Question 1

Proper audit documentation.
Audit documentation serves as the primary support of an audit. Give at least six examples of the components of proper working paper documentation.

Accepted Answer

The answer of Proper audit documentation.
Audit documentation serves as the...

Question 2

When using confirmations with outside parties, the auditor must assure which of the following about the outside party?
A) The outside party exists.
B) The outside party is able to respond objectively and independently.
C) The outside party is unbiased in responding.
D) All the above.

Accepted Answer

All three options are important aspects that the auditor must ensure about outside parties to obtain reliable confirmations. They must confirm that the party exists, is able to respond objectively and independently, and is unbiased in their response. Therefore, option D, which encompasses all three choices, is the best answer.

Question 3

Why is the appropriateness of audit evidence obtained by the auditor important in forming an audit opinion? Describe the qualities information should have to be considered appropriate by the auditor.

Accepted Answer

The answer of Why is the appropriateness of audit evidence...

Question 4

Reprocessing of transactions involves which of the following?
A) Testing forward.
B) Testing backward.
C) Testing at a point in time.
D) Directional testing either forward or backward.

Accepted Answer

The answer of Reprocessing of transactions involves which of the...

Question 5

Which of the following types of audit evidence is the most reliable?
A) Evidence from the client's organization.
B) Evidence from a poorly controlled system.
C) Directly observable evidence.
D) Facsimiles of documents.

Accepted Answer

Directly observable evidence provides the most reliable audit evidence because it is first-hand, objective and can be confirmed by the auditor's own observations. Evidence from the client's organization may be biased, while evidence from a poorly controlled system may be unreliable. Facsimiles of documents may be altered or incomplete, making them less reliable than directly observable evidence.

Question 6

Directional testing.
Explain the meaning of "directional testing" and identify the reasons why directional testing leads to audit efficiency. Give examples of directional testing for the existence and completeness assertions.

Accepted Answer

The answer of Directional testing.
Explain the meaning of "directional testing"...

Question 7

Audit documentation should contain which of the following?
A) A heading that includes the name of the audit client, an explanatory title, and the balance sheet date.
B) The initials or electronic signature of the auditor performing the audit test and the date the test was completed.
C) The initials or electronic signature of the manager or partner who reviewed the documentation and the date the review was completed.
D) All of the above.

Accepted Answer

All of the choices listed should be included in audit documentation. A clear heading that identifies the client, title, and date is necessary for organization and reference. The initials or electronic signature of the auditor and the date of completion show accountability and help track progress. Additionally, the auditor's work should be reviewed by a manager or partner, whose initials or electronic signature and the date of review should be included.

Question 8

Vouching of transactions deals with which of the following?
A) Testing forward.
B) Testing backward.
C) Testing at a point in time.
D) Directional testing either forward or backward.

Accepted Answer

The answer of Vouching of transactions deals with which of...

Question 9

Recalculations of the client's computations would not include which of the following types of evidence?
A) Cutoff.
B) Footing.
C) Extension.
D) Cross-footing.

Accepted Answer

Cutoff refers to ensuring that all transactions have been accurately recorded up to the end of the accounting period, and is not a type of evidence that would require a recalculation. Footing, extension, and cross-footing all involve adding or multiplying numbers to ensure accuracy in the calculations, so they would require recalculation.

Question 10

Which of the following characteristics are not normally included in good audit documentation?
A) Initials of the person preparing and reviewing the document.
B) An assessment of whether the test indicates the possibility of material misstatement in an account.
C) A cross-reference.
D) All are included in good audit documentation.

Accepted Answer

All the characteristics listed (initials, assessment of material misstatement, and cross-reference) are typically included in good audit documentation to ensure clarity, accountability, and traceability.

Question 11

Which of the following is not a type of internal documentation?
A) Legal documents.
B) Business documents.
C) Third-party documents.
D) Accounting documents.

Accepted Answer

Internal documentation refers to documents that are created by or for a business, for its own internal purposes. Legal, business, accounting documents are all types of internal documentation. Third-party documents are created by someone outside of the business and therefore do not fall under the category of internal documentation.

Question 12

Which of the following types of audit evidence is the least reliable?
A) Evidence from the client's organization.
B) Evidence derived from a well-controlled system.
C) Evidence from independent outside sources.
D) Original documents.

Accepted Answer

Evidence from the client's organization is the least reliable type of audit evidence as it is produced and controlled by the client, which may be biased or incomplete. It is therefore more open to manipulation or error.

Question 13

The written record that forms the basis for the auditor's conclusions is referred to as what?
A) Audit documentation.
B) Audit adjustment.
C) Accounting records.
D) Footing.

Accepted Answer

Audit documentation, also known as workpapers, is the written record that forms the basis for the auditor's conclusions regarding the financial statements of an entity. It includes information such as the planning of the audit, the nature, timing and extent of testing performed, the results of the testing, and the conclusions drawn by the auditor.

Question 14

A date at which audit evidence is collected earlier than the balance sheet date is referred to as what?
A) Subsequent date.
B) Cutoff period.
C) Significant date.
D) Interim date.

Accepted Answer

An audit evidence collection date that is earlier than the balance sheet date is referred to as an interim date. This allows the auditor to perform preliminary testing and gather evidence to support the financial statements before the year-end balance sheet date.

Question 15

Each of the audit procedures that an auditor could select possesses which of the following characteristics?:
A) Audit procedures take time, effort, and money.
B) Audit procedures are difficult to perform.
C) Audit procedures require multiple people from the firm to perform.
D) All of the above.

Accepted Answer

While some audit procedures may be more difficult or require multiple people, all audit procedures require time, effort, and money to perform. Therefore, option A is the best choice.

Question 16

Which of the following is not an estimate that requires significant auditor judgment and skepticism?
A) Obligations for pension plans.
B) Valuation of goodwill.
C) Allowance for bad debt.
D) Common stock and related additional paid-in capital.

Accepted Answer

The value of common stock and related additional paid-in capital can be easily determined based on information in the company's financial statements and are not subject to significant auditor judgment and skepticism. Obligations for pension plans, valuation of goodwill, and allowance for bad debt require significant judgment and skepticism as these amounts rely on assumptions and estimates made by management.

Question 17

What is determined to be appropriate and sufficient will be affected by which of the following?
A) The client's risk of material misstatement.
B) The risk of material weakness in internal controls.
C) Either a or b.
D) None of the above.

Accepted Answer

The determination of appropriate and sufficient audit procedures is affected by both the client's risk of material misstatement and the risk of material weakness in internal controls. Therefore, option C is the best answer. Option A or B alone is not sufficient to determine what is appropriate and sufficient in terms of audit procedures. Option D is incorrect as both A and B factors affect the audit process.

Question 18

The auditor normally considers both underlying accounting data and corroborating information in the audit process. Underlying accounting data does not include which of the following items?
A) Evidence of controls.
B) Minutes of meetings.
C) Checks, invoices, and contracts.
D) General and subsidiary ledger.

Accepted Answer

Minutes of meetings are not considered underlying accounting data as they are not directly related to financial transactions and may not provide objective evidence. The other options listed are all examples of accounting data that are typically used in the audit process.

Question 19

Which of the following is a factor that the auditor should consider as they affect the reliability and relevance of information produced by a management's specialist?
A) Competence, capabilities, and objectivity of that specialist.
B) Work performed by that specialist.
C) Appropriateness of that specialist's work as audit evidence for the relevant assertion.
D) All of the above.

Accepted Answer

All three factors - competence, capabilities, and objectivity of the specialist, work performed by the specialist, and appropriateness of the specialist's work as audit evidence for the relevant assertion - can affect the reliability and relevance of information produced by a management's specialist. Therefore, the auditor should consider all of these factors when evaluating the specialist's work as audit evidence.

Question 20

In evaluating cost of evidence, which of the following evidence qualities of the audit usually has the lowest cost?
A) High quality.
B) Medium quality.
C) Low quality.
D) All cost the same.

Accepted Answer

Low-quality evidence usually has the lowest cost because it requires less effort to gather and is less reliable. However, it may not be sufficient to support the audit opinion. Higher quality evidence may require more effort and resources to collect and analyze, leading to higher costs.

Quiz 6: A Framework for Audit Evidence

Proper audit documentation. Audit documentation serves as the primary support of an audit. Give at least six examples of the components of proper working paper documentation.

When using confirmations with outside parties, the auditor must assure which of the following about the outside party?

Why is the appropriateness of audit evidence obtained by the auditor important in forming an audit opinion? Describe the qualities information should have to be considered appropriate by the auditor.

Reprocessing of transactions involves which of the following?

Which of the following types of audit evidence is the most reliable?

Directional testing. Explain the meaning of "directional testing" and identify the reasons why directional testing leads to audit efficiency. Give examples of directional testing for the existence and completeness assertions.

Audit documentation should contain which of the following?

Vouching of transactions deals with which of the following?

Recalculations of the client's computations would not include which of the following types of evidence?

Which of the following characteristics are not normally included in good audit documentation?

Which of the following is not a type of internal documentation?

Which of the following types of audit evidence is the least reliable?

The written record that forms the basis for the auditor's conclusions is referred to as what?

A date at which audit evidence is collected earlier than the balance sheet date is referred to as what?

Each of the audit procedures that an auditor could select possesses which of the following characteristics?:

Which of the following is not an estimate that requires significant auditor judgment and skepticism?

What is determined to be appropriate and sufficient will be affected by which of the following?

The auditor normally considers both underlying accounting data and corroborating information in the audit process. Underlying accounting data does not include which of the following items?

Which of the following is a factor that the auditor should consider as they affect the reliability and relevance of information produced by a management's specialist?

In evaluating cost of evidence, which of the following evidence qualities of the audit usually has the lowest cost?