Deck 5: Audit Evidence

Question 1

Reliability relates to the source of the evidence and the nature of the evidence.

Answer 1

True

Question 2

Sufficient audit evidence relates to the quantity of audit evidence gathered.

Answer 2

True

Question 3

What do you call a statement or representation, explicit or implied, made by management regarding the recognition, measurement, presentation, and disclosure of items included in the financial statements and notes?

A)assertion
B)inspection
C)tracing
D)vouching

Answer 3

assertion

Question 4

Auditors gathering evidence to verify that recorded assets are owned by the entity and recorded liabilities represent commitments of the entity consider ________.

A)Rights and obligations
B)Completeness
C)Occurrence
D)Valuation and allocation

Question 5

A specialist is an individual or an organization with expertise in a field other than accounting or auditing.

Question 6

Inquiry involves asking verbal questions only.

Question 7

The current file includes extracts from the minutes of meetings, such as the board of directors' meetings, which pertain to the current audit.

Question 8

In the context of assertions about classes of transactions and events for the period under audit, auditors considering occurrence gather evidence to verify that _______.

A)a recorded transaction or event, such as a revenue or an expense item, actually took place and relates to the entity
B)all transactions have been recorded and the financial statements are not understated or overstated because transactions have been omitted
C)transactions and events have been recorded at appropriate amounts
D)transactions and events have been recorded in the proper accounts

Question 9

Audit risk affects the quantity and quality of evidence gathered by an auditor during the risk response phase.

Question 10

Which of the following is a listing of details of the audit procedures to be used when testing controls and when conducting detailed substantive audit procedures?

A)Audit data analytics
B)Accounting records
C)Analytical procedures
D)Audit program

Question 11

Examples of assertions include: accuracy, cutoff and valuation and allocation.

Question 12

What do auditors do when considering rights and obligations?

A)Gather evidence to verify that recorded assets are owned by the entity and recorded liabilities represent commitments of the entity.
B)Search for evidence to verify that asset, liability, and equity items on the balance sheet actually exist.
C)Search for assets, liabilities, and equity items to ensure they have been recorded.
D)Search for evidence that assets, liabilities, and equity items have been recorded at appropriate amounts.

Question 13

Inspection of documents can only be used as a test of controls.

Question 14

Auditors who are searching for evidence that assets, liabilities, and equity items have been recorded at appropriate amounts and allocated to the correct general ledger accounts consider ________.

A)existence
B)classification
C)valuation and allocation
D)rights and obligations

Question 15

It is management's responsibility to ensure that financial statements are fairly and truthfully presented.

Question 16

Which assertion is common to both (i) classes of transactions and events for the period under audit and (ii) account balances at the period-end?

A)Classification
B)Completeness
C)Rights and obligation
D)Valuation and allocation

Question 17

When reporting inventory, management claims that the items exist, are owned by the entity, represent a complete list of the inventory owned, and are valued appropriately.These are examples of _______.

A)Assertions
B)Accounting records
C)Negative confirmation
D)Positive confirmation

Question 18

What term signifies assertions that have a reasonable possibility of containing a material misstatement that would cause the financial statements to be materially misstated?

A)Relevant assertions
B)Rights and obligations
C)Valuation and allocation
D)Accuracy and valuation

Question 19

What do auditors do when considering existence?

A)Search for evidence to verify that asset, liability, and equity items on the balance sheet actually exist.
B)Gather evidence to verify recorded assets are owned by the entity and recorded liabilities represent commitments of the entity.
C)Search for assets, liabilities, and equity items to ensure they have been recorded.
D)Search for evidence that assets, liabilities, and equity items have been recorded at appropriate amounts.

Question 20

The permanent file includes client information and documentation that applies to the most recent year's audit.

Question 21

Auditors gathering evidence that transactions and events have been recorded at appropriate amounts consider _______.

A)accuracy
B)occurrence
C)completeness
D)classification

Question 22

When considering classification, auditors gather evidence that transactions and events have been recorded _______.

A)in the proper accounts
B)in the correct accounting period
C)at appropriate amounts
D)alongside equity interests

Question 23

The sufficiency of audit evidence refers to the _______.

A)quantity of audit evidence gathered
B)quality of audit evidence gathered
C)logical connection with the assertion being tested
D)source, form, or nature of the audit evidence

Question 24

The responsibility of ensuring sufficient appropriate audit evidence is gathered to arrive at an opinion is ________.

A)the responsibility of the auditor
B)the responsibility of management
C)a joint responsibility between management and the auditor
D)a function of internal control

Question 25

When testing for the ________ assertion, auditors gather evidence that transactions and events have been recorded at appropriate amounts.

A)cutoff
B)accuracy
C)existence
D)completeness

Question 26

When testing for the ________ assertion, auditors gather evidence that transactions and events have been recorded in the proper accounts.

A)classification
B)existence
C)rights and obligations
D)presentation and disclosure

Question 27

When testing for the ________ assertion, auditors gather evidence to verify recorded assets are owned by the entity and recorded liabilities represent commitments of the entity.

A)existence
B)valuation and accuracy
C)rights and obligations
D)occurrence

Question 28

The accuracy and valuation assertion relates to ________.

A)financial and other information is disclosed fairly and in appropriate amounts
B)ensuring records of ownership of assets is accurate
C)the auditor's charges for fees and services provided
D)all disclosures having been properly made

Question 29

The completeness assertion relates to ________.

A)all transactions and events that should have been recorded have been recorded
B)all payroll accounting records are complete and accounted for
C)all entries are recorded in the correct period
D)all accounts are valued at their correct amounts

Question 30

When testing for the ________ assertion, auditors search for evidence that assets, liabilities and equity items have been recorded at appropriate amounts and allocated to the correct general ledger accounts.

A)presentation and disclosure
B)valuation and allocation
C)existence
D)occurrence

Question 31

The cutoff assertion deals with ________.

A)ensuring accounts are appropriately valued
B)ensuring amounts are recorded in the correct accounts
C)transactions and events have been recorded in the correct accounting period
D)ensuring that assets, liabilities and equity interests exist.

Question 32

Management assertions are best defined as ________.

A)sometimes being present in the financial statements, and sometimes not.
B)optional items for the auditor to check
C)representations by management, explicit and implicit, contained within the financial statements.
D)management communications with an attorney

Question 33

When testing for the ________ assertion, auditors search for evidence that transactions have been recorded in the correct accounting period.

A)rights and obligations
B)valuation and accuracy
C)cutoff
D)existence

Question 34

When testing for the ___________ assertion, auditors gather evidence that all transactions have been recorded and the financial statements are not understated or overstated.

A)completeness
B)cutoff
C)valuation and allocation
D)disclosure

Question 35

The management assertion of classification deals with ________.

A)ensuring vacancies are posted to appropriated classified ads
B)transactions and events have been recorded in the proper accounts.
C)classifying between the appropriate financial statements
D)current versus non-current only

Question 36

With regard to management assertions, it is true to say that ________.

A)all assertions apply to all accounts and balances
B)only some assertions apply to accounts and their balances
C)none of the assertions apply to accounts and their balances
D)management should be consulted to determine which assertions apply to which accounts.

Question 37

When testing for the ________ assertion, auditors search for evidence to verify that asset, liability and equity items on the balance sheet actually exist.

A)presentation and disclosure
B)existence
C)occurrence
D)valuation and accuracy

Question 38

When testing for the ________ assertion, auditors search for assets, liabilities and equity items to ensure they have been recorded.

A)cutoff
B)valuation and accuracy
C)completeness
D)presentation and disclosure

Question 39

The information that auditors use when arriving at their opinion on the fair presentation of the client's financial statements is called _______.

A)audit evidence
B)relevant assertion
C)receivable confirmation
D)working papers

Question 40

When testing for the ________ assertion, auditors ensure that all items included in the financial statements are appropriately presented and disclosures are clearly expressed.

A)classification and understandability
B)cutoff
C)presentation and disclosure
D)occurrence

Question 41

The quality of audit evidence is determined by its ________ in providing support for the conclusions on which the auditor's opinion is based.

A)relevance and reliability
B)accuracy and valuation
C)classification and understandability
D)occurrence and rights and obligations

Question 42

The procedure of auditors examining a client's unpaid invoices file and determining if payables have been properly created for any unpaid invoices would provide evidence in support of the _______ assertion.

A)accuracy
B)occurrence
C)completeness
D)cut-off

Question 43

Reliability of audit evidence refers to ________.

A)the source of the evidence and form or nature of the evidence
B)the accuracy and reliability of the balances
C)only the specific source of the information
D)only the nature of the evidence only

Question 44

Auditors inspecting a sample of accounts payable balances listed on the ledger and verifying that they are true payables owed by the client gather evidence in support of the _______ assertion.

A)accuracy
B)occurrence
C)completeness
D)existence

Question 45

Auditors inspecting purchase orders for proper authorization by a manager before a purchase is made would be an example of ________.

A)a test of controls
B)client communication
C)substantive procedures
D)analytical procedures

Question 46

Considering the risk of overstatement of receivables due to premature revenue recognition that inflates revenues and receivables, which assertion for the accounts receivable balance is typically relevant?

A)Accuracy
B)Existence
C)Completeness
D)Rights and obligations

Question 47

Auditors are willing to accept a higher risk that their audit procedures may not detect a material misstatement ________.

A)when detection risk is high
B)when control risk is high
C)when detection risk is low
D)when control risk is low

Question 48

The appropriateness of audit evidence refers to the _______.

A)quality of audit evidence gathered
B)quantity of audit evidence gathered
C)logical connection with the assertion being tested
D)source, form, or nature of the audit evidence

Question 49

An auditors' evaluation of financial information by studying plausible relationships among both financial and non-financial data ________.

A)is known as recalculation
B)is known as reperformance
C)is referred to as substantive testing
D)is referred to as analytical procedures

Question 50

Auditors communicating directly with a client's bank regarding the existence of the client's cash account balances at year-end would be an example of an:

A)audit issue
B)independent source
C)internal source
D)illegal communication

Question 51

The primary assertion that is tested when using receivable confirmations is _______.

A)existence
B)occurrence
C)accuracy
D)completeness

Question 52

Audit evidence will typically consist of ________.

A)all observations made by the auditor
B)all records prepared by the auditor, not including records received from external entities
C)information that supports and corroborates management's assertions and any information that contradicts the assertions
D)information that supports the auditor's initial assessment of audit risk

Question 53

When there is a low risk of material misstatement with an assertion and the client's system of internal controls is considered effective at reducing risk, ________.

A)detection risk is set at low
B)detection risk is set at high
C)inherent risk is set to medium
D)control risk is ignored

Question 54

The specific procedures auditors will use to gather evidence are detailed in the ________.

A)financial statements
B)representation letter
C)audit program
D)flowchart

Question 55

The amount of evidence that an auditor must collect is a function of __________.

A)the risk of material misstatement in a relevant assertion for an account balance or class of transactions
B)prior years' audit risk
C)a detailed assessment of the clients' system of internal control
D)the ability of the client to provide all documentation requested by the auditor

Question 56

Auditors would plan for audit procedures that may result in lower quality evidence and possibly a decreased quantity of evidence for that assertion ________.

A)when detection risk is high
B)when audit risk is low
C)when management risk is low
D)when control risk is high

Question 57

Relevance of audit evidence refers to ________.

A)its importance to the audit
B)its relevance to outside investors and creditors
C)its relationship to the assertion being tested
D)its relevance to the balance sheet

Question 58

What procedures are designed to detect material misstatements at the assertion level (namely, tests of details and substantive analytical procedures)?

A)Tests of controls
B)Substantive procedures
C)Analytical procedures
D)Risk assessment procedures

Question 59

When would auditors want to decrease the risk that their audit procedures will not detect a material misstatement?

A)When detection risk is high
B)When detection risk is low
C)When inherent risk is low
D)When control risk is low

Question 60

In audit evidence, which of the following refers to the logical connection with the assertion being tested?

A)Reliability
B)Sufficiency
C)Relevance
D)Appropriateness

Question 61

Auditors spend a considerable amount of total audit time on the process of obtaining and evaluating audit evidence in support of management assertions, which is sourced primarily from the client's ________.

A)working papers
B)accounting records
C)internal auditors
D)audit data analytics

Question 62

According to Brazel's research, responses from financial statement auditors in the U.S.who were surveyed about their experiences with IT auditors indicated that they believe IT auditors' _______ levels vary in practice.

A)competence
B)capability
C)objectivity
D)participation

Question 63

Performing numerical accuracy tests for foreign currency translation, payroll taxes, interest on loans outstanding, and depreciation calculations ________.

A)is the role of the internal audit function
B)is the responsibility of management
C)is referred to as recalculation
D)is unnecessary if the client is assessed as having low control risk

Question 64

Who among the following is generally the most experienced in an audit team?

A)Partner
B)Manager
C)Senior/in-charge
D)Staff/associates

Question 65

A common audit procedure that involves watching a process or procedure being carried out by client personnel or another party is known as ________.

A)inspection
B)observation
C)recalculation
D)reperformance

Question 66

Using ADA software typically makes the audit _______.

A)more comprehensive but less efficient.
B)less comprehensive and less efficient.
C)less comprehensive but more efficient.
D)more comprehensive and more efficient.

Question 67

Selecting source documents and working forward to follow the transaction through to recording in the journal and ledger is called _______.

A)tracing
B)vouching
C)inquiring
D)observing

Question 68

Which of the following helps discover and analyze patterns, identify anomalies, and extract other useful information in data underlying the subject matter of an audit?

A)Tests of Control
B)ADA
C)XBRL
D)GAAP

Question 69

Receivable confirmations provide very little evidence regarding the _______ assertion.

A)accuracy
B)rights and obligation
C)occurrence
D)completeness

Question 70

In the PCAOB standard, the term "other auditors" refers to ________.

A)component auditors
B)principal auditors
C)the group engagement team
D)the group engagement partner

Question 71

When an auditor asks questions verbally or in written form of knowledgeable individuals internal to the client, this is referred to as ________.

A)confirmation
B)attestation
C)affirmation
D)inquiry

Question 72

Positive confirmation is correspondence sent directly by an auditor to a third party, who must respond _________.

A)in all circumstances
B)only if it disagrees with the information provided
C)only if it agrees with the information provided
D)in circumstances where the client disagrees with the auditor

Question 73

If an auditor has determined that inherent risk for accounts receivable is high and wishes to verify the balance as accurate, the best corroborating evidence would be ________.

A)a phone call to the client
B)a negative confirmation sent to the entity in question
C)a positive confirmation sent to the entity in question
D)inspection of supporting documents relating to the receivables transactions

Question 74

Which of the following provides evidence for the occurrence assertion?

A)Tracing
B)Visualization
C)Vouching
D)Tests of controls

Question 75

Among methods used by auditors in gathering evidence, what are tests of control?

A)Methods used to determine the operating effectiveness of the client's controls in preventing, or detecting and correcting, material misstatements at the assertion level.
B)Methods designed to detect material misstatements at the assertion level.
C)Methods used to gain an understanding of a client and its industry for the purpose of identifying risk of material misstatement.
D)Methods used in the evaluation of financial information by studying plausible relationships among both financial and non-financial data.

Question 76

Positive confirmations ask recipients to reply ________.

A)in all circumstances.If a response cannot be obtained, auditors must obtain alternative evidence to determine if the balance exists.
B)only if they disagree with the information provided.If a recipient does not respond, it is assumed that he/she agrees with the information provided
C)in all circumstances.If a recipient does not respond, it is assumed that he/she agrees with the information provided
D)only if they disagree with the information provided.If a response cannot be obtained, auditors assume that the receivable does not exist

Question 77

When auditors start with the underlying source documents and work forward to follow the transaction through to recording in the journal and ledger, this is referred to as ________.

A)audit procedures
B)substantive procedures
C)tracing
D)vouching

Question 78

In general, reliance on an IT specialist is appropriate when the financial statement auditor complies with the conditions of AU-C ________.

A)610
B)620
C)600
D)500

Question 79

When an auditor selects transactions from the sales journal or ledger and then examines the underlying source documents, such as a shipping document and an invoice to the customer, this is known as ________.

A)tracing
B)vouching
C)examination
D)inspection of records

Question 80

A type of analytical procedure in which auditors use their professional judgment to review accounting data to identify unusual or significant items that may be an indication of a material misstatement ________.

A)is referred to as scanning
B)is known as substantive testing
C)is known as an audit review
D)is no longer allowed under Sarbanes-Oxley.