of meetings, journals and ledgers, and the annual operating plan are all examples of internally generated evidence, as they are created and maintained within the organization.

Question 11

An auditor verifiamounts recorded in their client's records using:

Accepted Answer

An auditor verifies amounts recorded in their client's records using electronic evidence, verbal evidence, and confirmations.

Question 12

Completeness is an assertion used:

Accepted Answer

Completeness is an assertion used not only when testing balance sheet items but also for transactions and events as well as presentation and disclosure. Therefore, option D "all of the above" is the best choice.

Question 13

When an auditor usthe work of an expert, who has the responsibility for arriving at an overall conclusion regarding the fair presentation of a client's financial statements?

Accepted Answer

The responsibility for arriving at an overall conclusion regarding the fair presentation of a client's financial statements lies with the auditor. The auditor may use the work of an expert to obtain additional information or to support the auditor's own conclusions, but ultimately, it is the auditor's responsibility to form an opinion on the financial statements.

Question 14

Which assertion do auditors test when they test for the adequacy of the provision for doubtful debts?

Accepted Answer

When auditors test for the adequacy of the provision for doubtful debts, they are primarily testing the valuation and allocation assertion. This involves ensuring that the amount of the provision is sufficient to cover the expected losses from doubtful debts and that it has been appropriately allocated to the relevant financial statements. The other assertions listed (rights and obligations, classification, and occurrence) are not directly relevant to this particular audit procedure.

Question 15

External confirmations can be sent to:

Accepted Answer

External confirmations are typically sent to independent third parties who can provide verification of certain information. This includes third parties holding the client's inventory (to confirm the existence and condition of the inventory) and the client's lawyers (to confirm details about legal matters, such as litigation, claims, and assessments). The client's audit committee, being an internal body, does not fall under the category of entities to which external confirmations are usually sent.

Question 16

Which of the following is an example of a situation where an auditor may use the work of an expert?

Accepted Answer

Both options (a geologist and an actuary) are examples where an auditor may use the work of an expert. The auditor may lack the specialized knowledge or expertise to evaluate the geological or actuarial aspects, so they may need to rely on the work of an expert in those fields.

Question 17

When there is a significant risk that an account will be misstated and the client's system of internal controls is not considered effective at reducing that risk:

Accepted Answer

When there's a significant risk of misstatement and the client's internal controls are ineffective, auditors set the detection risk as low. This means they will gather more high-quality evidence through substantive testing to compensate for the higher risk and ineffective controls.

Question 18

The first stage when an auditor considers the use of an expert is:

Accepted Answer

The first stage when an auditor considers the use of an expert is to assess the need to use an expert. The auditor must determine whether a matter requires expertise beyond the scope of the audit team or whether it can be resolved through other means. Once the decision has been made to use an expert, the auditor can move onto assessing the objectivity of the expert, determining the scope of the work to be carried out, and assessing the expert's report.

Question 19

Which of the following forms of evidence is used when gaining an understanding of the client and its internal control systems?

Accepted Answer

When gaining an understanding of the client and its internal control systems, verbal evidence is commonly used through discussions with management and staff. This allows auditors to gain insights into the company's operations, control systems, and potential areas of risk. While computational and physical evidence may also play a role in the audit, they are not specifically used to gain an understanding of internal controls. External confirmations, meanwhile, are typically used to verify information provided by the client rather than to gain understanding of their internal controls.

Question 20

Abe Freed, a struggling public accountant was being coached by his father. His father told him that he was using a poor form of evidence as a basis for his conclusions. What type of evidence was he referring to?

Accepted Answer

The father is suggesting that Abe is relying on verbal evidence, which can often be subjective and unreliable. The other options (computational and physical evidence through inspection) are more objective and reliable forms of evidence.

Quiz 5: Audit Evidence