A physical examination b analytical procedures c

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Unformatted text preview: . relevance and reliability. c. appropriateness and sufficiency. d. independence and effectiveness. 11. easy c Three common types of confirmations used by auditors are (1) negative confirmations, (2) blank form positive confirmations, and (3) positive confirmations with information included. Place the confirmations in order of reliability from highest to lowest. a. 1, 2, 3. b. 3, 2, 1. c. 2, 3, 1. d. 3, 1, 2. 12. easy c When auditors use documents to support recorded transactions, the process is often called: a. inquiry. b. confirmation. c. vouching. d. physical examination. 13. easy b An example of an external document is: a. employees’ time reports. b. bank statements. c. purchase order for company purchases. d. carbon copies of checks. 14. easy c An example of a document the auditor receives from the client, but which was prepared by someone outside the client’s organization, is a(n): a. confirmation. 1-113 b. c. d. sales invoice. vendor invoice. bank reconciliation. 15. easy a “Evaluations of financial information made by a study of plausible relationships among financial and nonfinancial data involving comparisons of recorded amounts to expectations developed by the auditor” is a definition of: a. analytical procedures. b. tests of transactions. c. tests of balances. d. auditing. 16. Often, auditor procedures result in significant differences being discovered by the auditor. The auditor should investigate further if: Easy a a. b. c. d. Significant differences are not expected but do exist Yes No Yes No Significant differences are expected but do not exist Yes No No Yes 17. easy c Which of the following is not a purpose of analytical procedures? a. Understand the client’s industry. b. Assess the client’s ability to continue as a going concern. c. Evaluate internal controls. d. Reduce detailed audit tests. 18. medium a Which of the following forms of evidence would be least persuasive in forming the auditor’s opinion? a. Responses to auditor’s questions by the president and controller regarding the investments account. b. Correspondence with a stockbroker regarding the quantity of client’s investments held in street name by the broker. c. Minutes of the board of directors authorizing the purchase of stock as an investment. d. The auditor’s count of marketable securities. 19. medium c Which of the following statements is not true? “The evidence-gathering technique of inquiry: a. cannot be regarded as conclusive.” b. requires the gathering of corroborative evidence.” c. is the auditor’s principal method of evaluating the client’s internal control.” d. does not provide evidence from an independent source.” 20. (SOX) medium c Sarbanes-Oxley requires auditors of public companies to maintain audit documentation for what period of time? a. Not less than 3 years. b. Not less than 5 years. c. Not less than 7 years. d. Through the issuance of the financial statements. 21. medium Analytical procedures must be used during which phase(s) of the audit? b a. b. c. Test of Controls Yes No Yes Planning Yes Yes No 1-114 Completion Yes Yes No d. No No No 22. medium b Which of the following statements is not correct? a. It is possible to vary the sample size from one unit to 100% of the items in the population. b. The decision of how many items to test should not be influenced by the increased costs of performing the additional tests. c. The decision of how many items to test must be made by the auditor for each audit procedure. d. The sample size for any given procedure is likely to vary from audit to audit. 23. medium b Auditors will replace tests of details with analytical procedures when possible because the: a. analytical procedures are more reliable. b. tests of details are more expensive. c. analytical procedures are more persuasive. d. tests of details are more difficult to interpret. 24. medium c Which of the following statements is not correct? a. Persuasiveness of evidence is partially determined by the reliability of evidence. b. The quantity of evidence obtained determines its sufficiency. c. The auditor need not consider the independence of an information source when obtaining evidence. d. Evidence obtained directly by the auditor is ordinarily more reliable than evidence obtained from other sources. 25. medium d Which one of the following is not one of the primary purposes of audit documentation? a. A basis for planning the audit. b. A record of the evidence accumulated and the results of the tests. c. A basis for review by supervisors and partners. d. A basis for determining work deficiencies by peer review teams. 26. medium Which of the following is the most objective type of evidence? a. A letter written by the client’s attorney discussing the likely outcome of outstanding lawsuits. b. The physical count of securities and cash. c. Inquiries of the credit manager about the collectibility of noncurrent accounts receivable. d. Observation of cobwebs on some inventory bins. b 27. medium b Which of the following statements regarding docum...
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