Homework answers / question archive / Manila Doctors College CAM bsa AT

Manila Doctors College CAM bsa AT

Accounting

Share With

Manila Doctors College

CAM bsa

AT.M-1415

AUDIT EVIDENCE AND DOCUMENTATION

AUDIT EVIDENCE-MULTIPLE CHOICE PART I

1)All the information used by the auditor in arriving at the conclusion on which the audit opinion is based. It includes the information contained in the accounting records underlying the financial statements (underlying accounting data) and other information (corroborating information).

A. Audit evidence C. Audit opinion

B. Audit risk D. Audit program

2. Which of the following statements is/are correct?

Statement 1: Audit evidence comprises source documents and accounting records, underlying the financial statements and corroborating information from other sources.

Statement 2: Audit evidence is obtained to form an appropriate mix of tests of control and substantive procedures.

Statement 3: The auditor should obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the audit opinion.

A. Statements 1 and 2 only C. Statement 2 and 3 only

B. Statements 1 and 3 only D. All statements are correct

3. All of the following are underlying accounting data, except:

A. Records of initial entries and supporting documents

B. General and subsidiary ledgers

C. Worksheets and spreadsheets for cost allocations D. Minutes of meetings

4. The measure of the quantity of audit evidence is:

A. Sufficiency C. Appropriateness

B. Competence D. Relevance

5. The measure of the quality of audit evidence is:

A. Sufficiency C. Appropriateness

B. Competence D. Relevance

6. An evidence to be considered appropriate must be:

A. Relevant C. Reliable

B. Relevant and reliable D. Relevant or reliable

7. The following statements are correct, except:

A. The greater the risk of misstatement, the more audit evidence is likely to be required.

B. The higher the quality of audit evidence, the less may be required.

C. Obtaining more audit evidence will compensate for its poor quality.

D. The sufficiency and appropriateness of audit evidence are interrelated.

8. The appropriateness of audit evidence available to an auditor is least likely to be affected by:

A. The relationship of the source or prepare of the evidence to the entity being audited.

B. The relevance of the evidence to the financial statement assertion being investigated.

C. The timeliness of the audit evidence.

D. The sampling method employed by the auditor to obtain a sample of the evidence.

9. The most reliable form of documentary evidence are those documents that are:

A. Internally generated C. Authorized by a responsible official

B. Pre-numbered D. Easily duplicated

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

A. Inquiries of the client’s internal audit staff held in private

B. Inspection of prenumbered client purchase orders filed in the vouchers payable department

C. Analytical procedures performed by the auditor on the entity’s trial balance

D. Inspection of bank statements obtained directly from the client’s financial institution

11. Ultimately, what is sufficient appropriate audit evidence depends on:

A. The users of the financial statements under audit.

B. The professional judgment of the client’s management and those charged with governance.

C. The professional judgment of the auditor.

D. A combination of the professional judgment of the auditor and the client’s management.

12. The auditor’s judgment as to what is sufficient appropriate audit evidence is influenced by such factors as:

A. The auditor’s assessment of the nature and level of inherent risk at both the financial statement level and the account balance or class of transaction level.

B. The nature of the internal control structure and the assessment of control risk.

C. The materiality of the item being examined.

D. The experience gained during previous audits.

E. The results of the audit procedures, including fraud or error which may have been found.

F. The source and reliability of information available.

A. A, B, D, F, G C. A, B, F

B. A, B, D, E, F D. A, B, C, D, E, F

13. Which of the following statements regarding reliability of evidence is incorrect?

A. Audit evidence is more reliable when it is obtained from independent sources outside the entity.

B. The condition of internal control of the entity does not contribute to the reliability of audit evidence.

C. Audit evidence that is generated internally is more reliable when the related controls are effective.

D. Audit evidence obtained directly by the auditor is more reliable than audit evidence obtained indirectly.

14. Which of the following is the least reliable evidence?

A. Confirmation from third parties C. Documentary form evidence

B. Observation of the inventory count D. Photocopies and facsimiles

15. Which of the following statement is/are correct?

Statement 1: The auditor considers the relationship between the cost of obtaining audit evidence and the usefulness of the information obtained.

Statement 2: The difficulty and the expense involved are valid basis of omitting an audit procedure for which there is no alternative.

Statement 3: The auditor relies on audit evidence that is persuasive rather than conclusive.

Statement 4: The auditor uses professional judgment and exercise professional scepticism to determine the sufficiency and appropriateness of evidence.

A. Only one statement is correct C. Only three statements are correct

B. Only two statements are correct D. All statements are correct

16. Assertions used by the auditor fall into the following categories, except:

A. Assertions about the faithful representations

B. Assertions about account balances

C. Assertions about classes of transactions and events

D. Assertions about presentation and disclosure

17. Management assertions are:

A. Stated in the footnotes to the financial statements

B. Implied or express representations about the accounts in the financial statements.

C. Explicitly expressed representations about the financial statements.

D. Provided to the auditor in the assertions letter, but are not disclosed in the financial statements.

18. Management assertions are:

A. Directly related to PSAs C. Directly related to GAAP

B. Indirectly related to PSAs D. Indirectly related to GAAP

19. Assertions about account balances at the period-end include valuation and allocation, which means that

A. Assets, liabilities and equity interest exist.

B. All assets, liabilities and equity interests that should have been recorded have been recorded.

C. Assets, liabilities and equity interests are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded.

D. The entity holds or controls the rights to assets, liabilities are the obligations of the entity.

20. The assertion of cut-off means that:

A. All transactions and events that should have been recorded

B. Amounts and other data relating to recorded transactions and events have been recorded appropriately

C. Transactions and events have been recorded in the correct accounting period

D. Transactions and events have been recorded in the proper accounts.

21. The assertion of occurrence means that:

A. All transactions and events that should have been recorded are recorded

B. Amounts and other data relating to recorded transactions and events have been recorded appropriately

C. Transactions and events that have been recorded have occurred, and pertain to the entity

D. Transactions and events have been recorded in the proper accounts

22. Which description refers to the completeness assertion?

A. All disclosures that should have been included in the financial statements have been included.

B. Disclosed events, transactions and other matters have occurred and pertain to the entity,

C. Financial information is appropriately presented and described, and disclosures are clearly expressed.

D. Financial and other information are disclosed fairly and at appropriate amounts.

23. Confirming proper title to equipment supports which of the following assertions?

A. Existence or occurrence C. Presentation and disclosure

B. Insurance or coverage D. Rights and obligations

24. Which of the following ultimately determines the auditing procedures necessary in an audit engagement?

A. Auditor judgment C. Relative risk

B. Materiality D. Reasonable assurance

25. The completeness assertion addresses whether

A. All of the assets on the balance sheet exist.

B. All recorded transactions occurred.

C. The entity has property rights to all assets on the balance sheet.

D. All of the transactions, which occurred during the period, were recorded.

26. The auditor notices that a client’s cash basis financial statements are prepared with accrual basis financial titles. This situation bears on which financial statement assertion?

A. Valuation or allocation C. Rights and obligations

B. Presentation and disclosure D. Completeness

27. When vouching,

A. The direction of the test is from recorded item back to the underlying support.

B. A complete examination of the transactions in the account is performed.

C. Recomputations are performed.

D. The auditor selects a transaction and follows it forward to recording in the accounting records.

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

A. Evidence gathered by auditors must be both valid and relevant to be considered competent.

B. Properly designed analytical procedures will detect material misstatements.

C. Evidential matter gathered by an auditor from outside a client is reliable.

D. Oral representations made by management are not valid.

29. The process of vouching helps establish that all recorded transactions

A. Have been completed C. Are valid

B. Are complete D. Are presented properly

30. Acts to be performed in order to obtain audit evidence

A. Audit standards C. Audit program

B. Audit procedures D. Audit strategy

31. Which of the following best describes the primary purpose of audit procedures?

A. To detect fraud

B. To comply with generally accepted accounting principles

C. To gather corroborative evidence to support the audit opinion

D. To verify the accuracy of account balances

32. Audit procedures performed to obtain an understanding of the entity and its environment, including its internal control.