Question 1

A first audit requires more work than a repeat engagement.

Accepted Answer

This is because in a first audit, the auditor needs to spend more time familiarizing themselves with the client's operations, internal controls, and accounting processes. In a repeat engagement, the auditor already has this knowledge and can focus more on testing the effectiveness of the controls and the accuracy of the financial statements.

Question 2

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

Accepted Answer

Receivables are often overstated due to optimistic revenue recognition, while payables are understated to improve financial appearance.

Question 3

Oral evidence from enquiry is considered to be very important.

Accepted Answer

Oral evidence is considered to be important in an enquiry as it provides firsthand information and allows for clarification on any confusion or doubts. It also allows for the questioning of the witness to ensure that all relevant information has been made available.

Question 4

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

Accepted Answer

Recalculation involves verifying the mathematical accuracy of documents or records, such as recalculating depreciation to ensure it has been computed correctly.

Question 5

Analysis is most useful in providing evidence of:

Accepted Answer

The answer of Analysis is most useful in providing evidence...

Question 6

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

Accepted Answer

The answer of Destroying working papers may prevent the auditor...

Question 7

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

Accepted Answer

Evidence must relate to management assertions to be relevant to the auditor, as these assertions are the basis for evaluating the accuracy and completeness of financial statements.

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.

Accepted Answer

While re-performing calculations on a random basis can help the auditor check for accuracy, it does not necessarily mean that if one component has been calculated properly, the other components have also been computed properly. Each component needs to be individually tested and verified for accuracy.

Question 9

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

Accepted Answer

Reading the terms of a lease agreement is an example of comprehension or understanding, not analysis. Analysis involves breaking down information into parts to understand it better.

Question 10

One example of a formal authoritative document is a:

Accepted Answer

Bank statements are formal authoritative documents that provide a record of financial transactions for a specific period.

Question 11

To provide efficient, reliable evidence, confirmations should be:

Accepted Answer

The answer of To provide efficient, reliable evidence, confirmations should...

Question 12

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

Accepted Answer

The two main types of audit programs are (1) fixed (standard) audit programs and (2) flexible (tailored) audit programs. Balance-audit and cycle-audit programs are not standard classifications in auditing.

Question 13

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

Accepted Answer

The answer of For new clients, the auditor can obtain...

Question 14

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

Accepted Answer

The answer of Permanent audit files contain such documents as...

Question 15

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

Accepted Answer

Reviewing prior year working papers and permanent file documents helps the audit team understand the client's business, past issues, and audit adjustments, providing a foundation for planning the current audit.

Question 16

Loan application documents are considered authoritative evidence.

Accepted Answer

The answer of 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.

Accepted Answer

The answer of The auditor is the legal owner of...

Question 18

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

Accepted Answer

This is because using multiple techniques helps to reduce the limitations and biases of each individual technique, providing a more comprehensive and objective view of the evidence. It also helps to increase the reliability and validity of the findings by triangulating the results from different sources.

Question 19

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

Accepted Answer

Substantive procedures are used to obtain evidence about the financial amounts reported in the financial statements. They provide direct evidence to confirm the existence, completeness, and accuracy of the amounts reported.

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.

Accepted Answer

Representations from the auditee's personnel are not considered sufficient on their own and need to be corroborated with other evidence to ensure reliability.

Quiz 8: Audit Evidence and Assurance