Chapter 05 – Evidence and Documentation
75. Which of the following tends to be most predictable for purposes of analytical procedures
applied as substantive procedures?
76. 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:
Chapter 05 – Evidence and Documentation
77. An auditor’s analytical procedures performed during the overall review stage indicated that
the client’s accounts receivable balance had doubled since the end of the prior year. However,
the allowance for doubtful accounts as a percentage of accounts receivable remained about the
same. Which of the following client explanations most likely would satisfy the auditor?
78. Which of the following would be least likely to be comparable between similar corporations
in the same industry or line of business?
Chapter 05 – Evidence and Documentation
79. Which of the following ratios would an engagement partner most likely calculate when
reviewing the balance sheet in the overall review stage of an audit?
80. Explain the occurrence and completeness assertions. How does failure to meet each
assertion affect the financial statements?
Chapter 05 – Evidence and Documentation
81. Name two account balance management assertions pertaining to inventory and explain why
they are considered in an audit.
82. For an auditor, how are management assertions useful?
Chapter 05 – Evidence and Documentation
83. The text discusses three main purposes for performing audit procedures. List and describe
these three main categories of audit procedures and describe their purpose.
84. Why is appropriateness important for audit evidence? What qualities must evidence have to
be considered appropriate?
Chapter 05 – Evidence and Documentation
85. Several factors may influence the reliability of evidence. Identify and describe two of these
factors.
86. Sarah is auditing the sales of a new client. In one procedure Sarah performs, she begins with
the original sales documents and then searches the accounting records to find the corresponding
entry. What test is Sarah performing and what management assertion is she testing?
Chapter 05 – Evidence and Documentation
87. Auditors obtain evidence about the client’s inventory through, among other procedures,
observing the counting of inventory. What are some limitations “observation” has as an audit
procedure?
88. The audit testing hierarchy is considered to be more effective and more efficient. Why?
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89. According to the text, what are the two functions of working papers?
90. Who is responsible for the financial statements? What does the term “assertions” mean?
Identify the assertion categories and the specific assertions for each category.
Chapter 05 – Evidence and Documentation
91. Discuss the reliability of the types of audit evidence and identify the level of reliability for
each type of evidence.
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92. For each of the following categories of analytical procedures, indicate (a) whether an
auditor is required to use the procedure and (b) the purpose(s) of the procedure.
Preliminary analytical procedures
Substantive analytical procedures
Final analytical procedures
93. When using analytical procedures, the auditor first needs to develop an expectation with
which to compare recorded results. What is meant by “precision of the expectation,” and what
factors affect the precision of analytical procedures?
Chapter 05 – Evidence and Documentation
94. In deciding to implement analytical procedures, what are some factors the auditor will
consider in determining a tolerable difference between the expectation and the recorded
amount?
95. Stan is auditing First Financial Services and would like to use financial ratios to test the
ability of First Financial Services to meet its current obligations. Name two ratios that would
help Stan in this task. Indicate how each ratio is calculated and what a high ratio would signify
to Stan.