Deck 8: Audit Evidence and Assurance

Question 1

A first audit requires more work than a repeat engagement.

Answer 1

True

Question 2

In considering the effectiveness of evidence gathering procedures, it was found that most companies have adjustments.Research also shows that:

A)Both receivables and payables are usually overstated.
B)Receivables are usually overstated and payables are usually understated.
C)Receivables are usually understated and payables are usually overstated.
D)Both receivables and payables are usually understated.

Answer 2

B

Question 3

Oral evidence from enquiry is considered to be very important.

Answer 3

True

Question 4

The audit evidence gathering technique known as computation or recalculation refers to:

A)Sending letters to independent third parties.
B)Counting inventory.
C)Recalculating depreciation.
D)Checking prices as per the price list.

Question 5

Analysis is most useful in providing evidence of:

A)Existence, completeness, and ownership.
B)Existence, ownership, and valuation.
C)Completeness, ownership, and presentation.
D)Completeness, valuation, and presentation.

Question 6

Destroying working papers may prevent the auditor from proving due care if they are sued for negligence.

Question 7

Evidence which does not relate to one of the management assertions can still be relevant to the auditor.

Question 8

An auditor should re-perform calculations on a random basis to check for accuracy.Usually, if one component has been calculated properly, the auditor can rely that the other components have also been computed properly.

Question 9

Reading the terms of lease agreement for lessee is an example of a analysis.

Question 10

One example of a formal authoritative document is a:

A)Purchase order.
B)Bank statement.
C)Vendor invoice.
D)Loan application.

Question 11

To provide efficient, reliable evidence, confirmations should be:

A)Created by the client and sent to third parties to be returned to the client.
B)Created by the auditor and sent to third parties to be returned to the client.
C)Created by the auditor and sent to third parties to be returned to the auditor.
D)Created by the client and sent to third parties to be returned to the auditor.

Question 12

There are two kinds of audit programs: (1) balance-audit programs and (2) cycle-audit programs.

Question 13

For new clients, the auditor can obtain knowledge about the client's business and its industry from the permanent file.

Question 14

Permanent audit files contain such documents as the engagement letter, client organization chart, and internal control system flowcharts.

Question 15

In preparing for a repeat engagement, the first thing an audit team should do is:

A)Interview client management for any changes in the business and industry.
B)Take a tour of a client's physical facilities noting obvious inventory obsolescence or equipment maintenance issues.
C)Obtain a copy of the yearend financial statements for the current year.
D)Reviewing prior year working papers and permanent file documents.

Question 16

Loan application documents are considered authoritative evidence.

Question 17

The auditor is the legal owner of the working papers related to an auditee's financial statements.

Question 18

A combination of evidence gathering techniques provides more persuasive than evidence gathered from a single technique.

Question 19

Substantive procedures give direct evidence about the financial amounts reported in the financial statements.

Question 20

Spoken and written representations given by the auditee's officers, directors, owners, and employees are generally considered reliable enough to stand on its own.

Question 21

For good form, each audit evidence paper should be indexed using a standard system of letters and numbers.The main purpose of this is to allow:

A)Other papers to be easily cross referenced so that connections among accounts can be followed.
B)A check of the completeness of working papers.
C)Working papers to be easily refiled if they are taken out of the file or when the paper is first created.
D)Auditors to prove that they have performed sufficient work to support their audit opinion.

Question 22

Analytical procedures are one type of evidence gathering procedure.According to auditing standards, there are five general forms of analytical procedures.Auditing standards also provide examples of five sources of information for analytical procedures.
Required:
Describe three of the five general forms of analytical procedures.For each form, describe a typical source of the information for the form.For each source, include any questions or concerns an auditor would have about the reliability or relevancy of the source.

Question 23

The audit program prepared by the independent auditors prior to the start of field work is considered appropriate documentation of

A)Planning.
B)Supervision.
C)Information evaluation.
D)Quality assurance.

Question 24

Define and discuss the evidence gathering technique of inspection.

Question 25

The overall audit strategy is documented in the:

A)Engagement letter.
B)Management letter.
C)Audit program.
D)Planning memorandum.

Question 26

An auditor selects audit procedures which will provide:

A)The most evidence.
B)The most persuasive evidence.
C)The most reliable evidence that can be obtained in a cost-effective manner.
D)The most relevant information to the audit assertion.

Question 27

Which of the following is true about specialists?

A)They are persons skilled in accounting and auditing.
B)They are not members of the audit team.
C)They have to be unrelated to the company or organization under audit.
D)They are relied on to verify all significant information on which they base their conclusions.

Question 28

Identify the two types of audit programs and indicate the purpose of each.

Question 29

The audit technique of enquiry has advantages and disadvantages.Discuss some of them.

Question 30

Working papers should be clear, concise, and complete.They communicate:

A)The degree of planning in the audit.
B)The amount of work performed by the auditor.
C)The amount of time spent by the auditor.
D)The quality of the audit.

Question 31

Contrast the qualitative aspects of evidence in terms of reliability.

Question 32

The strongest form of audit evidence:

A)Auditor's direct personal knowledge.
B)Evidence gathered directly from independent third parties.
C)Evidence produced by independent third parties.
D)Comprehensive analysis performed by the auditor.

Question 33

A copy of an auditee's long term lease for a building would likely be kept:

A)In the planning file.
B)In the permanent file.
C)In the administration file.
D)In the audit evidence file.

Question 34

A first time audit requires more work than a continuing client.Identify some of the issues involved in the first audit of a company that do not occur in an ongoing engagement.