Question 1

To be considered reliable evidence,confirmations must be controlled by:

Accepted Answer

A)   the client's employee responsible for accounts receivable.
B)   the external auditor.
C)   the client's internal audit department.
D)   the client's controller or CFO.E) A) and D)
F) B) and C)

Question 2

Below are 12 audit procedures.Classify each procedure according to the following types of audit evidence:
 (1)physical examination,(2)confirmation,(3)documentation,(4)observation,(5)inquiry of the client,(6)reperformance,and (7)analytical procedure.

Accepted Answer

1.Observation
2.Physical examination
3.R...

Question 3

One purpose of performing analytical procedures in the planning phase of an audit is to assess the client's financial condition.Explain how the assessment of a client's financial condition can affect the auditor's decisions concerning evidence accumulation in later phases of the audit.

Accepted Answer

Auditors must obtain knowledge about a c...

Question 4

Which of the following is a correct statement regarding confirmations?

Accepted Answer

A)   Confirmations can be in oral or written form.
B)   Electronic confirmations are not acceptable under generally accepted auditing standards.
C)   Confirmations are generally used in the audit of fixed asset additions.
D)   Auditors consider alternative evidence available when determining if confirmations should be used.E) None of the above
F) All of the above

Question 5

Evidence is usually more persuasive for balance sheet accounts when it is obtained:

Accepted Answer

A)   as close to the balance sheet date as possible.
B)   only from transactions occurring on the balance sheet date.
C)   from various times throughout the client's year.
D)   from the time period when transactions in that account were most numerous during the fiscal period.E) A) and D)
F) None of the above

Question 6

Which of the following statements is not correct?

Accepted Answer

A)   It is possible to vary the sample size from one unit to 100% of the items in the population.
B)   The decision of how many items to test should not be influenced by the increased costs of performing the additional tests.
C)   The decision of how many items to test must be made by the auditor for each audit procedure.
D)   The sample size for any given procedure is likely to vary from audit to audit.E) All of the above
F) B) and C)

Question 7

Which of the following is not a characteristic of the reliability of evidence?

Accepted Answer

A)   Effectiveness of client internal controls
B)   Education of auditor
C)   Independence of information provider
D)   TimelinessE) All of the above
F) A) and D)

Question 8

Audit documentation:

Accepted Answer

A)   should identify the items tested when the audit procedures involve sampling of transactions or balances.
B)   does not aid in the preparation of the tax return since accounting and tax rules differ.
C)   is another term for the audit program.
D)   should not be given to anyone outside the audit firm, even if a subpoena has been issued.E) None of the above
F) A) and B)

Question 9

Two determinants of the persuasiveness of evidence are:

Accepted Answer

A)   competence and sufficiency.
B)   relevance and reliability.
C)   appropriateness and sufficiency.
D)   independence and effectiveness.E) A) and B)
F) A) and C)

Question 10

Calculating the gross margin for the current year under audit as a percent of sales and comparing it with previous years is what type of evidence?

Accepted Answer

A)   Physical examination
B)   Analytical procedures
C)   Observation
D)   InquiryE) None of the above
F) B) and C)

Question 11

Which of the following statements relating to the competence of evidential matter is always true?

Accepted Answer

A)   Evidence from outside an enterprise is always reliable.
B)   Accounting data developed under satisfactory conditions of internal control is not reliable.
C)   Oral representations made by management are not reliable evidence.
D)   Evidence must be both reliable and relevant to be considered appropriate.E) A) and C)
F) None of the above

Question 12

An audit program is the list of audit procedures for an audit area or an entire audit.

Accepted Answer

A) True 
 B)False

Question 13

The evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data is the definition of:

Accepted Answer

A)   analytical procedures.
B)   tests of transactions.
C)   tests of balances.
D)   auditing.E) None of the above
F) A) and D)

Question 14

Determine which of the following is most correct regarding the reliability of audit evidence.

Accepted Answer

A)   Information that is indirectly obtained from external sources is the most reliable audit evidence.
B)   Reliability of audit evidence is dependent upon the evidence being subjective.
C)   Reliability of evidence refers to the amount of evidence obtained.
D)   If internal controls are effective, evidence obtained is more reliable than when the controls are not effective.E) B) and C)
F) A) and D)

Question 15

A canceled check written by the client,made payable to a local supplier and drawn on the client's bank account is one type of internal document.

Accepted Answer

A) True 
 B)False

Question 16

The auditor is concerned that a client is failing to bill customers for shipments.An audit procedure that would gather relevant evidence would be to:

Accepted Answer

A)   select a sample of duplicate sales invoices and trace each to related shipping documents.
B)   trace a sample of shipping documents to related duplicate sales invoices.
C)   trace a sample of Sales Journal entries to the Accounts Receivable subsidiary ledger.
D)   compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable account in the general ledger.E) A) and B)
F) B) and C)

Question 17

Auditors may decide to replace tests of details with analytical procedures when possible because the:

Accepted Answer

A)   analytical procedures are more reliable.
B)   analytical procedures are considerably less expensive.
C)   analytical procedures are more persuasive.
D)   tests of details are more difficult to interpret.E) None of the above
F) A) and D)

Question 18

Audit documentation should possess certain characteristics.Which of the following is true regarding those characteristics?

Accepted Answer

A)   
B)   
C)   
D)   E) A) and C)
F) None of the above

Question 19

Objective evidence is more reliable,and hence more persuasive,than subjective evidence.

Accepted Answer

A) True 
 B)False

Question 20

Audit evidence is often available only in electronic form,and auditors must evaluate how this affects their ability to gather sufficient,appropriate evidence.

Accepted Answer

A) True 
 B)False

Exam 7: Nature and Type of Audit Evidence

An audit program is the list of audit procedures for an audit area or an entire audit.

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Two determinants of the persuasiveness of evidence are:

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Audit documentation:

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A canceled check written by the client,made payable to a local supplier and drawn on the client's bank account is one type of internal document.

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The evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data is the definition of:

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Calculating the gross margin for the current year under audit as a percent of sales and comparing it with previous years is what type of evidence?

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Which of the following is a correct statement regarding confirmations?

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Evidence is usually more persuasive for balance sheet accounts when it is obtained:

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Which of the following is not a characteristic of the reliability of evidence?

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Determine which of the following is most correct regarding the reliability of audit evidence.

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The auditor is concerned that a client is failing to bill customers for shipments.An audit procedure that would gather relevant evidence would be to:

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Below are 12 audit procedures.Classify each procedure according to the following types of audit evidence: (1)physical examination,(2)confirmation,(3)documentation,(4)observation,(5)inquiry of the client,(6)reperformance,and (7)analytical procedure.

Correct Answerverified1.Observation2.Physical examination3.R...View AnswerShow Answer

Audit evidence is often available only in electronic form,and auditors must evaluate how this affects their ability to gather sufficient,appropriate evidence.

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Objective evidence is more reliable,and hence more persuasive,than subjective evidence.

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One purpose of performing analytical procedures in the planning phase of an audit is to assess the client's financial condition.Explain how the assessment of a client's financial condition can affect the auditor's decisions concerning evidence accumulation in later phases of the audit.

Correct AnswerverifiedAuditors must obtain knowledge about a c...View AnswerShow Answer

To be considered reliable evidence,confirmations must be controlled by:

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Auditors may decide to replace tests of details with analytical procedures when possible because the:

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Which of the following statements relating to the competence of evidential matter is always true?

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Which of the following statements is not correct?

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Audit documentation should possess certain characteristics.Which of the following is true regarding those characteristics?

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1.Observation
2.Physical examination
3.R...
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Auditors must obtain knowledge about a c...
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