Audit evidence includes only written information used by the auditor in arriving at an

opinion about the fairness of financial statements.

False

2
The auditor gathers audit evidence to test management's assertions

True

3
Management assertions fall into four main categories

False

4
The classification assertion refers to transactions and events being recorded in the
correct accounting period.

False

5
The completeness assertion refers to ensuring that transactions and events that should
have been recorded actually have been recorded

True

6
the cutoff assertion relates to whether transactions and events have been recorded in
the correct accounting period

True
7
Audit procedures are designed to test management assetions

True

8
The relevance of audit evidence or specific audit procedures depends on the assertion
being tested.

True

9
The auditor must use his or her professional judgement to determine the amount of
audit evidence to be gathered.

True

10
The sufficiency of evidence refers to the quality of audit evidence

False

11
A confirmation is used to

Verify a representation from a third party

12
Which of the following elements ultimately determines the amount of audit work that
is necessary in the circumstances to afford a reasonable basis for an opinion?

Auditor judgement
13
Which of the following is an essential factor in evaluating the sufficiency of
evidence? The evidence must

Be persuasive enough to enable the auditor to form an opinion

14
Which set of assertion is tested when, during completion of the audit, the audit partner
conducts a final review of the format of the entity's balance sheet?

Assertions about presentation and disclosure

15
In testing plant and equipment balances, an auditor may physically inspect new
additions listed on the summary of plant and equipment transactions for the year. This
procedure is designed to obtain evidence concerning management's assertions about
classes of transactions and events, and specifically, which assertion?

Occurrence

16
Which assertions may be tested for the "account balances" category of management
assertions?

Existence, rights and obligations, completeness, valuation and allocation

17
Which assertions may be tested for the "transactions and events" category of
management assertions?

Occurrence, completeness, authorization, accuracy, cutoff and classification

18
Which assertions may be tested for the "presentation and disclosure" category of
management assertions?

Occurrence, rights and obligations, completeness, classification and understandability,

accuracy and valuation

19
Tracing is used primarily to test which of the following assertions about classes of
transactions?

Completeness

20
Vouching is used primarily to test which of the following assertions about classes of
transaction?

Occurrence

21
In designing written audit programs, an auditor should plan specific audit procedures
to test

management assertions

22
Footing is an example of

Recalculation

23
In determining whether transactions have been recorded, the direction of the audit
testing should start from the

Original source documents

24
To test for unsupported entries in the ledger, the direction of audit testing should start
from the

Ledger entries

25
Which of the following presumptions does not relate to the appropriateness of audit
evidence

An auditor's opinion, to be economically useful, is formed within a reasonable time

and based on evidence obtained at a reasonable cost.

26
Of the following, which is the least persuasive type of audit evidence?

Copies of client sales invoices inspected by the auditor

27
The third general auditing standard requires that due professional care be exercised in
the performance of the examination and the preparation of the report. Due
professional care deals with what is done by the independent auditor and how well it
is done. For example, due care in the matter of audit document requires that audit
documents'

Content be sufficient to provide support for the auditor's report, including the auditor's
representation as to compliance with auditing standards.
28
Which of the following show the detailed general ledger accounts that make up a
financial statement category on the auditor's working trial balance

Lead schedules

29
The permanent (continuing) file of an auditor's working papers most likely would
include copies of the

Debt agreements

30
An example of audit evidence with a medium level of reliability is

Scanning

31
Audit documentation prepared on audits of public clients is the property of the

Auditor

32
All of the following are typically in the current file execpt

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Chart of accounts

33
You are auditing a store that sells merchandise. Some of the store merchandise is held
on consignment. Which account balance assertion for inventory should you be most
concerned about verifying

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Rights and obligations

34
You are auditing a manufactured company that has a large production facility. Some
of the production equipment is held through lease agreement. Which of the following
is the account balance assertion you would be most concerned about?

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Rights and obligations

35
Which of the following procedures would an auditor most likely perform to verify
management's assertion of completeness?

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Compare a sample of shipping documents to related sales invoices

36
Which of the following best describes the primary purpose of audit procedure?

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To gather corroborative evidence about management's assertions

37
Procedures specifically outlined in an audit program are designed primarily to

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Gather evidence about management's assertions

38
Which statement concerning audit evidence is not valid?

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The auditor performs tests to collect convincing evidence that the financial statements
are not misstated

39
Each of the following might, by itself, form a valid basis for an auditor to reduce
substantive testing except for the

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Difficulty and expense involved in testing a particular item

40
Of the following, the most reliable type of evidence typically is

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Reperformance

41
Which of the following presumptions is correct about the reliability of audit evidence?
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An effective internal control system provides more reliable audit evidence

42
Which of the following types of documentary evidence should the auditor consider to
be the most reliable?

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Confirmation of an account payable balance mailed by and returned directly to the

auditor

43
Which of the following is the least persuasive documentation in support of an
auditor's opinion?

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Schedules of details of physical inventory counts conducted by the client.

44
Which of the following statements is generally correct about the appropriateness of
audit evidence?

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The more effective the internal control, the more assurance it provides about the
reliability of the accounting data and financial statements

45
Which of the following types of audit evidence is the most persuasive?

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Bank statements obtained from the client

46
Following are several statements regarding accounting records or audit
documentation. Which of the statements are correct?

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Accounting records belong to the client

47
Audit documents record the results of the auditor's evidence-gathering procedures.
When preparing audit documents, the auditor should remember that

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Audit documents should be designed to facilitate the review and supervision of work
done by auditors to the engagement.

48
Audit documents that record the procedures used by the auditor to gather evidence
should be

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Designed in an orderly fashion to facilitate the review of audit work by the senior,
manager, and partner on the engagement

49
In creating lead schedules for an audit engagement, what client information is needed
to begin?

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General ledger information, such as account numbers, prior-year account balances,

and current year unadjusted information

50
Audit documentation

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May be in paper, electronic, or some other form.

51
Based on conversation with the owner-manager of an audit client, the auditor
ascertained that the company's primary motivation is to avoid paying income taxes.
Based on this motivation, which account balance assertion for ending inventory will
the auditor be most concerned about verifying?

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Completeness

52
Your audit client is under intense pressure to meet an earnings target Which
transaction assertion for transactions within the purchasing process are you most
concerned with?

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Completeness
53
You are concerned with unrecorded transactions in the purchasing cycle. Which audit
procedure are you most likely to use when auditing purchases?

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Tracing vendor invoices to accounting records.

54
The following statements were made in a discussion of audit evidence between two
CPAs. Which statement is not valid concerning audit evidence?

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"I would not undertake that procedure because at best the results would only be
persuasive and I'm looking for convincing evidence."

55
Which of the following statements concerning audit evidence is correct?

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A client's accounting data cannot be considered sufficient audit evidence to support

the financial statements

56
The permanent audit file usually includes

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Organizational chart
57
The current audit file usually includes

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Working trial balance

58
All audit documentation should have a heading, which includes

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Name of the client, title of the working paper, and client's year-end date

59
The audit working papers belong to

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the audit firm

60
Which of the following are ordinarily designed to detect possible material monetary
errors in the financial statements?

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Analytical procedures.

61
An auditor's decision either to apply analytical to apply analytical procedures as
substantive procedures or to perform tests of transactions and account balances
usually is determined by

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Relative effectiveness and efficiency of the tests

62
A company sells a particular product only in the last month of its fiscal year. The
company uses commission agents for such sales and pays them 6% of their net sales
30 days after the sales are made. The agents' sales were $10 million. Experience
indicates that 10% of the sales are usually not collected and 2% are returned in the
first month of the new year. The auditor would expect the year-end balance in the
accrued commissions payable account to be

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$558,000

63
Which of the following nonfinancial information would an auditor most likely
consider in performing analytical procedures during the planning phase of an audit?

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Square footage of selling space

64
Analytical procedures performed in the overall review stage of an audit suggest that
several accounts have unexpected relationships. The results of these procedures most
likely would indicate that
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Additional tests of details are required

65
Which of the following is not a typical analytical procedure?

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Comparison of recorded amounts of major disbursements with appropriate invoices

66
Analytical procedures may be classified as being primarily which of the following?

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Substantive procedures

67
An abnormal fluctuation in gross profit that might suggest the need for extended audit
procedures for sales and inventories would most likely be identified in the planning
phase of the audit by the use of

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Analytical procedures

68
An example of an analytical procedure used in planning an audit should focus on
identifying
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Financial information with similar information regarding the industry in which th

entity operates

69
Analytical procedures used in planning an audit should focus on identifying

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Areas that may represent specific risks relevant to the audit.

70
Analytical procedures are

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Required for planning an d overall review of the financial statements

71
As a result of analytical procedures conducted during the planning phase, the
independent auditor determines that the gross profit percentage has declined from
30% in the preceding year to 20% in the current year. The auditor should

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Consider the possibility of an error in the financial statements

72
The auditor generally gives most emphasis to ratio and trend analysis in the
examination of the
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Income Statement

73
The auditor notices significant fluctuations in key elements of the company's financial
statements. If management is unable to provide an acceptable explanation, the auditor
should

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Perform additional audit procedures to investigate the matter further

74
Which of the following tends to be most predictable for purposes of analytical
procedures applied as substantive procedures

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Relationships involving income statement accounts

75
Analytical procedures enable the auditor to predict the balance or quantity of an item
under audit. Information to develop this estimate can be obtained from all of the
following except

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Tracing transactions through the system to determine whether procedures are being
applied as prescribed.

76
Which of the following would be least likely to be comparable between similar
corporations in the same industry or line of business?

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Earnings per share

77
Which of the following rations would an engagement partner most likely calculate
when reviewing the balance sheet in the overall review stage of an audit?

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Total debt divided by total assets.