Deck 5: Audit Evidence

Question 1

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

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

Answer 1

B

Question 2

Analytical procedures involve an evaluation of financial information by studying plausible relationships among both financial and non-financial data.

Answer 2

True

Question 3

When preparing the financial report,auditors make assertions about each account and related disclosures in the notes.

Answer 3

False

Question 4

The cut-off assertion means that the entity holds or controls the rights to assets and liabilities are the obligations of the entity.

Question 5

Internally generated evidence is considered the most persuasive when the source of the evidence is considered to be reliable,trustworthy and independent of the client.

Question 6

An expert is expected to be less objective if they are not associated with the client.

Question 7

Completeness is an assertion used:

A)for presentation and disclosure
B)when testing balance sheet items
C)for transactions and events
D)all of the above

Question 8

When testing for accuracy,an auditor searches for evidence:

A)to verify that recorded assets are owned by the entity
B)that all disclosures that should have been included in the financial report have been included
C)to verify that a recorded transaction or event took place and relates to the entity
D)that transactions and events have been recorded at appropriate amounts

Question 9

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

A)existence
B)occurrence
C)cut-off
D)classification

Question 10

Correspondence with the client's lawyers is an example of externally generated evidence sent directly to the auditor.

Question 11

The component partner sets out the work to be conducted by the group engagement partner.

Question 12

An auditor verifies amounts recorded in their client's records using:

A)verbal evidence
B)all of the above
C)electronic evidence
D)confirmations

Question 13

The group engagement partner will not use the evidence provided by a component auditor when drawing a final conclusion on the true and fair view without conducting more tests.

Question 14

The greater the risk of material misstatement of the item under consideration,the more likely an auditor will turn to an expert for their advice.

Question 15

When assigning work to a component auditor,the group engagement partner will consider the capacity of the other auditor to undertake the work.

Question 16

Audit evidence is the information that an auditor uses when arriving at their opinion on
the truth and fairness of their client's financial report.

Question 17

Observation is an evidence gathering procedure that involves checking the mathematical accuracy of client records.

Question 18

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:

A)more high quality evidence is gathered when conducting substantive tests
B)detection risk is set as low
C)detection risk is set as high
D)none of the above

Question 19

A component auditor is an auditor who,at the request of the group engagement team,performs work on financial information related to a component for the group audit.

Question 20

Negative confirmations ask the recipient to reply only if they disagree with the information provided.

Question 21

The group engagement partner is:

A)not responsible for providing an opinion on the truth and fairness of the client's financial statements
B)requested by the component auditor to perform certain audit work on behalf of the group engagement team
C)not the auditor responsible for signing the audit report
D)the auditor responsible for signing the audit report

Question 22

When assigning work to a component auditor,the group engagement partner will;

A)Consider the capacity of the other auditor to undertake the audit
B)Review the work if this is the first engagement by the audit firm
C)Separate the component auditor's findings from those of audit firm
D)Give specific details as to the way to conduct the audit

Question 23

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

A)computational
B)verbal
C)physical
D)external confirmations

Question 24

If the component auditor cannot access sufficient evidence,the engagement partner will:

A)always issue an unqualified audit opinion
B)consider issuing an adverse audit opinion
C)consider issuing a modified audit opinion due to a scope limitation
D)none of the above

Question 25

Observation involves an auditor:

A)watching a procedure being carried out by another party
B)asking questions to gain an understanding of various matters throughout the audit
C)redoing processes conducted by the client
D)checking the mathematical accuracy of client records

Question 26

When an auditor uses the work of an expert,who has the responsibility for arriving at an overall conclusion regarding the truth and fairness of a client's financial report?

A)the expert
B)the auditor
C)the client's audit committee
D)the client's management

Question 27

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

A)the letter is sent by the client to its lawyers asking them to complete the letter and send it directly to the auditor
B)the letter is sent by the auditor to its lawyers asking them to complete the letter and send it directly to the client
C)the letter can include a request to provide details of any legal matters that the lawyer is in disagreement with the client
D)the letter can include any legal matters involving the client

Question 28

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

A)externally generated evidence held by the client
B)internally generated evidence
C)externally generated evidence sent directly to the auditor
D)none of the above

Question 29

The factors considered by the group engagement partner,when assigning work to a component auditor;

A)Reputation of the component auditor
B)Capacity of the component auditor
C)Membership association
D)All of the above

Question 30

Identify and explain the key assertions used for transactions and events,including income statement items,for an accounting period.

Question 31

Explain the purpose of working papers and the difference between the permanent file and current file.

Question 32

The group engagement partner;

A)Enlists the assistance of the internal auditors in completing the audit
B)The auditor responsible for signing the audit report
C)Provides the evidence required to satisfy the audit committee that the audit has been completed
D)The auditor responsible for the engagement of staff to gather evidence

Question 33

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

A)determining the scope of the work to be carried out
B)assessing the expert's report
C)assessing the objectivity of the expert
D)assessing the need to use an expert

Question 34

Which of the following statements regarding using the work of another auditor is ?

A)The group engagement partner will spend more time reviewing the component auditor's work if the component auditor has a good reputation
B)The group engagement partner will spend less time reviewing the component auditor's work when the component is at risk of material misstatement
C)The component auditor sets out the work to be conducted by the group engagement partner
D)The group engagement partner will spend more time reviewing the component auditor's work when the component is at risk of material misstatement

Question 35

Assessing an expert's report involves the auditor:

A)evaluating the expert's qualifications as a member of a relevant professional body
B)assessing the consistency of information included in the expert's report with their understanding of the client
C)setting the nature,timing and extent of work to be completed by the expert
D)deciding that they do not have the expertise necessary to test and evaluate the accuracy of reported information

Question 36

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

A)A geologist engaged to evaluate the quantity and quality of mineral deposits
B)An actuary engaged to verify insurance premiums
C)Both a and b
D)None of the above

Question 37

External confirmations can be sent to:

A)third parties holding the client's inventory
B)the client's audit committee
C)the client's lawyers
D)both a and c

Question 38

Describe the purpose and examples of external confirmations.

Question 39

Auditors use a re-performance procedure:

A)only when testing controls
B)when testing controls and when conducting substantive testing
C)only during the audit planning stage
D)only when conducting substantive testing

Question 40

Internally generated evidence held by the client includes:

A)copies of invoices sent to customers
B)bank statements
C)correspondence with the client's lawyers
D)expert valuations

Question 41

ASA620 Using the Work of an Auditor's Expert provides guidelines for auditors when using the work of an expert.Identify examples of situations where auditors may use experts and evaluate the benefits and risks associated in each situation.

Question 42

Explain the three broad categories of corroborating evidence.

Question 43

Describe the major evidence gathering procedures most often used by auditors.

Question 44

Audit evidence is the information that an auditor uses when arriving at their opinion on the truth and fairness of their client's financial report.Why is evidence so important to a financial report audit?

Question 45

ASA502 Audit Evidence - Specific Considerations for Litigation and Claims requires an auditor to gather sufficient appropriate audit evidence regarding any legal matters involving their client.How can auditors gather such evidence and what impacts can legal matters have on the client's financial report?