Which of the following should be considered an audit procedure for obtaining evidence?

1
Which of the following is true regarding audit evidence? A) Auditors typically gather audit evidence about one whole financial statement at a time rather than one account at a time. B) Auditors rarely gather audit evidence about one business process at a time. C) Audit evidence is gathered to determine whether each relevant financial statement assertion is being supported. D) When audit evidence supports management’s assertions, a qualified audit opinion can be issued. 2
Which of the following procedures would an auditor most likely rely on to verify management’s assertion of completeness? A) Reviewing bank confirmations for indications of cash manipulations. B) Comparing a sample of shipping documents to related sales invoices. C) Observing the entity’s physical count of inventory. D) Confirming a sample of recorded receivables by direct communication with the debtors. 3
Discussions with the owner-manager of an entity under audit reveal to the auditor that the company is more concerned with minimizing its income tax payments than maximizing income. Based on this information, which management assertion will the auditor be most concerned about verifying with regard to sales revenue? A) Existence and occurrence. B) Completeness. C) Rights and obligations. D) Valuation. 4
Which of the following primary assertions is satisfied when an auditor observes the entity’s physical count of inventory? A) Valuation. B) Completeness. C) Existence. D) Rights and obligations. 5
In testing the existence assertion for an asset, an auditor ordinarily works from the A) Financial statements to the potentially unrecorded items. B) Potentially unrecorded items to the financial statements. C) Accounting records to the supporting documents. D) Supporting documents to the accounting records. 6
Which of the following statements concerning audit evidence is correct? A) To be appropriate, audit evidence should be either persuasive or relevant but need not be both. B) The measure of the reliability of audit evidence lies in the auditor’s judgement. C) The difficulty and expense of obtaining audit evidence concerning an account balance are a valid basis for omitting the test. D) An entity’s general ledger may be sufficient audit evidence to support the financial statements. 7
Which of the following statements is correct with regard to the quality or appropriateness of audit evidence? A) The auditor’s direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly from independent outside sources. B) Audit evidence must be either valid or relevant but need not be both. C) Internal accounting data alone may be considered sufficient appropriate audit evidence to issue an unmodified opinion on financial statements. D) Appropriateness of audit evidence refers to the amount of corroborative evidence to be obtained. 8
Audit evidence can come in different forms with different degrees of persuasiveness. Which of the following is the least persuasive type of evidence? A) Vendor confirmations of accounts payable balances. B) Copies of bank statements obtained from the entity under audit. C) Pre-numbered sales invoices. D) The opinion of an outside expert regarding inventory valuation. 9
Which of the following presumptions is correct regarding the reliability of audit evidence? A) To be reliable, evidence should be convincing rather than simply persuasive. B) Information obtained directly from outside sources is considered to be the most reliable type of evidence. C) An effective internal control system provides increased assurance with regard to the reliability of audit evidence. D) Reliability generally refers to the amount and relevance of corroborative audit evidence obtained. 10
Which of the following audit procedures would most likely be used to test the mathematical accuracy of a five-hundred page inventory listing? A) Send confirmations to selected vendors to verify amounts. B) Examine a random sample of inventory documents. C) Manually foot or sum several randomly-selected pages. D) Use generalized audit software to foot or sum the entire listing. 11
According to the text, each of the following is a main purpose for performing audit procedures except: A) To obtain an understanding of the entity and its environment. B) To test the operating effectiveness of controls. C) To develop recommendations for the control system. D) To detect material misstatements in the financial statements. 12
External confirmations would normally be most likely used as a type of audit evidence in connection with which of the following? A) Goodwill. B) Deferred Taxes. C) Machinery and Equipment. D) Accounts Receivable. 13
One of the main objectives of performing analytical procedures during the planning phase of the audit is to identify: A) Transactions that have not been properly authorized. B) Non-compliance with laws undetected as a result of poor internal controls. C) Inefficient operations. D) Unusual changes that may signal possible account misstatements. 14
Which of the following procedures would provide the most reliable audit evidence? A) Inquiries of the entity’s internal accounting staff. B) Inspection of prenumbered entity purchase orders filed in the vouchers payable department. C) Observation of procedures performed by the entity’s personnel on the entity’s trial balance. D) Inspection of bank statements obtained directly from the entity’s financial institution. 15
Which of the following types of audit evidence is the least reliable? A) Prenumbered purchase order forms prepared by the entity. B) Bank statements obtained from the entity. C) Test counts of inventory performed by the auditor. D) Correspondence from the entity’s attorney about litigation. 16
Audit evidence can come in different forms with different degrees of reliability. Which of the following is the most persuasive type of evidence? A) Bank statements obtained from the entity. B) Computations made by the auditor. C) Prenumbered entity sales invoices. D) Vendors’ invoices included in the entity’s files. 17
An auditor would be least likely to use external confirmations in connection with the examination of A) Inventory held in a third-party warehouse. B) Refundable income taxes. C) Long-term debt. D) Stockholders’ equity. 18
According to the reliability hierarchy by evidence type as presented in the text, an example of audit evidence with a low level of reliability is: A) Reperformance. B) Inspection. C) Observation. D) Analytical procedures. 19
According to the reliability hierarchy by evidence type as presented in the text, an example of audit evidence with a high level of reliability is: A) Scanning. B) Recalculation. C) Observation. D) Confirmation. 20
The assurance bucket is filled with all of the following types of evidence except A) Test of controls. B) The audit report. C) Substantive analytical procedures. D) Tests of details. 21
Audit documentation provides the principal support for which of the following? A) Demonstrate how the audit complied with auditing and related professional standards. B) Support the basis for the auditor’s conclusions concerning each material financial statement assertion. C) Demonstrate that the underlying accounting records agreed or reconciled with the financial statements. D) All of the above. 22
Which of the following is true relating to audit work paper documentation? A) It serves as the basis of review for audit supervisors to determine if sufficient appropriate evidence has been gathered. B) It should not include copies of any client-generated documents. C) It is generally examined and utilized by the client after the audit is completed. D) It must be destroyed once the audit is complete and the opinion is rendered. 23
Which of the following items is generally not included as part of audit documentation? A) Heading. B) Indexing. C) Client review notation. D) Tickmarks. 24
The current file of the auditor’s working papers should generally include A) A flowchart of the accounting system. B) Organization charts. C) A copy of the financial statements. D) Copies of bond and note indentures. 25
The permanent file section of the working papers that is kept for each audit client most likely contains A) Review notes pertaining to questions and comments regarding the audit work performed. B) A schedule of time spent on the engagement by each individual auditor. C) Correspondence with the entity’s legal counsel concerning pending litigation. D) Narrative descriptions of the entity’s accounting system and control procedures. 26
An audit document that reflects the major components of an amount reported in the financial statements is referred to as a(n) A) Lead schedule. B) Supporting schedule. C) Audit control account. D) Working trial balance. 27
The primary objective of final analytical procedures is to A) Obtain evidence from details tested to corroborate particular assertions. B) Identify areas that represent specific risks relevant to the audit. C) Assist the auditor in assessing the validity of the conclusions reached. D) Satisfy doubts when questions arise about an entity’s ability to continue in existence.

What are the audit procedures for obtaining evidence?

What are the 5 audit procedures?

What is considered audit evidence?

What type of audit evidence the auditor should consider?