San Jose State University

ACCOUNTING 129A

1)A(n)_is the detailed instruction that explains the audit evidence to be obtained during the audit.

1. 1. 1. 1. audit objectives
         2. audit procedure
         3. audit assertion
         4. audit program

1. 1. 2. Which of the following is not one of the four decisions about what evidence to gather and how much of it to accumulate?
         1. Which audit procedures to use
         2. Which accounts must agree to the general ledger

1. 1. 1. 3. When to perform the procedures
         4. What sample size to select for a given procedure

1. 1. 1. 1. 1. Audit evidence has two primary qualities for the auditor; relevance and reliability. Given the choices below, which provides the auditor with the most reliable audit evidence?
               1. General ledger account balances
               2. Confirmation of accounts receivable balance received from a customer
               3. Internal memo explaining the issuance of a credit memo
               4. Copy of month-end adjusting entries

1. 1. 1. 1. 2. Which of the following is not a characteristic of the reliability of evidence?
               1. Effectiveness of client internal controls
               2. Education of auditor
               3. Independence of information provider
               4. Timeliness

1. 1. 1. 1. 3. The auditor must gather sufficient and appropriate evidence during the course of the audit. Sufficient evidence must:
               1. be well documented and cross-referenced in the audit documents.
               2. be based on sources that are external to company.
               3. provide evidence that prove or disprove an audit objective/assertion.
               4. be persuasive enough to enable the auditor to issue an audit report.

1. 1. 1. 1. 4. Audit evidence obtained directly by the auditor will not be reliable if:
               1. the auditor lacks the competence to evaluate the evidence.
               2. it is provided by the client's attorney.
               3. the client denies its veracity.
               4. it is impossible for the auditor to obtain additional corroboratory evidence.

1. 1. 1. 1. 5. Appropriateness of evidence is a measure of the:
               1. quantity of evidence.
               2. quality of evidence.
               3. sufficiency of evidence.
               4. meaning of evidence.

1. 1. 1. 1. 6. Which of the following statements regarding the relevance of evidence is correct?
               1. To be relevant, evidence must pertain to the audit objective of the evidence.
               2. To be relevant, evidence must be persuasive.
               3. To be relevant, evidence must relate to multiple audit objectives.
               4. To be relevant, evidence must be derived from a system including effective internal controls.

1. 1. 1. 1. 7. Two determinants of the persuasiveness of evidence are:
               1. competence and sufficiency.
               2. relevance and reliability.
               3. appropriateness and sufficiency.
               4. independence and effectiveness.

1. 1. 1. 1. 8. The two characteristics of the appropriateness of evidence are:
               1. relevance and timeliness.
               2. relevance and accuracy.
               3. relevance and reliability.
               4. reliability and accuracy.

1. 1. 1. 1. 9. Which of the following forms of evidence would be least persuasive in forming the auditor's opinion about marketable securities and other investments held by the company?
               1. Responses to auditor's questions by the president and controller regarding the investments account
               2. Correspondence with a stockbroker regarding the quantity of client's investments held in street name by the broker
               3. Minutes of the board of directors authorizing the purchase of stock as an investment
               4. The auditor's count of marketable securities

1. 1. 1. 1. 10. Which of the following statements is not correct?
                1. It is possible to vary the sample size from one unit to 100% of the items in the population.
                2. The decision of how many items to test should not be influenced by the increased costs of performing the additional tests.
                3. The decision of how many items to test must be made by the auditor for each audit procedure.
                4. The sample size for any given procedure is likely to vary from audit to audit.

1. 1. 1. 1. 11. For audit evidence to be compelling to the auditor it must be sufficient and appropriate. Which statement below is not correct regarding the appropriateness of audit evidence?
                1. The more effective the internal control system, the more assurance it provides the auditor about the reliability of financial reporting by the client.
                2. An auditor's opinion, to be economically useful and profitable to the auditing firm needs to be formed within a reasonable time and based on evidence obtained that assures profits for the auditing firm.
                3. Evidence obtained from independent sources outside the entity is generally more reliable than evidence secured solely within the entity.
                4. The independent auditor's direct personal knowledge, obtained through inquiry, observation and inspection, is generally more persuasive than information obtained indirectly.

1. 1. 1. 1. 12. Which of the following is a correct statement regarding audit evidence?
                1. A large sample of evidence provided by an independent party is always considered persuasive evidence.
                2. A small sample of only one or two pieces of highly appropriate evidence is always considered persuasive evidence.
                3. The auditor must obtain a sufficient amount of relevant and reliable evidence to form an opinion on the fairness of the financial statements.
                4. Evidence is usually more reliable for balance sheet accounts when it is obtained within six months of the balance sheet date.

1. 1. 1. 1. 13. Which of the following is the most objective type of evidence?

1. 1. 1. 1. 1. 1. A letter written by the client's attorney discussing the likely outcome of outstanding lawsuits
               2. The physical count of securities and cash
               3. Inquiries of the credit manager about the collectability of noncurrent accounts receivable
               4. Observation of cobwebs on some inventory bins

1. 1. 1. 1. 14. Which items affect the sufficiency of evidence when choosing a sample? A)

B)

C)

D)

1. 1. 1. 1. 15. Determine which of the following is most correct regarding the reliability of audit evidence.
                1. Information that is indirectly obtained from external sources is the most reliable audit evidence.
                2. Reliability of audit evidence is dependent upon the evidence being subjective.
                3. Reliability of evidence refers to the amount of evidence obtained.
                4. If internal controls are effective, evidence obtained is more reliable than when the controls are not effective.

1. 1. 1. 1. 16. Evidence is generally considered appropriate when:
                1. it has been obtained by random selection.
                2. there is enough of it to afford a reasonable basis for an opinion on financial statements.
                3. it is relevant to the audit objective being tested.
                4. it consists of written statements made by managers of the company under audit.

1. 1. 1. 1. 17. Given the economic and time constraints in which auditors can collect evidence about management assertions about the financial statements, the auditor normally gathers evidence that is:
                1. irrefutable.
                2. conclusive.
                3. persuasive.
                4. completely convincing.

1. 1. 1. 1. 18. Which of the following statements is not a correct statement regarding audit evidence?