Deck 9: Inquiry and Analytical Evidence

Question 1

Why should a junior auditor accompany a more senior auditor to lengthy interviews of client personnel?

Answer 1

A more junior auditor should accompany a more senior auditor and act as a note taker if the interview is to be lengthy or broad-ranging. This will both enhance the learning of the more junior auditor and it will enhance the effectiveness of the interview process. The more experienced auditor can focus on the meaning of client responses, manage the flow of the interview, note and interpret the non-verbal reactions of client personnel, and draw out nuances of client's responses. The less experienced auditor relieves the senior auditor of the distraction of note taking and learns to conduct an effective interview through observation of the more senior colleague.

Question 2

How might the auditor corroborate evidence gained from inquiry and interviews?

Answer 2

Other correct answers are possible, beyond these examples.
i) The auditor might view documentary evidence maintained by the interviewee or other personnel that supports the inquiry evidence.
ii) The auditor might examine third-party documents or data that reinforces the information obtained through inquiry.
iii) The auditor might consult industry experts who provide context about information and evaluate the reasonableness of evidence from inquiry.

Question 3

How does the audit team determine which client personnel to interview?

Answer 3

a. Determining the appropriate client personnel to interview is an important audit decision. Depending on the question at hand, the auditors will want to interview management, accounting personnel and operating personnel.
b. When the questions under discussion involve the financial reporting process, interviews with accounting personnel are appropriate. However, auditors should find client personnel who are responsible for conducting the underlying activities when the auditor is trying to understand the reasonableness of transactions and balances. Operating personnel will have a better understanding of the business than accounting personnel because they are directly involved in executing transactions. In addition, operating personnel usually have less accounting knowledge and are less likely to bias their answers in a way to make results appear better than they really are.

Question 4

Which members of the audit team should conduct interviews with client personnel?

Question 5

What lessons about auditor expectations and client performance in analytical procedures were learned from the WorldCom fraud?

Question 6

How should the information gathered from interviews be documented and discussed?

Question 7

Describe three approaches for performing analytical procedures using basic judgmental methods.

Question 8

What is the relationship between the auditor's analysis and inquiry?

Question 9

Why should the auditor follow a systematic process for conducting analytical procedures?

Question 10

What major elements must the auditor consider that may affect the quality of inquiry evidence?

Question 11

Describe the allegation against the auditor in the Enron fraud that relate to the auditors' inquiries.

Question 12

You are assigned to the Coca-Cola audit. Describe some areas where rigorous inquiry evidence is needed and formal inquiries should be planned.

Question 13

What is inquiry?

Question 14

When does the auditor perform analytical procedures?

Question 15

How should the audit team plan the conduct and timing of interviews?

Question 16

Why has inquiry recently become more important to auditors?

Question 17

How should questions be prepared and asked by the auditor for a client interview?

Question 18

What are the potential pitfalls of relying on analytical procedures?

Question 19

Is inquiry a distinct step in a typical audit? Why or why not?

Question 20

Is inquiry alone an inadequate source of audit evidence? Why or why not?

Question 21

Describe the steps in a systematic process for conducting analytical procedures

Question 22

Describe three approaches for performing analytical procedures using advanced judgmental methods.