Week 4 Online Quiz - 1. Question: Which is true about the...

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1. Question: Which is true about the auditor’s observation of physical inventory counts? Your Answer: It can provide evidence supporting the existence assertion. It can provide evidence supporting the completeness assertion. Both of the above. CORREC T Neither of the above. Instructor Explanation: Choice “c” is correct. Observation of physical inventory counts provides evidence about both existence and completeness. Observing the inventory provides evidence that it physically exists; observing the actual count provides evidence regarding completeness (i.e., does it appear that the client is doing a careful, accurate, and complete job of counting all of the inventory?) Choices “a”, “b”, and “d” are incorrect, based on the above explanation. Points Received: 10 of 10 Comments: 2. Question: Which of the following best explains why an analytical procedure might be used as a substantive test? Your Answer: To achieve audit objectives in the most effective and efficient manner possible. CORRECT ANSWER To assist in planning the nature, timing, and extent of the auditing procedures to be performed. To assess the conclusions reached by staff auditors. To determine the adequacy of evidence gathered in response to unusual or unexpected balances. INCORRECT Instructor Explanation: Choice “a” is correct. For some assertions, analytical procedures are more effective and efficient at providing an appropriate level of assurance than are tests of details. Choice “b” is incorrect. The objective of analytical procedures used in the planning stage of the audit is to assist in planning the nature, timing, and extent of auditing procedures to be performed. Choices “c” and “d” are incorrect. The purpose of applying
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analytical procedures in the overall review stage of the audit is to assist the auditor in assessing the conclusions reached and the overall financial statement presentation. The overall review would also generally include consideration of the adequacy of evidence gathered in response to unusual or unexpected balances. Points Received: 0 of 10 Comments: 3. Question: Which of the following is not a procedure the auditor would use in evaluating the reasonableness of an accounting estimate? Your Answer: Determine how management developed their estimate and test the procedures they used. Confirm via the management representation letter that management has disclosed all significant estimates. CORREC T Use subsequent events to determine whether the estimate was reasonable. Develop an independent estimate and compare it to management’s estimate. Instructor Explanation: Choice “b” is correct. While the auditor might obtain such a representation from management, confirmation that all significant estimates have been disclosed would not be enough to substantiate the reasonableness of the estimates. Choices “a”, “c”, and “d” are incorrect. In evaluating the
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Week 4 Online Quiz - 1. Question: Which is true about the...

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