Question 1

An audit working paper generally includes

Accepted Answer

All of the above options are typically included in an audit working paper:
- The client's name is necessary for identification purposes.
- Cross-referencing between working papers helps to ensure accuracy and completeness.
- A file reference is included for ease of reference and organization.

Question 2

During the risk response phase of the audit, an auditor will document

Accepted Answer

During the risk response phase of the audit, the auditor will document the details of audit tests undertaken to address identified risks. This documentation is important to track the progress of testing and ensure that all significant risks are addressed.

Answer B, C, and D are incorrect as they are more likely to be documented during the risk assessment phase of the audit, rather than the risk response phase. During risk assessment, auditors will document their understanding of their client, related parties identified, and analytical procedures used to identify risks.

Question 3

Which statement regarding audit working papers is correct?

Accepted Answer

All of the statements regarding audit working papers are correct. Working papers are used to document the details of each audit, they may be in paper or electronic format, and they provide evidence of the work completed and the evidence obtained to support the auditor's opinion.

Question 4

Explain the three broad categories of corroborating evidence.

Accepted Answer

The answer of Explain the three broad categories of corroborating...

Question 5

Describe the purpose and examples of external confirmations.

Accepted Answer

The answer of Describe the purpose and examples of external...

Question 6

CAS 501 Audit Evidence - Specific Considerations for Specific Items 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 statements?

Accepted Answer

The answer of CAS 501 Audit Evidence - Specific Considerations...

Question 7

Indicate whether you agree or disagree with the following statements and explain your reasoning.
a) Paula Faconi has just completed a risk assessment and has identified key risk factors at Darwin Industries. When asked by one of her staff members "What's next?", she replies: "Now that we have identified the risks, its time to perform some planning in order to obtain sufficient appropriate audit evidence."
b) Roni Khali was assigned to the Inglis Glass Company audit. She was ensuring that when recognizing revenues, all transactions and events that should have been recorded have been recorded. She was testing the occurrence assertion.
c) Harvey Jarvis, the group partner was reviewing the work of Jacob Barnes on the Bazzle Gold account. Jacob asked Harvey for an explanation on how audit risk would affect his work. Harvey answered: "Audit risk affects the quantity and quality of evidence gathering."
d) Benoit Chausson, CPA made the following true statement: "The appropriateness of audit evidence refers to its relevance and reliability." He then added:

Accepted Answer

The answer of Indicate whether you agree or disagree with...

Question 8

Nazim Kali, the auditor-in-charge of Valo, a Brazilian mining company, was reviewing the expert's report on the valuation of reserves for the world's largest bauxite deposits. The mining plans of Valo have met with strong criticism from scientists, environmentalists, and the Brazilian population.
The bauxite operations had required the use of local auditors of another international public accounting firm. The group engagement partner, Lori Lake, met with Nazim to discuss the reliance their firm would be placing on the component auditors. She was concerned that the component auditors conclusions were not based on adequate evidence. The financial statements being audited by the component auditors are a material part of the consolidated statements of Valo.
Required:
a) What role does Nazim have in assessing the expert's report on the bauxite deposits?
b) What role does Nazim and his firm have before they make a decision to use the work of another auditor?
c) What is the engagement partner's role once her firm has assigned the work to a component auditor?

Accepted Answer

The answer of Nazim Kali, the auditor-in-charge of Valo, a...

Question 9

CAS 620 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.

Accepted Answer

The answer of CAS 620 Using the Work of an...

Question 10

Which of the following would not be included in an auditor's permanent file?

Accepted Answer

Copies of accounts receivable confirmation letters are typically included in the current year audit files, not the permanent file. The permanent file contains information of continuing audit significance, such as the organizational chart, long-term contracts, and prior years' audit reports.

Question 11

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

Accepted Answer

The answer of Explain the purpose of working papers and...

Question 12

Audit evidence is the information that an auditor uses when arriving at their opinion on the fair presentation of their client's financial statements. Why is evidence so important to a financial statement audit?

Accepted Answer

The answer of Audit evidence is the information that an...

Question 13

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

Accepted Answer

The answer of Describe the major evidence gathering procedures most...

Question 14

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

Accepted Answer

The answer of Identify and explain the key assertions used...

Question 15

The current file of the auditor's working papers does not include

Accepted Answer

The current file should include management letters detailing weaknesses in internal controls identified in the previous audit, as this information is important for the current audit. The other options are all items that should be included in the working papers.

Quiz 5: Audit Evidence