Question 1

The permanent file should include ________.

Accepted Answer

The permanent file typically includes details of the client's board of directors and its subcommittees, as these provide essential governance context for the audit.

Question 2

A detailed record of work completed, and evidence gathered in forming the audit opinion ________.

Accepted Answer

The detailed record of work completed, and evidence gathered in forming the audit opinion is contained in the working papers. These working papers are used to support the auditor's findings and conclusions, and are considered confidential and the property of the auditor's firm. They should not be shared with client personnel without the auditor's consent. The audit plan, on the other hand, is a document outlining the scope and objectives of the audit, and the procedures that will be performed to achieve these objectives. It does not contain the detailed record of work completed and evidence gathered. The auditor is not required to submit the working papers to management for approval, although they may be reviewed during the audit process.

Question 3

Auditors document details of tests undertaken ________.

Accepted Answer

Auditors document details of tests undertaken during the risk response phase to address identified risks and ensure that the audit objectives are met. This documentation helps in evaluating the effectiveness of the audit procedures and in supporting the audit conclusions.

Question 4

A document containing details of the period under audit, and the initials of preparers and reviewers is referred to as ________.

Accepted Answer

An audit working paper is a document containing details of the period under audit and the initials of preparers and reviewers. It serves as evidence of the work done by the auditor and is used to support the auditor's opinion in the final report. An audit plan is a document outlining the scope, objectives, and procedures of the audit. A management representation letter is a letter from management to the auditor confirming certain information related to the financial statements. A positive confirmation is a form sent to a third party to confirm the accuracy of information related to the client's accounts receivable or inventory. None of these options fit the definition provided, so the best choice is A.

Question 5

If an audit partner reviewing an engagement was attempting to locate details of long-term contracts and agreements, this information would be found in ________.

Accepted Answer

The permanent file contains information of continuing audit significance, such as details of long-term contracts and agreements, which are relevant to multiple accounting periods.

Question 6

Documentation contained in the working papers for a client ________.

Accepted Answer

Documentation in working papers will vary by client because each client has unique circumstances and requirements. The auditor must tailor their work accordingly to provide an accurate and effective audit. Furthermore, sharing the working papers with the client is not standard practice, as the auditor must maintain confidentiality and independence. Any necessary changes to the final audit report should be discussed with the client, but the working papers themselves should not be shared without proper justification.

Question 7

Current year working papers for an audit client should contain ________.

Accepted Answer

Current year working papers for an audit client should contain both copies of the lead schedule and working papers. This is important for the auditor to have an organized and complete record of the audit procedures performed and the evidence obtained.

Question 8

An auditor has just prepared and sent a letter to management detailing weaknesses in internal control.A copy of this letter should be ________.

Accepted Answer

The copy of the letter detailing weaknesses in internal control should be placed in the permanent file as it is considered to be a significant matter that requires documentation for future reference. Sending it to the client's attorney, placing it in the temporary file or filing it with the Securities and Exchange Commission is not necessary.

Question 9

_______ is the information auditors use when arriving at their opinion on the fair presentation of the client's financial statements.
A.Opinion evidence | Audit evidence | Privileged client information | Internal audit evidence

Accepted Answer

The answer of _______ is the information auditors use when...

Question 10

_______ involves the examination of documents and physical assets.
A.Observation | Inspection | Examination | Recording

Accepted Answer

The answer of _______ involves the examination of documents and...

Question 11

Evidence gathered from a knowledgeable source independent of the client is more _______ than evidence gathered solely from internal client sources.
A.complete | accurate | reliable | questionable

Accepted Answer

The answer of Evidence gathered from a knowledgeable source independent...

Question 12

As audit work is performed and the auditor amasses client information and documentation that apply to the current year's audit, ________.

Accepted Answer

The information and documentation gathered in the current year's audit should be placed in the current file. This file contains all the information related to the current year's audit and is used for reference in future audits. The permanent file, on the other hand, contains information that is not relevant to the current year's audit but is important for future audits, such as articles of incorporation, bylaws, and previous year's financial statements.Copying all information to both files is unnecessary and can be a waste of resources. Destroying the information after seven days would be inappropriate and could lead to legal and ethical issues.

Question 13

Extracts from the minutes of meetings that pertain to the current audit ________.

Accepted Answer

Extracts from the minutes of meetings that pertain to the current audit should be added to the current file. This helps in ensuring that all relevant information is considered during the audit process.

Question 14

Ultimate responsibility for audit decisions, supervision of the team members, and the issuance of the final audit report rests with _______.

Accepted Answer

The ultimate responsibility for the audit decisions, supervision of the team members, and the issuance of the final audit report rests with the audit partner. While the audit manager and team members play important roles in the audit process, the audit partner is ultimately responsible for the quality and accuracy of the audit work. Management is responsible for the financial statements and internal controls, but they are not directly responsible for the audit process. The audit committee provides oversight and guidance to the external auditors, but they do not have direct responsibility for the audit decisions or final audit report.

Question 15

Client information and documentation that applies to multiple audits should be________.

Accepted Answer

Client information and documentation that applies to multiple audits should be stored in the permanent file. This includes items such as organizational charts, chart of accounts, and contracts that have a continuing effect. The permanent file is a repository for information that has continuing importance beyond the current year's audit, and is not destroyed or returned to the client.

Question 16

Letters to management that detail weaknesses in internal controls identified by the auditors in previous years should be ________.

Accepted Answer

Letters detailing weaknesses in internal controls identified by auditors in previous years should be included in the permanent file as they provide historical context and reference for ongoing and future audits.

Question 17

_______ refers to the quantity of audit evidence gathered.
A.Appropriate | Timely | Sufficient | Complete

Accepted Answer

The answer of _______ refers to the quantity of audit...

Question 18

A client's primary accounting methodologies and significant accounting policies ________.

Accepted Answer

A client's primary accounting methodologies and significant accounting policies should be stored in the permanent file, as they provide key information for future audits and evaluations. The current file only contains temporary documentation related to the current year's audit. The auditor should review this information during the audit process to ensure that the client is following generally accepted accounting principles (GAAP) and that the financial statements are fairly presented. As this information is important to the auditor's evaluation of the financial statements, it is not confidential and should be made available to the auditor.

Question 19

Once risks are identified, auditors assess the risk of material misstatement at the _______ level for these significant classes of transactions and account balances.
A.relevant assertion level | account | financial statement | disclosure

Accepted Answer

The answer of Once risks are identified, auditors assess the...

Question 20

With respect to an auditor's working papers, a lead schedule ________.

Accepted Answer

A lead schedule is a summary of the details for a particular account or group of accounts, including the balances, transactions, and any other relevant information. It helps the auditor to organize their working papers and ensure that they have accounted for all the necessary information.

Quiz 5: Audit Evidence