Chapter 6 – A Framework for Audit Evidence
1. Audit evidence used to support an audit opinion is obtained soley from audit procedures.
a.
True
b.
False
False
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AUDT.JOHN.16.06-01 – LO: 06-01
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Obtaining Sufficient Appropriate Audit Evidence
2. The amount of evidence gathered is not important to an auditor since the quality of the evidence is of primary
importance.
a.
True
b.
False
False
1
AUDT.JOHN.16.100 – Identify the Basic Sources of Audit Evidence
United States – AK – AICPA BB-Critical thinking
3. The auditor uses professional judgment to determine which audit procedures to perform.
a.
True
b.
False
True
1
AUDT.JOHN.16.100 – Identify the Basic Sources of Audit Evidence
United States – AK – AICPA BB-Critical thinking
4. Audit evidence consists of both information that corroborates management’s assertions and information that
contradicts such assertions.
a.
True
b.
False
True
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AUDT.JOHN.16.06-01 – LO: 06-01
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Obtaining Sufficient Appropriate Audit Evidence
5. The reliability of audit evidence relates to the connection between the audit procedure being performed and
Chapter 6 – A Framework for Audit Evidence
the assertion being audited.
a.
True
b.
False
False
AUDT.JOHN.16.06-02 – LO: 06-02
United States – BUSPORG: Analytic
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Appropriateness of Audit Evidence
6. The type of audit evidence known as inquiry does not ordinarily provide sufficient audit evidence of the
absence of a material misstatement, nor is it alone sufficient to test the operating effectiveness of controls.
a.
True
b.
False
True
1
AUDT.JOHN.16.101 – Audit Evidence
United States – AK – AICPA BB-Critical thinking
7. A limitation of observation is that observing a process on one day does not necessarily indicate how the
transactions were processed on a different day or over a relevant period of time.
a.
True
b.
False
8. Relevance and reliability of evidence make up the appropriateness of audit evidence.
a.
True
b.
False
9. Evidence can be directly or indirectly relevant to an assertion.
a.
True
b.
False
Chapter 6 – A Framework for Audit Evidence
10. Internal documentation is more reliable to the auditor if the internal control surrounding the documentation
is considered strong than if it is considered weak.
a.
True
b.
False
11. Internal documentation is generally less reliable than external documentation.
a.
True
b.
False
True
1
AUDT.JOHN.16.06-02 – LO: 06-02
United States – BUSPORG: Analytic
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Appropriateness of Audit Evidence
12. Confirmation statements from banks are an example of third-party external documents.
a.
True
b.
False
True
1
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Appropriateness of Audit Evidence
13. Inspection of tangible assets generally provides reliable evidence with the respect to the completeness of the
assets, but not necessarily about the existence of the assets.
a.
True
b.
False
14. Vouching recorded transactions involves taking a sample entry from a journal and obtaining the original
source documents to ensure the transaction occurred.
a.
True
b.
False
True
1
AUDT.JOHN.16.06-02 – LO: 06-02
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Appropriateness of Audit Evidence
15. Tracing is a process that helps establish that recorded transactions are valid.
a.
True
b.
False
False
1
AUDT.JOHN.16.06-02 – LO: 06-02
United States – BUSPORG: Analytic
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Obtaining Appropriate Audit Evidence
16. One strategy used by auditors in testing assertions is to perform directional testing to find overstatements or
understatements.
a.
True
b.
False
True
1
AUDT.JOHN.16.103 – Explain Directional Testing
United States – AK – AICPA BB-Critical thinking
17. The direction of testing from recorded amounts toward supporting documentation provides evidence as to
existence of assets and revenues.
a.
True
b.
False
True
1
AUDT.JOHN.16.102 – Appropriateness and Sufficiency of Evidence
United States – AK – AICPA BB-Critical thinking
18. The direction of testing from the source documents to recorded amounts provides evidence regarding the
completeness of liabilities and expenses.
a.
True
b.
False
True
1
AUDT.JOHN.16.103 – Explain Directional Testing
United States – AK – AICPA BB-Critical thinking
19. For an auditor to test the existence assertion of assets, testing will be performed beginning with the recorded
asset and ending with the source documents.
a.
True
b.
False
True
1
AUDT.JOHN.16.103 – Explain Directional Testing
20. Ulanda and Mudana, CPAs are performing an audit on McArnee, Inc. Ulanda selects a sample from certain
source documents and traces them forward to the accounts payable ledger. The purpose of this test is to
determine the possibility of understated liabilities.
a.
True
b.
False
True
1
AUDT.JOHN.16.103 – Explain Directional Testing
United States – AK – AICPA BB-Critical thinking
21. The auditor’s concern for potential fraud in the financial statements will most likely result in increased
testing for the overstatement of revenues.
a.
True
b.
False
1
AUDT.JOHN.16.103 – Explain Directional Testing
United States – AK – AICPA BB-Critical thinking
22. While inspecting documents, auditors should use original documents rather than copies, because copies are
easy for management to falsify.
a.
True
b.
False
True
1
AUDT.JOHN.16.104 – Audit Procedures and the Assertion(s) Each Tests
United States – AK – AICPA BB-Critical thinking
23. Auditors should mail third party confirmations through the client’s mailroom.
a.
True
b.
False
False
1
AUDT.JOHN.16.104 – Audit Procedures and the Assertion(s) Each Tests
United States – AK – AICPA BB-Critical thinking
24. Inspection of an asset generally provides reliable evidence about the rights and obligations assertion related
to that asset.
a.
True
b.
False
False
1
AUDT.JOHN.16.06-03 – LO: 06-03
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Type and Timing of Audit Procedures
25. Audit documentation serves as support for the financial statements.
a.
True
b.
False
False
1
AUDT.JOHN.16.105 – Purposes and Contents of Audit Programs
United States – AK – AICPA BB-Critical thinking
26. The greatest risk of recording transactions in the incorrect period occurs during the roll-forward period.
a.
True
b.
False
False
AUDT.JOHN.16.104 – Audit Procedures and the Assertion(s) Each Tests
27. The primary importance of the audit program is its guidance of the overall conduct of the audit.
a.
True
b.
False
True
1
AUDT.JOHN.16.105 – Purposes and Contents of Audit Programs
United States – AK – AICPA BB-Critical thinking
28. Inquiries of client personnel are not a frequent means of evidence gathering by an auditor.
a.
True
b.
False
False
1
AUDT.JOHN.16.104 – Audit Procedures and the Assertion(s) Each Tests
United States – AK – AICPA BB-Critical thinking
29. The purpose of performing analytical procedures in the planning stage of an audit is to gather audit evidence
and make conclusions about account balances.
a.
True
b.
False
False
1
AUDT.JOHN.16.06-03 – LO: 06-03
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Type and Timing of Audit Procedures
30. An example of physical observation is the auditor’s testing of inventory by counting it to substantiate the
existence assertion.
a.
True
b.
False
True
1
31. The auditor multiplies the quantity of inventory on the inventory ledger by the cost of the inventory to arrive
at total inventory balance per product number. This is an example of recalculation by footing.
a.
True
b.
False
False
1
AUDT.JOHN.16.104 – Audit Procedures and the Assertion(s) Each Tests
United States – AK – AICPA BB-Critical thinking
32. Some audit procedures may be performed prior to the end of the year under audit.
a.
True
b.
False
True
1
AUDT.JOHN.16.104 – Audit Procedures and the Assertion(s) Each Tests
United States – AK – AICPA BB-Critical thinking
33. The audit program specifies what the client must do to perform the audit in accordance with generally
accepted accounting procedures.
a.
True
b.
False
False
1
AUDT.JOHN.16.106 – Nature and Purposes of Audit Programs
United States – AK – AICPA BB-Critical thinking
34. The auditor utilizes the same audit program and the same procedures each year for each client in order to
ensure that nothing is missed in the current year audit.
a.
True
b.
False
False
1
AUDT.JOHN.16.106 – Nature and Purposes of Audit Programs
AUDT.JOHN.16.104 – Audit Procedures and the Assertion(s) Each Tests
United States – AK – AICPA BB-Critical thinking
35. In a reasonableness test, the auditor develops an expected value of an account by using data wholly or partly
independent of the client’s accounting information system.
a.
True
b.
False
True
1
AUDT.JOHN.16.104 – Audit Procedures and the Assertion(s) Each Tests
United States – AK – AICPA BB-Critical thinking
36. Audit planning workpapers are prepared to support the foundation of the audit and are prepared for the
client to assist in their understanding of the specific audit procedures that will be performed.
a.
True
b.
False
False
1
AUDT.JOHN.16.105 – Purposes and Contents of Audit Programs
United States – AK – AICPA BB-Critical thinking
37. An outside specialist may assist the auditor in obtaining sufficient, appropriate evidence concerning the
analysis of complex tax compliance issues.
a.
True
b.
False
True
1
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Using a Specialist to Assist with Obtaining Evidence
38. Audit documentation should generally be retained for at least seven years.
a.
True
b.
False
True
1
AUDT.JOHN.16.105 – Purposes and Contents of Audit Programs
United States – AK – AICPA BB-Critical thinking
39. Audit documentation should include the initials or electronic signature in order to identify the audit
personnel responsible for the work and the managers and partners reviewing the work.
Chapter 6 – A Framework for Audit Evidence
a.
True
b.
False
True
1
AUDT.JOHN.16.105 – Purposes and Contents of Audit Programs
United States – AK – AICPA BB-Critical thinking
40. The reliability of audit evidence is a measure of the quality of the underlying evidence and is influenced by
risk, potential management bias associated with the evidence, and the quality of the internal control system
underlying the preparation of the evidence.
a.
True
b.
False
True
1
AUDT.JOHN.16.101 – Audit Evidence
United States – AK – AICPA BB-Critical thinking
41. The client’s verbal evidence is more reliable than evidence from independent outside sources.
a.
True
b.
False
False
1
AUDT.JOHN.16.101 – Audit Evidence
United States – AK – AICPA BB-Critical thinking
42. Underlying accounting records consist of evidence of controls as well as supporting records such as checks,
invoices, the general and subsidiary ledger and journal entries.
a.
True
b.
False
True
1
AUDT.JOHN.16.101 – Audit Evidence
United States – AK – AICPA BB-Critical thinking
43. The relevance of audit evidence depends on the audit assertion being tested.
a.
True
b.
False
44. Analytical procedures are a type of substantive evidence.
a.
True
b.
False
True
1
AUDT.JOHN.16.101 – Audit Evidence
United States – AK – AICPA BB-Critical thinking
45. While inspecting documents, the reliability depends on the nature and source of the documentation.
a.
True
b.
False
True
1
AUDT.JOHN.16.101 – Audit Evidence
United States – AK – AICPA BB-Critical thinking
46. The auditor’s job is to gather sufficient appropriate audit evidence on which to base an opinion.
a.
True
b.
False
47. Appropriateness deals with the quantity of evidence the auditor collects, whereas sufficiency deals with the
quality of evidence the auditor collects.
a.
True
b.
False
48. Audit findings represent a summary of incorrect transactions detected during the audit.
a.
True
AUDT.JOHN.16.101 – Audit Evidence
United States – AK – AICPA BB-Critical thinking
Chapter 6 – A Framework for Audit Evidence
b.
False
False
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Documenting Audti Evidence
49. Liabilities and expenses are most often tested for overstatements.
a.
True
b.
False
False
1
AUDT.JOHN.16.101 – Audit Evidence
United States – AK – AACSB-Analytical skills
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50. Which one of the following statements is false?
a.
Auditing includes the process of gathering evidence to test assertions.
b.
No general audit program suits the needs for all situations.
c.
Even though all audits are different, they can all be approached in the same manner.
d.
All audits involve testing management’s assertions contained in written communications to another
party and independently gathering evidence to test the relevant assertions.
1
AUDT.JOHN.16.rview – Overview
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51. Appropriateness of evidence is a measure of which of the following?
a.
Quantity of evidence.
b.
Quality of evidence.
c.
Sufficiency of evidence.
d.
Meaning of evidence.
52. Two determinants of the persuasiveness of evidence include which of the following?
Chapter 6 – A Framework for Audit Evidence
a.
Competence and Sufficiency.
b.
Relevance and Reliability.
c.
Appropriateness and Sufficiency.
d.
Independence and Effectiveness.
53. Directional testing involves testing transactions or balances primarily for which type of error?
a.
Overstatement.
b.
Understatement.
c.
Either overstatement or understatement.
d.
Either overstatement nor understatement.
1
AUDT.JOHN.16.107 – Directional Testing
United States – AK – AICPA BB-Critical thinking
54. Which one of the following would be considered the most reliable type of audit evidence?
a.
Purchase orders from vendors.
b.
Customer accounts receivable files.
c.
Computerized general ledger.
d.
Confirmations from banks.
55. Which one of the following would be the most reliable type of evidence?
a.
Photocopies.
b.
Indirectly obtained evidence.
c.
Observation of assets.
d.
Inquiry with the in-house attorney.
56. Which one of the following would be the least reliable type of evidence?
Chapter 6 – A Framework for Audit Evidence
a.
Confirmations returned by bank directly to the auditor.
b.
Letters of communication from the Securities Exchange Commission.
c.
Physical examination of perpetual inventory.
d.
Evidence from an easily overridden information system.
57. An example of an external document would include which of the following?
a.
Vendor invoices.
b.
Customer orders.
c.
Confirmation replies from customers.
d.
All the above.
AUDT.JOHN.16.108 – External Document
58. Which of the following is an example of inspection of documentation?
a.
Review shipping documents.
b.
Estimate the expected amount of interest income.
c.
Observe controls.
d.
Recalculate the total amount include on a sales invoice.
AUDT.JOHN.16.104 – Audit Procedures and the Assertion(s) Each Tests
59. The process of vouching helps establish which of the following regarding recorded transactions?
a.
Transactions have been recorded.
b.
Transactions are complete.
c.
Transactions are valid.
d.
Transactions are presented properly.
60. Footing, cross-footing, and tests of extensions are examples of which approach to gathering evidence?
a.
Reprocessing.
b.
Recalculation.
Chapter 6 – A Framework for Audit Evidence
c.
Vouching.
d.
Examination of documentation.
61. Reprocessing of transactions helps establish that all valid items have been recorded. Reprocessing tests
which of the following assertions?
a.
Occurrence.
b.
Rights.
c.
Existence.
d.
Completeness.
62. Sufficient evidence gathered by the auditor involves which of the following?
a.
The quantity of evidence to be obtained.
b.
The type of evidence to be obtained.
c.
Obtaining limited evidence to achieve efficiency.
d.
The use of an audit program to obtain evidence.
63. An audit program provides an effective means for which of the following?
a.
Reviewing the completeness and persuasiveness of procedures performed.
b.
Recording the audit work performed and those responsible for performing the work.
c.
Organizing and distributing the work.
d.
All the above.
d
1
AUDT.JOHN.16.105 – Purposes and Contents of Audit Programs
64. The reliability of a client’s internal documentation is most affected by which of the following?
a.
The auditor’s independence.
b.
Management’s motivation to misstate accounts.
c.
The type of audit report that will be issued.
d.
Management’s ability to understand generally accepted audit standards.
65. External documentation may lack reliability. Which of the following is the most probable reason for that?
a.
The external party may be competent in performing duties.
b.
The documentation may be properly understood by the client in the response.
c.
The auditor may decide not to use the documentation and replace it with other documents.
d.
The documentation may have been altered if the process is not controlled from inception.
66. When may audit procedures be performed?
I – on the balance sheet date.
II – prior to the balance sheet date.
III – subsequent to the balance sheet date.
a.
I only.
b.
I and III only.
c.
II only.
d.
I, II, and III.
AUDT.JOHN.16.104 – Audit Procedures and the Assertion(s) Each Tests
United States – AK – AICPA BB-Critical thinking
67. An auditor selects a sample of items recorded and traces them back to the supporting documentation. This is
an example of which of the following?
a.
Directional testing for existence.
b.
Directional testing for completeness.
c.
Direct testing for valuation.
d.
Direct testing for rights.