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Homework answers / question archive / Mindanao State University ACCOUNTING 141 AUDIT EVIDENCE 1)Which of the following is correct? The evidence that the auditor accumulates remains the same from audit to audit, but the general objectives vary, depending on the circumstances

Mindanao State University ACCOUNTING 141 AUDIT EVIDENCE 1)Which of the following is correct? The evidence that the auditor accumulates remains the same from audit to audit, but the general objectives vary, depending on the circumstances

Accounting

Mindanao State University

ACCOUNTING 141

AUDIT EVIDENCE

1)Which of the following is correct?

  1. The evidence that the auditor accumulates remains the same from audit to audit, but the general objectives vary, depending on the circumstances.
  2. The general audit objectives remain the same from audit to audit, but the evidence varies, depending on the circumstances.
  3. The circumstances may vary from audit to audit, but the evidence accumulated remains the same.
  4. The general audit objectives may vary from audit to audit, but the circumstances remain the same.

 

  1. Auditing standards require the auditor to accumulate sufficient competent evidence to support the opinion issued. Because of the nature of audit evidence, it is
  1. unlikely that the auditor will be completely convinced that the opinion is correct.
  2. likely that the auditor will be completely convinced that the opinion is correct.
  3. unlikely that the auditor will arrive at a conclusion.
  4. likely that the auditor would change his/her mind about the opinion if he/she takes the time to gather additional evidence

 

  1. Which of the following ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion?
  1. The audit program
  2. The auditor’s judgment
  3. Philippine Standards on Auditing
  4. The auditor’s working papers

 

 

 

  1. In the final analysis, the amount and kinds of evidential matter that are required to support the auditor’s opinion should be determined by
  1. the audit committee.
  2. auditor’s judgment.
  3. professional standards.
  4. standards of auditing.

 

  1. To adequately plan the extent of the audit evidence to gather, the generally accepted auditing standards require the auditor to gain an understanding of
  1. the internal control structure.
  2. client’s organization charts.
  3. client’s procedural manuals.
  4. All of these

 

  1. When unable to obtain sufficient competent evidential matter to determine whether certain client management’s acts are non-compliance to laws and regulations, the auditor would most likely issue
  1. an unqualified opinion with a separate explanatory paragraph.
  2. either a qualified opinion or an adverse opinion.
  3. either a disclaimer of opinion or a qualified opinion.
  4. either an adverse opinion or a disclaimer of opinion.

 

  1. An audit evidence is generally considered relevant when it is
  1. derived through valid statistical sampling.
  2. objective and unbiased.
  3. factual, adequate, and convincing.
  4. consistent with the audit objectives.

 

  1. Two overriding considerations that affect an auditor’s judgment in accumulating evidence are:
  1. Sufficient competent evidence must be accumulated to meet the auditor’s professional responsibility.
  2. Cost of accumulating evidence should be minimized.

 

In evaluating these conditions,

  1. the first is more important than the second.
  2. the second is more important than the first.
  3. they are equally important.
  4. it is impossible to prioritize one.

 

  1. Most of the independent auditor’s work in formulating an opinion on the financial statement consists of
  1. studying and evaluating internal control.
  2. obtaining and examining evidential matter.
  3. examining cash transactions.
  4. comparing recorded accountability with assets.

 

  1. There are four subcategories of decisions that the auditors must make in accumulating audit evidence. Which of the following is not one of those subcategories?
  1. Audit procedures to be used

 

 

  1. Reasons for deciding not to test controls
  2. Sample size
  3. Timing of the audit procedures

 

  1. Evidential matter supporting the financial statements consists of the underlying accounting data and all corroborating information available to the auditor. Which of the following is an example of corroborating information?
  1. Minutes of meetings of the board of directors
  2. General and subsidiary ledgers
  3. Accounting manuals
  4. Worksheets supporting cost allocations

 

  1. Which of the following is not one of the major phases in an audit process?
  1. Plan and design an audit approach
  2. Test controls and transactions
  3. Inform client of any adjustments or corrections to be made in the financial statements
  4. Complete the audit and issue the report

 

  1. Evidential matter is generally considered sufficient when
  1. it is competent.
  2. there is enough of it to afford a reasonable basis for an opinion on the financial statements.
  3. it has the qualities of being relevant, objective, and free from known bias.
  4. it has been obtained through random selection.

 

  1. In making decisions about evidence for a given audit, the auditor’s goal is to obtain a sufficient amount of timely, reliable evidence that is relevant to the information being verified, and to do so
  1. no matter what the cost involved in obtaining such evidence.
  2. only if the cost is reasonable.
  3. at the lowest possible total cost.
  4. at any cost because the costs are billed to the client.

 

  1. Which of the following is not a distinguishing feature of risk-based auditing?
  1. Identifying areas posing the highest risk of financial statements errors
  2. Analysis of internal control
  3. Collecting and evaluating evidence
  4. Concentrating audit resources in those areas presenting the highest risk of financial statement errors

 

  1. The competence of evidence available to an auditor is least likely affected by
  1. the relevance of such evidence to the financial statement assertion being investigated.
  2. the relationship of the source of such an evidence to the entity being audited.
  3. the timeliness of the audit evidence obtained.
  4. the sampling method employed by the auditor to obtain a number of samples as evidence

 

  1. Which of the following procedures would provide the auditor the most reliable audit evidence?

 

 

  1. Inquires of the client’s internal audit staff held in private.
  2. Inspection of prenumbered client purchase orders filled in the vouchers payable department.
  3. Analytical procedures performed by the auditor on the entity’s trial balance.
  4. Inspection of bank statements obtained directly from the client’s financial institution.

 

  1. The most reliable forms of documentary evidence are those documents that are
  1. prenumbered.
  2. easily duplicated.
  3. internally generated.
  4. authorized by a responsible official.

 

  1. You have been assigned to audit the maintenance department of an organization. Which of the following is likely to produce the least reliable audit evidence?
  1. Notes on discussions with mechanics in the maintenance operation.
  2. A schedule comparing actual maintenance expenses with budgeted expenses and those of the prior period and disclosing important differences.
  3. A narrative covering review of user reports on maintenance service.
  4. An analysis of changes in certain maintenance department ratios.

 

  1. Before applying substantive tests to the details of asset accounts at an interim date, an auditor should assess
  1. control risk at below the maximum level.
  2. inherent risk at the maximum level.
  3. the difficulty in controlling the incremental audit risk.
  4. materiality for the accounts tested as insignificant.

 

  1. Before applying principal substantive tests to the details of accounts at an interim date, an auditor should
  1. assess control risk as below the maximum for the assertions embodied in the accounts selected for interim testing.
  2. determine that the accounts selected for interim testing are not material to the financial statements taken as a whole.
  3. consider whether the amounts of the year-end balances selected for interim testing are reasonably predictable.
  4. obtain written representations from management that all financial records and related data will be made available.

 

  1. If an auditor conducts an audit of financial statements in accordance with generally accepted auditing standards, which of the following will the auditor most likely detect?
  1. Misposting of recorded transactions
  2. Forgery
  3. Unrecorded transactions
  4. Collusive fraud

 

  1. Which of the following best explains the difference between audit objectives and audit procedures?
  1. Audit objectives establish broad general goals; audit objectives specify the detailed work to be performed.
  2. Audit objectives are tailor-made for each assignment; audit procedures are generic in application.

 

 

  1. Audit objectives define specific desired accomplishments; audit procedures provide the means of achieving audit objectives.
  2. Audit procedures and audit objectives are essentially the same.

 

  1. In gathering audit evidence in the performance of substantive tests, the auditor
  1. should use the test month approach.
  2. relies on persuasive rather than convincing evidence in the majority of cases.
  3. would consider the client’s documentary evidence more competent than evidence gathered from observation and physical inspection.
  4. would express an adverse opinion if he has substantial doubt as to any significant assertion.

 

  1. The auditor will not ordinarily initiate discussion with the audit committee concerning the
  1. extent to which the work of internal auditors will affect the scope of the examination.
  2. extent to which a change in the company’s organization will influence the scope of the examination.
  3. details of potential problems that the auditor believes might cause a qualified opinion.
  4. details of the procedures that the auditor intends to apply.

 

  1. With respect to the auditor’s planning of a year-end examination, which of the following statements is always true?
  1. An engagement should not be accepted after the fiscal year ends.
  2. An inventory count must be observed at the balance sheet date.
  3. The client’s audit committee should not be told of the specific audit procedures that will be performed.
  4. It is an acceptable practice to carry out substantial parts of the examination at interim dates.

 

  1. An auditor test counts a batch of inventory. This is an example of what kind of evidence?
  1. Analytical
  2. Documentary
  3. Physical
  4. Testimony

 

  1. The audit program is basically a list of
  1. detailed audit procedures.
  2. account balances and their related assertions.
  3. audit procedures to be performed.
  4. audit controls.

 

  1. Each audit program should have a column for all of the following except:
  1. Audit procedures to be performed
  2. The initials of the auditor who performs each procedure
  3. The date that the performance of the procedure is performed and completed
  4. The test of controls related to each procedure

 

  1. Which of the following is not an example of confirmation as an evidence?

 

 

  1. Requesting the client’s outside legal counsel to evaluate the possible outcome of pending litigation.
  2. Questioning the client’s employees about existing internal control policies and procedures.
  3. Requesting the client’s customers to verify year-end account receivable balances.
  4. Requesting payees to respond in writing to the terms contained in notes payable appearing in the client’s ledger.

 

  1. Accounting for the numeric sequence in the issuance of the sales invoices meets primarily the
  1. completeness assertion.
  2. valuation or allocation assertion.
  3. occurrence.
  4. presentation or disclosure assertion.

 

  1. Which of the following factors affects the competence of evidence obtained by an auditor?
  1. The independence of the information source
  2. The competence of the information source
  3. The timeliness of the information
  4. All of these factors affect the competence of evidence

 

  1. Which one of the following is the least persuasive type of audit evidence?
  1. Documents mailed by outsiders to the auditor
  2. Correspondence between the auditor and vendors
  3. Copies of sales invoices inspected by the auditor
  4. Computations made by the auditor

 

  1. Audit evidence takes different forms and varies in persuasiveness. Which of the following is the least persuasive type of evidence?
  1. Vendor’s evidence
  2. Computations made by the auditor
  3. Bank statement obtained from the client
  4. Canceled checks

 

  1. Which of the following statements is true?
  1. Evidence must pertain to the objective that the auditor is testing before it can be persuasive.
  2. Relevance can be considered only in terms of specific audit objectives.
  3. Evidence may be relevant to one objective but not to other objective.
  4. All the responses are true.

 

  1. A term which is synonymous with competence is
  1. relevance.
  2. reliability of evidence.
  3. sufficient.
  4. any of the given choices.

 

  1. Which of the following statements about the competence of evidence is not correct?
  1. To be competent, an evidence must be both valid and relevant.
  2. Competence can be improved by selecting a larger sample size.

 

 

  1. Competence can be improved by selecting audit procedures that contain a higher quality of the characteristics sought.
  2. Competence cannot be improved by selecting different population items to include in the sample size.

 

  1. Which one of the following forms of evidence would be least reliable?
  1. Monthly bank statement
  2. Positive confirmation of customer’s balance
  3. A letter from the client’s attorney stating that there are no known lawsuits pending against the client
  4. Client’s file copy of a purchase requisition

 

  1. Which one of the following forms of evidence would be most reliable?
  1. An insurance policy in the client’s file
  2. The file copy of a purchase requisition
  3. The file copy of a receiving room report
  4. The file copy of sales invoices

 

  1. Evidence obtained directly by the auditor is more competent than information obtained indirectly. Which of the following is not an example of the auditor’s direct knowledge about an evidence?
  1. Physical examination
  2. Observation
  3. Computation
  4. Inquiry

 

  1. When the auditor is gathering evidence, he will conclude that if the source of information is independent, the evidence will
  1. be reliable.
  2. not be reliable.
  3. be reliable if the provider has no reason to be biased.
  4. not be reliable unless the provider is qualified.

 

  1. Evidence obtained directly by the auditor will not be reliable if
  1. it is provided by the client’s attorney.
  2. the auditor lacks the qualifications to evaluate the evidence.
  3. it is impossible for the auditor to obtain additional corroborating evidence.
  4. The client denies its veracity.

 

  1. Evidence is usually more persuasive for balance sheet accounts when it is obtained
  1. from various times throughout the client’s year.
  2. only from transactions occurring on the balance sheet date.
  3. as close to the balance sheet date as possible.
  4. from the time period when transactions in that account were most numerous during the fiscal period.

 

  1. For income statement accounts; evidence is more persuasive if there is a sample from
  1. the entire period under audit.
  2. the period closest to the end of the fiscal period.
  3. at least three months of the fiscal year.
  4. December, since this would include large holiday sales.

 

 

 

  1. Which of the following statements is not true?
  1. A large sample of highly competent evidence is not persuasive unless it is relevant to the objective being tested.
  2. A large sample of evidence that is neither competent nor timely is not persuasive.
  3. A small sample of only one or two pieces of relevant, competent, and timely evidence lacks persuasiveness.
  4. The persuasiveness of evidence can be evaluated after considering its competence and its sufficiency.

 

  1. Generally, what source of evidence would most persuasively support audit conclusions?
  1. External
  2. Inquiry
  3. Oral
  4. Informal

 

  1. Observation, though considered a reliable audit procedure, has limited usefulness. However, it is used in a number of different audit situations. Which of the following statements is true regarding observation as an audit technique?
  1. It is the most effective audit methodology to use in filling out internal control questionnaires.
  2. It is the most persuasive technique to learn how transactions are really processed during the period under audit.
  3. It is rarely sufficient to satisfy any audit assertion other than existence.
  4. It is the most persuasive audit technique for determining if fraud has really occurred.

 

  1. Which of the following would be the most relevant form of evidence to evaluate the reasonableness of account balances?
  1. Analytical
  2. Documentary
  3. Physical
  4. Representation

 

  1. When an auditor calculates the gross margin as a percent of sales and compares it with previous periods, this type of evidence is called
  1. physical examination.
  2. computation.
  3. observation.
  4. inquiry.

 

  1. Objective evidence is more reliable than evidence that requires considerable judgment to determine whether it is correct. Which of the following is not an example of an objective evidence?
  1. Confirmation of accounts receivable
  2. Confirmation of bank balances
  3. Confirmation by client’s attorney of the likely outcome of outstanding lawsuits against the client.
  4. Adding a list of accounts payable to determine the total reconciles with the general ledger balance.

 

  1. Which of the following is an example of subjective evidence?

 

 

  1. A positive confirmation of an account receivable
  2. A bank confirmation
  3. Inquiries of the credit manager about the collectibility of noncurrent accounts receivable
  4. The physical count of securities and cash

 

  1. Physical examination refers to the inspection or count by the auditor of assets such as
  1. cash or inventory only.
  2. cash, inventory, canceled checks, and sales documents.
  3. cash, inventory, securities, notes receivable, and tangible fixed assets.
  4. cash, inventory, canceled checks, and tangible fixed assets

 

  1. The distinction between physical examination of assets and examination of documents is dependent on the item being examined. If the object being examined has no inherent value, the evidence is called
  1. physical examination.
  2. documentation.
  3. confirmation.
  4. garbage.

 

  1. Confirmations are a highly regarded and often-used type of evidence because
  1. they are inexpensive.
  2. cause no inconvenience for auditor or third party.
  3. come from independent sources.
  4. all of the given sources.

 

  1. Three common types of confirmations used by auditors are:
  1. Negative confirmations
  2. Positive confirmations with a request for information
  3. Positive confirmations with the information included

 

If they were placed in the order of their reliability, from highest to lowest, the sequence would be

a. 1, 2, 3

b. 3, 2, 1

c. 2, 3, 1

d. 3, 1, 2

 

  1. Whenever practicable and reasonable, the CPA must confirm a sample of
  1. accounts receivable.
  2. accounts payable.
  3. both accounts receivable and accounts payable.
  4. client’s bank accounts.

 

  1. Confirmations lose their value if the client
  1. controls the preparation of the confirmation.
  2. does the mailing of the confirmation.
  3. receives the responses
  4. does any of the given choices.

 

 

  1. When the auditor examines the client’s documents and records to substantiate the information on the financial statements, it is commonly referred to as
  1. inquiry.
  2. confirmation.
  3. vouching.
  4. physical examination.

 

  1. Documentation is the form of evidence used
  1. in every financial statement audit.
  2. in most financial statement audit.
  3. when it is both readily available and less costly than other procedures.
  4. used when nothing is available that is more competent.

 

  1. A document which the auditor receives from the client, but which is prepared by someone outside the client’s organization, is a(n)
  1. confirmation.
  2. internal document.
  3. external document.
  4. inquiry.

 

  1. An example of vouching would be
  1. trace from receiving reports to the acquisition journal.
  2. trace from the acquisitions journal to the supporting vendor’s invoices.
  3. trace from duplicate bank deposit slips to the cash receipts journal.
  4. trace from canceled checks to the cash disbursements journal.

 

  1. Which of the following statements is not true? “The evidence-gathering technique of inquiry
  1. cannot be regarded as conclusive.”
  2. requires the gathering of corroborative evidence.”
  3. is the auditor’s principal method of evaluating the client’s internal control structure.”
  4. does not provide evidence from an independent source.

 

  1. An auditor would be least likely to use confirmations in connection with the examination of
  1. inventories.
  2. long-term debt.
  3. property, plant, and equipment.
  4. stockholders’ equity.

 

  1. Which of the following is an example of internal evidence that the auditor would obtain in an audit of accounts receivable?
  1. The carrier’s bill of lading
  2. Sales invoice copies
  3. A customer’s purchase order
  4. A vendor’s month-end statement

 

  1. Ordinarily, what source of evidence should least affect audit conclusions?
  1. External
  2. Inquiry of management
  3. Auditor-prepared analysis

 

 

  1. Inquiry of company legal counsel

 

AUDIT PROCEDURES

  1. A list of audit procedures that the auditors need to perform to produce evidence is called an
  1. audit plan.
  2. audit program.
  3. audit standard.
  4. audit budget.

 

  1. The procedures specifically outlined in an audit program are primarily designed to
  1. protect the auditor in the event of litigation.
  2. detect errors or irregularities.
  3. test internal control structure.
  4. gather evidence.

 

  1. In the context of an audit of financial statements, substantive tests are audit procedures that
  1. may be eliminated under certain conditions.
  2. are designed to discover significant subsequent events.
  3. may be either tests of transactions, direct tests of financial balances, or analytical tests.
  4. will increase proportionately with the auditor’s assessment of control risk.

 

  1. When evaluating the planned level of substantive tests for each significant assertion, the auditor will consider the evidence obtained from all of the following except:
  1. Procedures to understand the business and industry and related analytical procedures that have been completed.
  2. Evidence about the effectiveness of internal controls gained while obtaining an understanding of internal control structure.
  3. The assessment of detection risk.
  4. Evidence of effectiveness of computer control procedures and related follow-up.

 

  1. A revision of the planned level of detection risk will be necessary whenever
  1. accounts are affected by more than one transaction class.
  2. the multiple control risk assessments for the same account balance assertion differ.
  3. the final assessed control risk is not the same as the actual level.
  4. the final assessed control risk does not support the planned level.

 

  1. Tests of details of transactions primarily involve
  1. tracing and vouching.
  2. confirmation with outsiders.
  3. observation.
  4. scanning.

 

  1. The objective of dual-purpose tests is to
  1. evaluate whether internal controls are operating effectively.
  2. detect material misstatements in the financial statements.
  3. identify unusual trends or patterns in comparative financial statements.
  4. test internal controls as well as transactions and balances using the same test procedures.

 

 

 

  1. To test for unsupported entries in the ledger, the direction of audit testing should be from the
  1. ledger entries.
  2. journal entries.
  3. externally generated documents.
  4. original source documents.

 

  1. The least costly form of testing is usually
  1. tests of controls.
  2. tests of details of balances.
  3. tests of detais of transactions.
  4. analytical procedures.

 

  1. Tracing from source documents to journals most directly addresses which financial statement assertion?
  1. Valuation
  2. Competence
  3. Existence
  4. Rights

 

  1. An auditor is examining the detailed debit and credit entries in an account. The auditor is most likely performing
  1. analytical procedures.
  2. tests of details of balances.
  3. tests of details of transactions.
  4. tests of controls.

 

  1. Choices about audit evidence are influenced by all of the following except:
  1. The auditor’s understanding of the business and industry
  2. Assessment of inherent and control risk
  3. Comparisons of the auditor’s expectation of the financial statements with the client’s books and records
  4. Decisions about immaterial risk factors

 

  1. The auditor is performing substantive tests several months before the end of the year.

This most likely means that

  1. inherent risk is set at moderate to high.
  2. detection risk is set at moderate to high.
  3. control risk is set at maximum.

`           d. detection risk at low to very low.

 

  1. In testing the existence assertion for an asset, an auditor ordinarily works from the
  1. financial statements to the potentially unrecorded items.
  2. potentially unrecorded items to the financial statements.
  3. accounting records to the supporting evidence.
  4. supporting evidence to the accounting records.

 

  1. WB Industries has significant information that is transmitted, processed, maintained, and accessed electronically. The auditor has concluded that it is not possible to

 

 

reduce detection risk to an acceptable level by performing only substantive tests for a number of financial statement assertions. The auditor’s alternative strategy is to

  1. increase the acceptable audit risk.
  2. focus audit tests on other assertions for which substantive tests prove to be effective.
  3. require management to change its information system to provide appropriate evidence.
  4. perform tests of controls to gather evidential matter to be used as basis of assessing control risk related to those assertions.

 

  1. The decision on the part of the auditor to perform substantive tests during the interim period will be based upon
  1. audit risk control and cost effectiveness.
  2. the approach followed in the past.
  3. the auditor’s time convenience.
  4. the cooperation extended by the client staff.

 

  1. Choose the best illustration of objective audit evidence from the following:
  1. The paid invoice file containing invoices matched with receiving reports and purchase orders.
  2. Management’s assertion that payment procedure requires matching of invoice with receiving report and purchase order.
  3. Clerical staff assurances that management policy regarding payment of invoices— matching of invoice with receiving report and purchase order—is always followed.
  4. The treasurer’s statement of not remembering any exceptions in which an invoice was submitted for payment that is not accompanied by a covering receiving report and purchase order.

 

  1. Which of the following audit procedures best supports the valuation objective?
  1. Performing a lower of cost or market test of the client’s inventories
  2. Reviewing a contingent liability disclosure for proper wording
  3. Searching for unrecorded liabilities
  4. Observing the client’s year-end physical inventory taking

 

  1. Which of the following is not an appropriate auditing procedure supporting the fairness of financial statement presentation?
  1. Inspecting plant asset additions for existence
  2. Recalculating accrued interest on notes payable
  3. Examining invoices in support of legal fees recorded during the fiscal year.
  4. Reviewing the client’s production quality control program

 

  1. Audit procedures are normally performed
  1. early in the accounting period being examined.
  2. throughout the accounting period being examined, but with emphasis on the transactions near the end.
  3. within one to three months after the close of the accounting period.
  4. During all three of the above periods.

 

  1. The auditor would unlikely perform early substantive testing of account balances when:
  1. A number of significant deviations from control policies and procedures were detected during tests of controls.

 

 

  1. Due to economic factors, the fourth quarter activity this year is expected to be somewhat sluggish.
  2. The client uses a natural business year.
  3. The taking of the client’s inventory is performed at an early date.

 

  1. As the acceptable level of detection risk decreases, an auditor may change the
  1. timing of substantive tests by performing them at an interim date rather than at year-end.
  2. nature of substantive tests from a less effective to a more effective procedure.
  3. timing of tests of controls by performing them at several dates rather at one time.
  4. assessed level of inherent risk to a higher amount.

 

  1. The auditor is concerned that a client usually fails to bill customers for shipments. An audit procedure that would gather relevant evidence would be to
  1. select a sample of duplicate sales invoices and trace each to related shipping documents.
  2. trace a sample of shipping documents to related duplicate sales invoices.
  3. trace a sample of Sales Journal entries to Accounts Receivable subsidiary ledger.
  4. compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable account in the general ledger.

 

  1. The extent of testing normally applies
  1. exhaustively to the number of items to be tested.
  2. to both the number of items tested and the number of tests performed.
  3. exclusively to the number of substantive tests performed.
  4. to both the nature of items tested and the number of tests performed.

 

  1. Which of the following, when performed by the auditor, is not a test of mechanical accuracy?
  1. Extending sales invoices
  2. Adding journals and ledgers
  3. Tracing amounts from journals to ledgers
  4. Calculating the current ratio

 

  1. Which of the following audit procedures would provide the least reliable evidence about legal title to inventories?
  1. Confirmation of inventories at locations outside the client’s facilities
  2. Analytical procedures comparing inventory balances to purchasing and sales activities
  3. Observation of physical inventory counts
  4. Examination of paid vendors’ invoices

 

  1. Which of the following is not a substantive procedure?
  1. Tests of details of transactions
  2. Tests of purchasing function
  3. Tests of details of balances
  4. Analytical reviews

 

  1. Which of the following types of audit tests are not used to satisfy planned detection risk?
  1. Analytical procedures

 

 

  1. Tests of controls
  2. Substantive tests of transactions
  3. Tests of details of balances

 

  1. Substantive tests aid the auditor in all, but which of the following ways?
  1. Identify monetary misstatements in an account
  2. Obtain an understanding of internal control structure
  3. Satisfy planned detection risk
  4. All of the given choices

 

  1. Auditors usually try to plan the audit to minimize the use of tests of details of balances because
  1. other types of audit tests are more reliable.
  2. other types of audit tests are less costly.
  3. other types of audit tests require less experienced audit personnel.
  4. All of the given choices are true

 

  1. The independent auditor selects several transactions in each functional are and traces them through the entire accounting system, paying special attention to evidence about whether or not the control features are in operation. This audit procedure is an example of a
  1. sequence test.
  2. test of controls.
  3. substantive test.
  4. functional test.

 

  1. Ending account balances may be audited through the use of which of the following types of audit procedures?
  1. Tests of details of balances
  2. Analytical procedures
  3. Tests of controls
  4. Analytical procedures and tests of details of balances

 

  1. Which of the following represents an incorrect pairing of a type of audit test and evidence?
  1. Procedures to obtain an understanding of internal controls – Documentation
  2. Analytical procedures Ratio analysis
  3. Substantive tests of transactions Confirmation
  4. Tests of details of balances – Physical examination

 

  1. After finishing the procedures to obtain an understanding of internal control, the auditor should perform tests of control on
  1. key controls that have a material effect on the financial statements.
  2. a random sample of key controls that were reviewed.
  3. key controls upon which the auditor intends to rely and plans to assess control risk below maximum.
  4. key controls which represent material weaknesses.

 

  1. Where the auditor has assessed control risk of a particular area at a reduced level, he will then
  1. eliminate the need to gather evidence in that area.

 

 

  1. test the effectiveness of the controls in that area.
  2. proceed to expand the sample sizes in that area.
  3. negotiate with management to determine which controls will be tested in that area.

 

  1. Many tests of controls involve inspecting documents. These tests are commonly referred to as
  1. tests of transactions.
  2. tests of documentation.
  3. tests of balances.
  4. tests of analytical procedures.

 

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