B the quantity of evidence obtained determines its

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Unformatted text preview: entation is not correct? a. Documentation includes examining client records such as general ledgers and supporting journals. b. Internal documents are documents that are generated within the company and used to communicate with external parties. c. External documents are documents that are generated outside of the company and are used to communicate the results of a transaction. d. External documents are considered more reliable than internal documents. 28. medium c When making decisions about evidence for a given audit, the auditor’s goal is to obtain a sufficient amount of timely, reliable evidence that is relevant to the information being verified, and to do so: a. no matter the cost involved in obtaining such evidence. b. at any cost because the costs are billed to the client. c. at the lowest possible total cost. d. at the cost suggested in the engagement letter. 29. medium d “Physical examination” is the inspection or count by the auditor of items such as: a. cash, inventory, and payroll timecards. b. cash, inventory, canceled checks, and sales documents. 1-115 c. d. 30. medium c cash, inventory, canceled checks, and tangible fixed assets. cash, inventory, securities, notes receivable, and tangible fixed assets. Which items affect the sufficiency of evidence when choosing a sample? a. b. c. d. Selecting items with a high likelihood of misstatement Yes No Yes No The randomness of the items selected Yes No No Yes 31. medium a Which of the following is an example of vouching? a. Trace inventory purchases from the acquisitions journal to supporting invoices. b. Trace selected sales invoices to the sales journal. c. Trace details of employee paychecks to the payroll journal. d. All of the above are examples of vouching. 32. medium b Which of the following statements about confirmations is true? a. Confirmations are expensive and so are often not used. b. Confirmations may inconvenience those asked to supply them, but they are widely used. c. Confirmations are sometimes not reliable and so auditors use them only as necessary. d. Confirmations are required for several balance sheet accounts but no income statement accounts. 33. medium b Traditionally, confirmations are used to verify: a. individual transactions between organizations, such as sales transactions. b. bank balances and accounts receivable. c. fixed asset additions. d. payroll expenses. 34. medium b To be considered reliable evidence, confirmations must be controlled by: a. a client employee responsible for accounts receivable. b. a financial statement auditor. c. a client’s internal audit department. d. a client’s controller or CFO. 35. medium Indicate whether confirmation of accounts receivable and accounts payable is required or optional: b a. b. c. d. Accounts Receivable Required Required Optional Optional Accounts Payable Required Optional Required Optional 36. medium b The Auditing Standards Board has concluded that analytical procedures are so important that they are required during: a. planning and test of control phases. b. planning and completion phases. c. test of control and completion phases. d. planning, test of control, and completion phases. 37. medium Which of the following statements regarding analytical procedures is not correct? a. Analytical tests emphasize a comparison of client internal controls to GAAP. 1-116 a b. c. d. Analytical procedures are required on all audits. Analytical procedures can be used as substantive tests. For certain accounts with small balances, analytical procedures alone may be sufficient evidence. 38. medium a A benefit obtained from comparing the client’s data with industry averages is that it provides a(n): a. indication of the likelihood of financial problems. b. indication where errors exist in the statements. c. benchmark to be used in evaluating a client’s budgets. d. comparison of “what is” with “what should be.” 39. medium a The primary purpose of performing analytical procedures in the planning phase of an audit is to: a. help the auditor obtain an understanding of the client’s industry and business. b. assess the going concern assumption. c. indicate possible misstatements. d. reduce detailed tests. 40. medium d Which of the following is not a correct combination of terms and related type of audit evidence? a. Foot – reperformance. b. Compare – documentation. c. Vouch – documentation. d. Trace – analytical procedures. 41. medium c Which of the following is not a correct combination of terms and related type of audit evidence? a. Inquire – inquiries of client. b. Count – physical examination. c. Recompute – documentation. d. Read – documentation. 42. medium d Which of the following is not one of the major types of analytical procedures? a. Compare client with industry averages. b. Compare client with prior year. c. Compare client with budget. d. Compare client with SEC averages. 43. medium c What is the overall objective of audit documentation? a. Defend against claims of a deficient audit. b. Provide a basis for reviewing th...
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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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