Principles of Auditing and Other Assurance Services 20th Edition By Whittington - Test Bank Instant Download - Complete Test Bank With Answers Sample Questions Are Posted Below Chapter 05 Audit Evidence and Documentation True / False Questions 1. The professional standards consider calculating depreciation expense a "routine" transaction. True False …
$19.99
Principles of Auditing and Other Assurance Services 20th Edition By Whittington – Test Bank
Instant Download – Complete Test Bank With Answers
Sample Questions Are Posted Below
Chapter 05
Audit Evidence and Documentation
True / False Questions
| 1. | The professional standards consider calculating depreciation expense a “routine” transaction.
True False |
| 2. | The most reliable form of documentary evidence generally is considered to be documents created by the client.
True False |
| 3. | A vendor’s invoice is an example of documentary evidence created by a third party and held by the client.
True False |
| 4. | In performing analytical procedures, the auditors may use dollar amounts, physical quantities, or percentages.
True False |
| 5. | The primary purpose of a letter of representations is to obtain additional evidence about specific accounts.
True False |
| 6. | The auditors should propose an adjusting journal entry for all material related-party transactions.
True False |
| 7. | When the risk of material misstatement for an account is high, the auditors may perform additional substantive procedures to restrict detection risk to a lower level.
True False |
| 8. | Working papers of continuing audit interest usually are filed with the administrative working papers.
True False |
| 9. | The use of lead schedules is designed to increase the detail of the working trial balance.
True False |
| 10. | Adjusting journal entries are ordinarily recorded by the client, while reclassifying journal entries need not be recorded.
True False |
Multiple Choice Questions
| 11. | To be effective, analytical procedures performed near the end of the audit should be performed by
|
| 12. | The components of the risk of misstatement are:
|
| 13. | Financial statement assertions are established for classes of transactions:
|
| 14. | Further audit procedures include:
|
| 15. | Assertions that have a meaningful bearing on whether an account balance, transaction class, or disclosure is fairly stated are referred to as:
|
| 16. | Which of the following is not an assertion relating to classes of transactions?
|
| 17. | Audit documentation should be sufficient to allow which individual to understand the audit work performed, the evidence obtained, and the significant conclusions?
|
| 18. | Which of the following is not considered to be an analytical procedure?
|
| 19. | An auditor plans to apply substantive tests to the details of asset and liability accounts as of an interim date rather than as of the balance sheet date. The auditor should be aware that this practice
|
| 20. | An auditor compared the current-year gross margin with the prior-year gross margin to determine if cost of sales is reasonable. What type of audit procedure was performed?
|
| 21. | The inspection of a vendor’s invoice by the auditors is:
|
| 22. | The auditors of Smith Electronics wish to limit the audit risk of material misstatement in the test of accounts receivable to 5 percent. They believe that inherent risk is 100%, and there is a 40% risk that material misstatement could have bypassed the client’s system of internal control. What is the maximum detection risk the auditors should specify in their substantive procedures of details of accounts receivable?
|
| 23. | Analytical procedures are required at the risk assessment stage and as:
|
| 24. | During financial statement audits, auditors seek to restrict which type of risk?
|
| 25. | Which of the following groups are not considered a specialist by AICPA Professional Standards?
|
| 26. | A CPA wishes to use a representation letter as a substitute for performing other audit procedures. Doing so:
|
| 27. | Which of the following best describes the problem with the use of published industry averages for analytical procedures?
|
| 28. | In auditing an asset valued at fair value, which of the following potentially provides the auditor with the strongest evidence?
|
| 29. | An auditor should expect that fair value is the price that would be received to sell an asset in an orderly transaction between the market participants at the:
|
| 30. | Which of the following best describes the reason that auditors are concerned with the detection of related party transactions?
|
| 31. | Which of the following is not a basic procedure used in an audit?
|
| 32. | Which of the following is not a financial statement assertion relating to account balances?
|
| 33. | Which of the following is generally true about the sufficiency of audit evidence?
|
| 34. | Which of the following is true about analytical procedures?
|
| 35. | Which of the following is a basic approach often used by auditors to evaluate the reasonableness of accounting estimates?
|
| 36. | An auditor is performing an analytical procedure that involves comparing a client’s account balances over time. This technique is referred to as:
|
| 37. | An auditor is performing an analytical procedure that involves comparing a client’s ratios with other companies in the same industry. This technique is referred to as:
|
| 38. | An auditor is performing an analytical procedure that involves developing common-size financial statements. This technique is referred to as:
|
| 39. | Which of the following is not a basic approach often used by auditors to evaluate the reasonableness of accounting estimates?
|
| 40. | The audit time budget is an example of:
|
| 41. | A schedule set up to combine similar general ledger accounts, the total of which appears on the working trial balance as a single amount, is referred to as a:
|
| 42. | Which of the following is not a function of working papers?
|
| 43. | A schedule listing account balances for the current and previous years, and columns for adjusting and reclassifying entries proposed by the auditors to arrive at the final mount that will appear in the financial statement, is referred to as a:
|
| 44. | The auditors use analytical procedures during the course of an audit. The most important phase of performing these procedures is the:
|
| 45. | The auditors must obtain written client representations that normally should be signed by:
|
| 46. | Which of the following ultimately determines the specific audit procedures necessary to provide independent auditors with a reasonable basis for the expression of an opinion?
|
| 47. | Failure to detect material dollar errors in the financial statements is a risk which the auditors primarily mitigate by:
|
| 48. | An independent auditor finds that the Simmer Corporation occupies office space, at no charge, in an office building owned by a shareholder. This finding indicates the existence of:
|
| 49. | Which of the following would not necessarily be considered a related party transaction?
|
| 50. | The date of the management representation letter should coincide with the:
|
| 51. | An example of an analytical procedure is the comparison of:
|
| 52. | When considering the use of management’s written representations as audit evidence about the completeness assertion, an auditor should understand that such representations:
|
| 53. | Which of the following expressions is least likely to be included in a client’s representation letter?
|
| 54. | Which of the following statements is generally correct about audit evidence?
|
| 55. | Which of the following statements relating to audit evidence is the most accurate statement?
|
| 56. | Which of the following is not a typical analytical procedure?
|
| 57. | Which of the following is not a primary purpose of audit working papers?
|
| 58. | Concerning retention of working papers, the Sarbanes-Oxley Act:
|
| 59. | During an audit engagement pertinent data are prepared and included in the audit working papers. The working papers primarily are considered to be:
|
| 60. | Although the quantity, type, and content of working papers will vary with the circumstances, the working papers generally would include the:
|
| 61. | The permanent file section of the working papers that is kept for each audit client most likely contains:
|
| 62. | Working papers that record the procedures used by the auditor to gather evidence should be:
|
| 63. | In general, which of the following statements is correct with respect to ownership, possession, or access to working papers prepared by a CPA firm in connection with an audit?
|
| 64. | Confirmation would be most effective in addressing the existence assertion for the:
|
| 65. | In preparing for an audit of the retail footwear division of a major retail organization, the auditor gathered the following information about the organization’s stores:
An auditor performs analytical procedures that involve comparing the gross margins of various divisional operations with those of other divisions and with the individual division’s performance in previous years. The auditor notes a significant increase in the gross margin at one division. The auditor does some preliminary investigation and also notes that there were no changes in products, production methods, or divisional management during the year. Based on the above information, the most likely cause of the increase in gross margin would be:
|
| 66. | Management is concerned about the lower level of profitability in the Mid-Central Region. Which of the following would be a reasonable possible explanation(s) of the lower profitability for the Mid-Central Region? I. The lower number of stores in the Mid-Central Region. II. Sales employees are not as productive in generating sales as those in other regions. III. The Mid-Central Region has a lower gross margin.
|
| 67. | Based on the previous information, which of the following preliminary conclusions can the auditor use as a basis for further investigations?
|
| 68. | Which of the following statements is not correct regarding the auditor’s further analysis?
|
| 69. | Management has centralized purchasing and uses a model based upon previous year’s sales with adjustments for trends in the market place (e.g., the trend to more casual shoes). A staff auditor has suggested that the centralized purchasing may be one of the reasons for the lower level of profitability in the Mid-Central Region. Which of the following would be the best single audit procedure to address the staff auditor’s assertion?
|
| 70. | What type of transactions ordinarily have high inherent risk because they involve management judgments or assumptions in formulating accounting balances?
|
| 71. | Assertions with high inherent risk are least likely to involve:
|
| 72. | The date on which no information may be deleted from audit documentation is the
|
| 73. | In evaluating an entity’s accounting estimates, one of the auditor’s objectives is to determine whether the estimates are
|
| 74. | In obtaining sufficient appropriate audit evidence, the work of which type or types of specialists may be relied upon?
|
| 75. | Which of the following is most likely to be considered an analytical procedure?
|
| 76. | An unexpected economic downturn is likely to have which effect on inventory turnover.
|
| 77. | Which of the following is most consistent with an increase in the ratio of debt to equity?
|
| 78. | Fraudulent sales and accounts receivables recorded at year-end (with no cost of goods sold entry) will:
|
Essay Questions
| 79. | For each of the audit procedures listed below select the type of audit procedure, if any, that the auditor performed. A type of audit procedure may be selected once or not at all.
|
||||||||||||||||||||||||||||||||||||
| 80. | Analytical procedures are substantive procedures that may be used to provide evidence about specific accounts and classes of transactions.
a. Describe three major types of comparisons the auditor might make in performing analytical procedures.
|
| 81. | Audit working papers are an integral part of an examination in accordance with generally accepted auditing standards.
a. Describe three major functions of the audit working papers.
|
| 82. | The following is an audit working paper prepared by an assistant on the Williams audit:
√ Amount agrees to amount recorded as a deposit on the bank statement and description agrees with receipt enclosed with 12/31/0X bank statement. This note is the Wilde note receivable that was recorded as a receipt by the client in the cash receipts journal on 1/3/0X. The receivable was appropriately credited and properly reflected in the January cash receipts journal. No adjustment needed as bank and books simply record this in different periods. Γ Agreed to 12/31/0X bank statement. Required:
Prepare a list of review points as the preparer of this working. You may assume that any other working papers referred to appropriate. You will receive credit for proper points you bring up and lose credit for improper ones and omissions.
|
||||||||||||||||
Chapter 05 Audit Evidence and Documentation Answer Key
True / False Questions
| 1. | The professional standards consider calculating depreciation expense a “routine” transaction.
FALSE |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 05-02 Identify and explain the components of audit risk. Topic: Risk, Evidence, and Assertions |
| 2. | The most reliable form of documentary evidence generally is considered to be documents created by the client.
FALSE |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Risk, Evidence, and Assertions |
| 3. | A vendor’s invoice is an example of documentary evidence created by a third party and held by the client.
TRUE |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Risk, Evidence, and Assertions |
| 4. | In performing analytical procedures, the auditors may use dollar amounts, physical quantities, or percentages.
TRUE |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Analytical Procedures |
| 5. | The primary purpose of a letter of representations is to obtain additional evidence about specific accounts.
FALSE |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 3 Hard Learning Objective: 05-04 List and describe types of audit evidence. Topic: Risk, Evidence, and Assertions |
| 6. | The auditors should propose an adjusting journal entry for all material related-party transactions.
FALSE |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 3 Hard Learning Objective: 05-05 Describe the considerations involved in auditing subjective areas, such as certain financial statement items valued at fair value. Topic: Evidence for Subjective Areas |
| 7. | When the risk of material misstatement for an account is high, the auditors may perform additional substantive procedures to restrict detection risk to a lower level.
TRUE |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-02 Identify and explain the components of audit risk. Topic: Risk, Evidence, and Assertions |
| 8. | Working papers of continuing audit interest usually are filed with the administrative working papers.
FALSE |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-09 Describe the types of working papers and the way they are organized. Topic: Audit Documentation |
| 9. | The use of lead schedules is designed to increase the detail of the working trial balance.
FALSE |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-09 Describe the types of working papers and the way they are organized. Topic: Audit Documentation |
| 10. | Adjusting journal entries are ordinarily recorded by the client, while reclassifying journal entries need not be recorded.
TRUE |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-09 Describe the types of working papers and the way they are organized. Topic: Audit Documentation |
Multiple Choice Questions
| 11. | To be effective, analytical procedures performed near the end of the audit should be performed by
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Analytical Procedures |
| 12. | The components of the risk of misstatement are:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-02 Identify and explain the components of audit risk. Topic: Risk, Evidence, and Assertions |
| 13. | Financial statement assertions are established for classes of transactions:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-01 Explain the relationship between audit risk, audit evidence, and financial statement assertions. Topic: Risk, Evidence, and Assertions |
| 14. | Further audit procedures include:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Audit Procedures |
| 15. | Assertions that have a meaningful bearing on whether an account balance, transaction class, or disclosure is fairly stated are referred to as:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-01 Explain the relationship between audit risk, audit evidence, and financial statement assertions. Topic: Risk, Evidence, and Assertions |
| 16. | Which of the following is not an assertion relating to classes of transactions?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-03 Distinguish between the concepts of sufficient and appropriate as they apply to audit evidence. Topic: Risk, Evidence, and Assertions |
| 17. | Audit documentation should be sufficient to allow which individual to understand the audit work performed, the evidence obtained, and the significant conclusions?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-07 Discuss the factors that affect the auditors’ judgment as to the nature and extent of audit documentation. Source: AICPA Topic: Audit Documentation |
| 18. | Which of the following is not considered to be an analytical procedure?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Risk, Evidence, and Assertions |
| 19. | An auditor plans to apply substantive tests to the details of asset and liability accounts as of an interim date rather than as of the balance sheet date. The auditor should be aware that this practice
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 3 Hard Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 20. | An auditor compared the current-year gross margin with the prior-year gross margin to determine if cost of sales is reasonable. What type of audit procedure was performed?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Audit Procedures |
| 21. | The inspection of a vendor’s invoice by the auditors is:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Risk, Evidence, and Assertions |
| 22. | The auditors of Smith Electronics wish to limit the audit risk of material misstatement in the test of accounts receivable to 5 percent. They believe that inherent risk is 100%, and there is a 40% risk that material misstatement could have bypassed the client’s system of internal control. What is the maximum detection risk the auditors should specify in their substantive procedures of details of accounts receivable?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-02 Identify and explain the components of audit risk. Topic: Risk, Evidence, and Assertions |
| 23. | Analytical procedures are required at the risk assessment stage and as:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-04 List and describe types of audit evidence. Topic: Analytical Procedures |
| 24. | During financial statement audits, auditors seek to restrict which type of risk?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-02 Identify and explain the components of audit risk. Topic: Risk, Evidence, and Assertions |
| 25. | Which of the following groups are not considered a specialist by AICPA Professional Standards?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Risk, Evidence, and Assertions |
| 26. | A CPA wishes to use a representation letter as a substitute for performing other audit procedures. Doing so:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-04 List and describe types of audit evidence. Topic: Risk, Evidence, and Assertions |
| 27. | Which of the following best describes the problem with the use of published industry averages for analytical procedures?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Analytical Procedures |
| 28. | In auditing an asset valued at fair value, which of the following potentially provides the auditor with the strongest evidence?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-05 Describe the considerations involved in auditing subjective areas, such as certain financial statement items valued at fair value. Topic: Evidence for Subjective Areas |
| 29. | An auditor should expect that fair value is the price that would be received to sell an asset in an orderly transaction between the market participants at the:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-05 Describe the considerations involved in auditing subjective areas, such as certain financial statement items valued at fair value. Topic: Evidence for Subjective Areas |
| 30. | Which of the following best describes the reason that auditors are concerned with the detection of related party transactions?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 3 Hard Learning Objective: 05-05 Describe the considerations involved in auditing subjective areas, such as certain financial statement items valued at fair value. Topic: Evidence for Subjective Areas |
| 31. | Which of the following is not a basic procedure used in an audit?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Audit Procedures |
| 32. | Which of the following is not a financial statement assertion relating to account balances?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-01 Explain the relationship between audit risk, audit evidence, and financial statement assertions. Topic: Risk, Evidence, and Assertions |
| 33. | Which of the following is generally true about the sufficiency of audit evidence?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 3 Hard Learning Objective: 05-03 Distinguish between the concepts of sufficient and appropriate as they apply to audit evidence. Topic: Risk, Evidence, and Assertions |
| 34. | Which of the following is true about analytical procedures?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Analytical Procedures |
| 35. | Which of the following is a basic approach often used by auditors to evaluate the reasonableness of accounting estimates?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 3 Hard Learning Objective: 05-05 Describe the considerations involved in auditing subjective areas, such as certain financial statement items valued at fair value. Topic: Evidence for Subjective Areas |
| 36. | An auditor is performing an analytical procedure that involves comparing a client’s account balances over time. This technique is referred to as:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-04 List and describe types of audit evidence. Topic: Analytical Procedures |
| 37. | An auditor is performing an analytical procedure that involves comparing a client’s ratios with other companies in the same industry. This technique is referred to as:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-04 List and describe types of audit evidence. Topic: Analytical Procedures |
| 38. | An auditor is performing an analytical procedure that involves developing common-size financial statements. This technique is referred to as:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-04 List and describe types of audit evidence. Topic: Analytical Procedures |
| 39. | Which of the following is not a basic approach often used by auditors to evaluate the reasonableness of accounting estimates?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-05 Describe the considerations involved in auditing subjective areas, such as certain financial statement items valued at fair value. Topic: Evidence for Subjective Areas |
| 40. | The audit time budget is an example of:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-09 Describe the types of working papers and the way they are organized. Topic: Audit Documentation |
| 41. | A schedule set up to combine similar general ledger accounts, the total of which appears on the working trial balance as a single amount, is referred to as a:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-09 Describe the types of working papers and the way they are organized. Topic: Audit Documentation |
| 42. | Which of the following is not a function of working papers?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-06 Describe the purposes of audit documentation. Topic: Audit Documentation |
| 43. | A schedule listing account balances for the current and previous years, and columns for adjusting and reclassifying entries proposed by the auditors to arrive at the final mount that will appear in the financial statement, is referred to as a:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-09 Describe the types of working papers and the way they are organized. Topic: Audit Documentation |
| 44. | The auditors use analytical procedures during the course of an audit. The most important phase of performing these procedures is the:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Analytical Procedures |
| 45. | The auditors must obtain written client representations that normally should be signed by:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 46. | Which of the following ultimately determines the specific audit procedures necessary to provide independent auditors with a reasonable basis for the expression of an opinion?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Audit Procedures |
| 47. | Failure to detect material dollar errors in the financial statements is a risk which the auditors primarily mitigate by:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Audit Procedures |
| 48. | An independent auditor finds that the Simmer Corporation occupies office space, at no charge, in an office building owned by a shareholder. This finding indicates the existence of:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-05 Describe the considerations involved in auditing subjective areas, such as certain financial statement items valued at fair value. Source: AICPA Topic: Evidence for Subjective Areas |
| 49. | Which of the following would not necessarily be considered a related party transaction?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-05 Describe the considerations involved in auditing subjective areas, such as certain financial statement items valued at fair value. Source: AICPA Topic: Evidence for Subjective Areas |
| 50. | The date of the management representation letter should coincide with the:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 51. | An example of an analytical procedure is the comparison of:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Analytical Procedures |
| 52. | When considering the use of management’s written representations as audit evidence about the completeness assertion, an auditor should understand that such representations:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 53. | Which of the following expressions is least likely to be included in a client’s representation letter?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 54. | Which of the following statements is generally correct about audit evidence?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 55. | Which of the following statements relating to audit evidence is the most accurate statement?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-03 Distinguish between the concepts of sufficient and appropriate as they apply to audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 56. | Which of the following is not a typical analytical procedure?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Analytical Procedures |
| 57. | Which of the following is not a primary purpose of audit working papers?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-06 Describe the purposes of audit documentation. Source: AICPA Topic: Audit Documentation |
| 58. | Concerning retention of working papers, the Sarbanes-Oxley Act:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-08 Identify matters that should be included in audit working papers. Topic: Audit Documentation |
| 59. | During an audit engagement pertinent data are prepared and included in the audit working papers. The working papers primarily are considered to be:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-06 Describe the purposes of audit documentation. Source: AICPA Topic: Audit Documentation |
| 60. | Although the quantity, type, and content of working papers will vary with the circumstances, the working papers generally would include the:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-07 Discuss the factors that affect the auditors’ judgment as to the nature and extent of audit documentation. Source: AICPA Topic: Audit Documentation |
| 61. | The permanent file section of the working papers that is kept for each audit client most likely contains:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-09 Describe the types of working papers and the way they are organized. Source: AICPA Topic: Audit Documentation |
| 62. | Working papers that record the procedures used by the auditor to gather evidence should be:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-07 Discuss the factors that affect the auditors’ judgment as to the nature and extent of audit documentation. Source: AICPA Topic: Audit Documentation |
| 63. | In general, which of the following statements is correct with respect to ownership, possession, or access to working papers prepared by a CPA firm in connection with an audit?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 05-08 Identify matters that should be included in audit working papers. Source: AICPA Topic: Audit Documentation |
| 64. | Confirmation would be most effective in addressing the existence assertion for the:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 65. | In preparing for an audit of the retail footwear division of a major retail organization, the auditor gathered the following information about the organization’s stores:
An auditor performs analytical procedures that involve comparing the gross margins of various divisional operations with those of other divisions and with the individual division’s performance in previous years. The auditor notes a significant increase in the gross margin at one division. The auditor does some preliminary investigation and also notes that there were no changes in products, production methods, or divisional management during the year. Based on the above information, the most likely cause of the increase in gross margin would be:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Blooms: Apply Difficulty: 3 Hard Learning Objective: 05-04 List and describe types of audit evidence. Source: IIA Topic: Analytical Procedures |
| 66. | Management is concerned about the lower level of profitability in the Mid-Central Region. Which of the following would be a reasonable possible explanation(s) of the lower profitability for the Mid-Central Region? I. The lower number of stores in the Mid-Central Region. II. Sales employees are not as productive in generating sales as those in other regions. III. The Mid-Central Region has a lower gross margin.
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: IIA Topic: Analytical Procedures |
| 67. | Based on the previous information, which of the following preliminary conclusions can the auditor use as a basis for further investigations?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: IIA Topic: Analytical Procedures |
| 68. | Which of the following statements is not correct regarding the auditor’s further analysis?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: IIA Topic: Analytical Procedures |
| 69. | Management has centralized purchasing and uses a model based upon previous year’s sales with adjustments for trends in the market place (e.g., the trend to more casual shoes). A staff auditor has suggested that the centralized purchasing may be one of the reasons for the lower level of profitability in the Mid-Central Region. Which of the following would be the best single audit procedure to address the staff auditor’s assertion?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 3 Hard Learning Objective: 05-04 List and describe types of audit evidence. Source: IIA Topic: Analytical Procedures |
| 70. | What type of transactions ordinarily have high inherent risk because they involve management judgments or assumptions in formulating accounting balances?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-05 Describe the considerations involved in auditing subjective areas, such as certain financial statement items valued at fair value. Topic: Evidence for Subjective Areas |
| 71. | Assertions with high inherent risk are least likely to involve:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-02 Identify and explain the components of audit risk. Topic: Risk, Evidence, and Assertions |
| 72. | The date on which no information may be deleted from audit documentation is the
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-08 Identify matters that should be included in audit working papers. Topic: Audit Documentation |
| 73. | In evaluating an entity’s accounting estimates, one of the auditor’s objectives is to determine whether the estimates are
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Risk Analysis Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 3 Hard Learning Objective: 05-05 Describe the considerations involved in auditing subjective areas, such as certain financial statement items valued at fair value. Source: AICPA Topic: Evidence for Subjective Areas |
| 74. | In obtaining sufficient appropriate audit evidence, the work of which type or types of specialists may be relied upon?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Risk, Evidence, and Assertions |
| 75. | Which of the following is most likely to be considered an analytical procedure?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 76. | An unexpected economic downturn is likely to have which effect on inventory turnover.
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 77. | Which of the following is most consistent with an increase in the ratio of debt to equity?
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 3 Hard Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
| 78. | Fraudulent sales and accounts receivables recorded at year-end (with no cost of goods sold entry) will:
|
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 3 Hard Learning Objective: 05-04 List and describe types of audit evidence. Source: AICPA Topic: Risk, Evidence, and Assertions |
Essay Questions
| 79. | For each of the audit procedures listed below select the type of audit procedure, if any, that the auditor performed. A type of audit procedure may be selected once or not at all.
A. 5. Inspection of tangible assets. |
||||||||||||||||||||||||||||||||||||
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Audit Procedures |
| 80. | Analytical procedures are substantive procedures that may be used to provide evidence about specific accounts and classes of transactions.
a. Describe three major types of comparisons the auditor might make in performing analytical procedures. a. Comparisons made in performing analytical procedures include (only three required): • Comparisons with prior years’ data. b. Analytical procedures may be performed: 1. During risk assessment to identify items that require more audit attention (required analytical procedures). |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-04 List and describe types of audit evidence. Topic: Analytical Procedures |
| 81. | Audit working papers are an integral part of an examination in accordance with generally accepted auditing standards.
a. Describe three major functions of the audit working papers. a. The functions of audit working papers include (only three required): • Provide a means of assigning and coordinating audit work. b. The permanent file is used to organize working papers of continuing audit interest over a number of years. The current file contains the administrative and evidence working papers for the year under examination. |
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement Blooms: Understand Difficulty: 2 Medium Learning Objective: 05-06 Describe the purposes of audit documentation. Learning Objective: 05-09 Describe the types of working papers and the way they are organized. Topic: Audit Documentation |
| 82. | The following is an audit working paper prepared by an assistant on the Williams audit:
√ Amount agrees to amount recorded as a deposit on the bank statement and description agrees with receipt enclosed with 12/31/0X bank statement. This note is the Wilde note receivable that was recorded as a receipt by the client in the cash receipts journal on 1/3/0X. The receivable was appropriately credited and properly reflected in the January cash receipts journal. No adjustment needed as bank and books simply record this in different periods. Γ Agreed to 12/31/0X bank statement. Required: Prepare a list of review points as the preparer of this working. You may assume that any other working papers referred to appropriate. You will receive credit for proper points you bring up and lose credit for improper ones and omissions. The working paper’s deficiencies include: • “Prepared by” is not initialed (“Reviewed by” isn’t either, but since we are performing the review it need not be). |
||||||||||||||||
| AACSB: Analytical Thinking AICPA: BB Industry AICPA: FN Measurement AICPA: FN Risk Analysis Blooms: Apply Difficulty: 3 Hard Learning Objective: 05-06 Describe the purposes of audit documentation. Learning Objective: 05-07 Discuss the factors that affect the auditors’ judgment as to the nature and extent of audit documentation. Learning Objective: 05-08 Identify matters that should be included in audit working papers. Learning Objective: 05-09 Describe the types of working papers and the way they are organized. Topic: Audit Documentation |
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
