Watch client employees count inventory to determine

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Unformatted text preview: ries in the purchases journal. 10. Foot entries in the sales journal to determine whether they were correctly totaled by the client. 11. Make a surprise count of petty cash to verify that the amount of the petty cash fund is intact. 12. Obtain a written statement from the client’s bank stating the client’s year-end balance on deposit. Answer: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Observation Physical examination Reperformance Analytical procedure Inquiry of the client Reperformance Physical examination Analytical procedure Documentation Reperformance Physical examination Confirmation 1-126 76. medium Match nine of the terms (a-k) with the definitions provided below (1-9): a. b. c. d. e. f. g. h. i. j. k. Foot Compute Scan Inquire Count Trace Recompute Read Examine Observe Compare b 1. A calculation done by the auditor independent of the client. a 2. Addition of a column of numbers to determine if the total is the same as the client’s. k 3. A comparison of information in two different locations. j 4. A use of the senses to assess certain activities. f 5. Following details of transactions from original documents to journals. c 6. A less detailed examination of a document or record to determine if there is something unusual warranting further investigation. d 7. Obtaining information from the client in response to specific questions. e 8. A determination of assets on hand at a given time. h 9. An examination of written information to determine facts pertinent to the audit. 1-127 77. medium Match five of the terms (a-h) with the definitions provided below (1-5): a. b. c. d. e. f. g. h. Audit documentation Audit procedures Audit objectives Analytical procedures Budgets Reliability of evidence Sufficiency of evidence Persuasiveness of evidence d 1. Use of comparisons and relationships to assess the reasonableness of account balances. b 2. Detailed instructions for the collection of a type of audit evidence. f 3. The degree to which evidence can be considered believable or trustworthy. a 4. Contains all the information that the auditor considers necessary to conduct an adequate audit and to provide support for the audit report. g 5. This is determined by the amount of evidence obtained. 78. medium Below are 10 documents typically examined during an audit. Classify each document as either internal or external. Type of Document Documents 1. Canceled checks for payments of accounts payable. 2. Payroll time cards. 3. Duplicate sales invoices. 4. Vendors’ invoices. 5. Bank statements. 6. Minutes of the board of directors’ meetings. 7. Signed lease agreements. 8. Notes receivable. 9. Subsidiary accounts receivable records. 10. Remittance advices. Answer: 1. External 2. Internal 3. Internal 4. External 5. External 6. 7. 8. 9. 10. 1-128 Internal External External Internal External 79. easy b Cost should never be a consideration when making decisions about evidence for a given audit. a. True b. False 80. easy a Confirmations are among the most expensive type of evidence to obtain. a. True b. False 81. easy b Observation is normally more reliable than physical examination. a. True b. False 82. easy b Inquiries of the client are usually sufficient to provide appropriate evidence to satisfy an audit objective. a. True b. False 83. easy b A canceled check written by the client, made payable to a local supplier and drawn on the client’s bank account is one type of internal document. a. True b. False 84. easy a Whenever practical and reasonable, the confirmation of accounts receivable is required of CPAs. a. True b. False 85. easy a Inquiries of clients and reperformance normally have a low cost associated with them. a. True b. False 86. easy b When analytical procedures reveal unusual fluctuations in an account balance, the auditor will probably perform fewer tests of details for that account and increase the tests of controls related to the account. a. True b. False 87. easy a The type of audit evidence known as inquiry requires the auditor to obtain oral information from the client in response to questions. a. True b. False 88. medium b One of the primary determinants of the reliability of audit evidence is the quantity of evidence. a. True b. False 89. medium b Audit documentation is the joint property of the auditor and the audit client. a. True b. False 1-129 90. medium a Objective evidence is more reliable, and hence more persuasive, than subjective evidence. a. True b. False 91. medium a Ordinarily, audit documentation can be provided to someone else only with the express permission of the client. a. True b. False 92. medium a Analytical procedures must be used in the planning and completion phases of the audit. a. True b. False 93. medium a Confirmations are ordinarily used to verify account balances, but may be used to verify transactions. a. True b. False 94. medium a Of the three common types of confirmations used by auditors, the least reliable type is the negative confirmation. a. True b. False 95. medium b Accounts receivable confirm...
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This note was uploaded on 02/04/2014 for the course ACCOUNTING 211 taught by Professor Alikapur during the Fall '13 term at American University of Sharjah.

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