Question 1

An auditor selects audit procedures that will provide ________.

Accepted Answer

A)   the most evidence
B)   the most persuasive evidence
C)   the most reliable evidence that can be obtained in a cost-effective manner
D)   the most relevant information to the audit assertionE) None of the above
F) All of the above

Question 2

The audit evidence gathering technique known as computation or recalculation refers to ________.

Accepted Answer

A)   sending letters to independent third parties
B)   counting inventory
C)   recalculating depreciation
D)   checking prices as per the price listE) B) and C)
F) None of the above

Question 3

In preparing for a repeat engagement, the first thing an audit team should do is ________.

Accepted Answer

A)   interview client management for any changes in the business and industry
B)   take a tour of a client's physical facilities, noting obvious inventory obsolescence or equipment maintenance issues
C)   obtain a copy of the year-end financial statements for the current year
D)   review prior-year working papers and permanent file documentsE) B) and C)
F) A) and C)

Question 4

Since audit papers are the property of the auditor, what was fundamentally wrong about Arthur Andersen's decision to shred working papers related to the Enron audit.

Accepted Answer

Andersen's reputation declined in Januar...

Question 5

In considering the effectiveness of evidence gathering procedures, it was found that most companies have adjustments. Research also shows that ________.

Accepted Answer

A)   both receivables and payables are usually overstated
B)   receivables are usually overstated and payables are usually understated
C)   receivables are usually understated and payables are usually overstated
D)   both receivables and payables are usually understatedE) C) and D)
F) A) and D)

Question 6

Analytical procedures are one type of evidence-gathering procedure. According to auditing standards, there are five general forms of analytical procedures. Auditing standards also provide examples of five sources of information for analytical procedures.
Required:
A. Describe three of the five general forms of analytical procedures.
B. For each form, describe a typical source of the information for the form.
C. For each source, include any questions or concerns an auditor would have about the reliability or relevancy of the source.

Accepted Answer

A) The five general forms of analytical procedures are:
i. Comparison of current-year account balances to one or more prior periods.
ii. Comparison of the current-year account balances to budgets and forecasts prepared by the company.
iii. Evaluation of the relationships of current-year account balances to other current-year balances to determine if they conform to expectations based on the company's historical experience.
iv. Comparison of current-year account balances and financial ratios with similar information for the industry in which the company operates.
v. Study of the relationships of current-year account balances with relevant nonfinancial information (e.g., physical production statistics).
B) The five sources of information for analytical procedures are:
i. Financial account information for prior period(s).
ii. Company budgets and forecasts.
iii. Financial relationships among accounts in the current period.
iv. Industry statistics.
v. Nonfinancial information, such as physical production statistics.
C) Concerns about relevance and reliability of the sources of information are:
i. Has the financial information from prior period(s) been audited?
ii. Are company budgets or forecasts generally accurate?
iii. What processes does the client go through to develop these?
iv. Are the industry statistics from a reliable source? Are the industry statistics specific enough to the client or the particular segment or division of the client being examined?
v. Has the nonfinancial information been audited? Have the controls over the production of the nonfinancial information been tested?

Question 7

Loan application documents are considered authoritative evidence.

Accepted Answer

A) True 
 B)False

Question 8

A first audit requires more work than a repeat engagement.

Accepted Answer

A) True 
 B)False

Question 9

For good form, each audit evidence paper should be indexed using a standard system of letters and numbers. The main purpose of this practice is to allow ________.

Accepted Answer

A)   other papers to be easily cross-referenced so that connections among accounts can be followed
B)   a check of the completeness of working papers
C)   working papers to be easily re-filed if they are taken out of the file or when the paper is first created
D)   auditors to prove that they have performed sufficient work to support their audit opinionE) B) and C)
F) None of the above

Question 10

Spoken and written representations given by the auditee's officers, directors, owners, and employees are generally considered reliable enough to stand on their own.

Accepted Answer

A) True 
 B)False  False

Question 11

A first-time audit requires more work than a continuing client. Identify some of the issues involved in the first audit of a company that do not occur in an ongoing engagement.

Accepted Answer

If an organization has been operating fo...

Question 12

What is the strongest form of audit evidence?

Accepted Answer

A)   The auditor's direct personal knowledge.
B)   Evidence gathered directly from independent third parties.
C)   Evidence produced by independent third parties.
D)   Comprehensive analysis performed by the auditor.E) B) and C)
F) A) and B)

Question 13

Permanent audit files contain such documents as the engagement letter, client organization chart, and internal control system flowcharts.

Accepted Answer

A) True 
 B)False

Question 14

Destroying working papers may prevent auditors from proving due care if they are sued for negligence.

Accepted Answer

A) True 
 B)False

Question 15

An auditor should re-perform calculations on a random basis to check for accuracy. Usually, if one component has been calculated properly, the auditor can rely that the other components have also been computed properly.

Accepted Answer

A) True 
 B)False

Question 16

There are two kinds of audit programs: (1) balance-audit programs and (2) cycle-audit programs.

Accepted Answer

A) True 
 B)False

Question 17

For new clients, the auditor can obtain knowledge about the client's business and its industry from the permanent file.

Accepted Answer

A) True 
 B)False  False

Question 18

A combination of evidence gathering techniques provides more persuasive than evidence gathered from a single technique.

Accepted Answer

A) True 
 B)False

Question 19

Oral evidence from inquiry is considered to be very important.

Accepted Answer

A) True 
 B)False

Question 20

Identify the three main types of audit programs and indicate the purpose of each.

Accepted Answer

The three types of audit programs are th...

Exam 8: Audit Evidence and Assurance

An auditor selects audit procedures that will provide ________.

Correct Answer
verified

The audit evidence gathering technique known as computation or recalculation refers to ________.

Correct Answer
verified

In preparing for a repeat engagement, the first thing an audit team should do is ________.

Correct Answer
verified

Since audit papers are the property of the auditor, what was fundamentally wrong about Arthur Andersen's decision to shred working papers related to the Enron audit.

Correct Answer
verified
Andersen's reputation declined in Januar...
View Answer

In considering the effectiveness of evidence gathering procedures, it was found that most companies have adjustments. Research also shows that ________.

Correct Answer
verified

Loan application documents are considered authoritative evidence.

Correct Answer
verified

A first audit requires more work than a repeat engagement.

Correct Answer
verified

For good form, each audit evidence paper should be indexed using a standard system of letters and numbers. The main purpose of this practice is to allow ________.

Correct Answer
verified

Spoken and written representations given by the auditee's officers, directors, owners, and employees are generally considered reliable enough to stand on their own.

Correct Answer
verified
False

A first-time audit requires more work than a continuing client. Identify some of the issues involved in the first audit of a company that do not occur in an ongoing engagement.

Correct Answer
verified
If an organization has been operating fo...
View Answer

What is the strongest form of audit evidence?

Correct Answer
verified

Permanent audit files contain such documents as the engagement letter, client organization chart, and internal control system flowcharts.

Correct Answer
verified

Destroying working papers may prevent auditors from proving due care if they are sued for negligence.

Correct Answer
verified

An auditor should re-perform calculations on a random basis to check for accuracy. Usually, if one component has been calculated properly, the auditor can rely that the other components have also been computed properly.

Correct Answer
verified

There are two kinds of audit programs: (1) balance-audit programs and (2) cycle-audit programs.

Correct Answer
verified

For new clients, the auditor can obtain knowledge about the client's business and its industry from the permanent file.

Correct Answer
verified
False

A combination of evidence gathering techniques provides more persuasive than evidence gathered from a single technique.

Correct Answer
verified

Oral evidence from inquiry is considered to be very important.

Correct Answer
verified

Identify the three main types of audit programs and indicate the purpose of each.

Correct Answer
verified
The three types of audit programs are th...
View Answer

Exam 8: Audit Evidence and Assurance

An auditor selects audit procedures that will provide ________.

Correct AnswerverifiedShow Answer

The audit evidence gathering technique known as computation or recalculation refers to ________.

Correct AnswerverifiedShow Answer

In preparing for a repeat engagement, the first thing an audit team should do is ________.

Correct AnswerverifiedShow Answer

Since audit papers are the property of the auditor, what was fundamentally wrong about Arthur Andersen's decision to shred working papers related to the Enron audit.

Correct AnswerverifiedAndersen's reputation declined in Januar...View AnswerShow Answer

In considering the effectiveness of evidence gathering procedures, it was found that most companies have adjustments. Research also shows that ________.

Correct AnswerverifiedShow Answer

Loan application documents are considered authoritative evidence.

Correct AnswerverifiedShow Answer

A first audit requires more work than a repeat engagement.

Correct AnswerverifiedShow Answer

For good form, each audit evidence paper should be indexed using a standard system of letters and numbers. The main purpose of this practice is to allow ________.

Correct AnswerverifiedShow Answer

Spoken and written representations given by the auditee's officers, directors, owners, and employees are generally considered reliable enough to stand on their own.

Correct AnswerverifiedFalse

A first-time audit requires more work than a continuing client. Identify some of the issues involved in the first audit of a company that do not occur in an ongoing engagement.

Correct AnswerverifiedIf an organization has been operating fo...View AnswerShow Answer

What is the strongest form of audit evidence?

Correct AnswerverifiedShow Answer

Permanent audit files contain such documents as the engagement letter, client organization chart, and internal control system flowcharts.

Correct AnswerverifiedShow Answer

Destroying working papers may prevent auditors from proving due care if they are sued for negligence.

Correct AnswerverifiedShow Answer

An auditor should re-perform calculations on a random basis to check for accuracy. Usually, if one component has been calculated properly, the auditor can rely that the other components have also been computed properly.

Correct AnswerverifiedShow Answer

There are two kinds of audit programs: (1) balance-audit programs and (2) cycle-audit programs.

Correct AnswerverifiedShow Answer

For new clients, the auditor can obtain knowledge about the client's business and its industry from the permanent file.

Correct AnswerverifiedFalse

A combination of evidence gathering techniques provides more persuasive than evidence gathered from a single technique.

Correct AnswerverifiedShow Answer

Oral evidence from inquiry is considered to be very important.

Correct AnswerverifiedShow Answer

Identify the three main types of audit programs and indicate the purpose of each.

Correct AnswerverifiedThe three types of audit programs are th...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Andersen's reputation declined in Januar...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified
If an organization has been operating fo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The three types of audit programs are th...
View Answer