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7-1 AC 316 CHAPTER 7 AUDIT EVIDENCE D 1.Which of the following "decisions" are relevant to the auditor's evidence accumulation?

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AC 316 CHAPTER 7 AUDIT EVIDENCE

D 1.Which of the following “decisions” are relevant to the auditor’s evidence
accumulation?
a. Type of audit procedure to use.
b. # of items to examine.
c. Timing of audit procedures.
d. All of the above are relevant.
A 2. Audit procedures are normally performed
a. early in the accounting period being examined.
b. throughout the accounting period being examined, but with emphasis on the
transactions near the end.
c. within one to three months after the close of the accounting period.
d. during all three of the above periods.
B 3. Which of the following forms of evidence is most reliable?
a. General ledger account balances.
b. Confirmation of A/R balance received from a customer.
c. Internal memo explaining the issuance of a credit memo.
d. Copy of month-end adjusting entries.
D 4.Evidence obtained directly by the auditor is more competent than information
obtained indirectly. Which of the following is not an example of the auditor’s
direct knowledge?
a. Physical examination.
b. Observation.
c. Computation.
d. Inquiry.
A 5.When an auditor calculates the gross margin as a percent of sales and compares
it with previous periods, this type of evidence is called
a. physical examination.
b. analytical procedures.
c. observation.
d. inquiry
C 6. Evidence obtained directly by the auditor will not be reliable if
a. the auditor lacks the qualifications to evaluate the evidence.
b. it is provided by the client’s attorney.
c. the client denies its veracity.
d. it is impossible for the auditor to obtain additional corroboratory evidence.
B 7. For a given audit procedure, the evidence obtained from a sample of 200 would
ordinarily be
a. more sufficient than from a sample of one hundred.
b. less sufficient than from a sample of one hundred.
c. more competent than from a sample of one hundred.
d. less competent than from a sample of one hundred.
D 8.Auditors routinely examine selected items from a much larger population.
Which of the following methods might an auditor use in selecting the items to
examine?
a. Select the items that are largest.
b. Select items randomly.
c. Select items that are most likely to contain misstatements.
d. All of the above are appropriate methods.
A 9. Which of the following statements regarding the relevance of evidence is
correct?
a. To be relevant, evidence must pertain to the question at hand.
b. To be relevant, evidence must be persuasive.
c. To be relevant, evidence must relate to multiple audit objectives.
d. To be relevant, evidence must be evaluated in terms of the general audit
objectives.
C 10.Three common types of confirmations used by auditors are (1) negative
confirmations, (2) positive confirmations with a request for information, (3)
positive confirmations with the information included. If they were placed in the
order of their competence, from highest to lowest, the sequence would be
a. 1, 2, 3.
b. 3, 2, 1.
c. 2, 3, 1.
d. 3, 1, 2.
C 11.When the auditor examines the client’s documents and records to substantiate
the information on the financial statements, it is commonly referred to as
a. inquiry.
b. confirmation.
c. vouching.
d. physical examination.
B 12. An example of external documents is
a. employees’ time reports.
b. bank statements.
c. purchase order for company purchases.
d. carbon copies of checks.
A 13.A document which the auditor receives from the client, but which was prepared
by someone outside the client’s organization, is a(n)
a. confirmation.
b. internal document.
c. external document.
d. inquiry.
D 14.“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.
D 15. Unusual fluctuations occur when
a. significant differences are not expected but do exist.
b. significant differences are expected but do not exist.
c. significant differences are expected and do exist.
d. either a or b is true.
C 16. When analytical procedures reveal no unusual fluctuations, the implication is that
a. there are no material errors or fraud.
b. there are no material errors.
c. there are no material fraud.
d. the possibility of a material error or fraud is lessened.
A 17.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.
B 18.Which of the following qualities affecting the persuasiveness of evidence is not
relevant to the auditor’s evidence decisions related to which audit procedures to
use?
a. When procedures are preformed – timeliness.
b. Qualifications of information provider.
c. Effectiveness of internal controls.
d. All of the above are relevant.
B 19.“The detailed description of the results of the four evidence decisions for a
specific audit” is called an
a. audit procedure.
b. audit program.
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c. audit plan.
d. audit guide.
A 20. The audit program usually states all four of the choices below, but it always
includes the
a. audit procedures.
b. sample sizes.
c. particular items to select.
d. timing of the tests.
7-1 AC 316 CHAPTER 7 AUDIT EVIDENCE D 1.Which of the following “decisions” are relevant to the auditor’s evidence accumulation? a. Type of audit procedure to use. b. # of items to examine. c. Timing of audit procedures. d. All of the above are relevant. A 2. Audit procedures are normally performed a. early in the accounting period being examined. b. throughout the accounting period being examined, but with emphasis on the transactions near the end. c. within one to three months after the close of the accounting period. d. during all three of the above periods. B 3. Which of the following forms of evidence is most reliable? a. General ledger account balances. b. Confirmation of A/R balance received from a customer. c. Internal memo explaining the issuance of a credit memo. d. Copy of month-end adjusting entries. D 4.Evidence obtained directly by the auditor is more competent than information obtained indirectly. Which of the following is not an example of the auditor’s direct knowledge? a. Physical examination. b. Observation. c. Computation. d. Inquiry. A 5.When an auditor calculates the gross margin as a percent of sales and compares it with previous periods, this type of evidence is called a. physical examination. b. analytical procedures. c. observation. d. inquiry C 6. Evidence obtained directly by the auditor will not be reliable if a. the auditor lacks the qualifications to evaluate the evidence. b. it is provided by the client’s attorney. c. the client denies its veracity. d. it is impossible for the auditor to obtain additional corroboratory evidence. B 7 . For a given audit procedure, the evidence obtained from a sample of 200 would ordinarily be a. more sufficient than from a sample of one hundred. b. less sufficient than from a sample of one hundred. c. more competent than from a sample of one hundred. d. less competent than from a sample of one hundred. D 8.Auditors routinely examine selected items from a much larger population. Which of the following methods might an auditor use in selecting the items to examine? a. Select the items that are largest. b. Select items randomly. c. Select items that are most likely to contain misstatements. d. All of the above are appropriate methods. A 9. Which of the following statements regarding the relevance of evidence is correct? a. To be relevant, evidence must pertain to the question at hand. b. To be relevant, evidence must be persuasive.
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c. To be relevant, evidence must relate to multiple audit objectives. d. To be relevant, evidence must be evaluated in terms of the general audit objectives. C 10.Three common types of confirmations used by auditors are (1) negative confirmations, (2) positive confirmations with a request for information, (3) positive confirmations with the information included. If they were placed in the order of their competence, from highest to lowest, the sequence would be a. 1, 2, 3. b. 3, 2, 1. c. 2, 3, 1. d. 3, 1, 2. C 11.When the auditor examines the client’s documents and records to substantiate the information on the financial statements, it is commonly referred to as a. inquiry. b. confirmation. c. vouching. d. physical examination. B 12. An example of external documents is a. employees’ time reports. b. bank statements. c. purchase order for company purchases. d. carbon copies of checks. A 13.A document which the auditor receives from the client, but which was prepared by someone outside the client’s organization, is a(n) a. confirmation. b. internal document. c. external document. d. inquiry. D 14.“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. D 15. Unusual fluctuations occur when a. significant differences are not expected but do exist. b. significant differences are expected but do not exist. c. significant differences are expected and do exist. d. either a or b is true. C 16. When analytical procedures reveal no unusual fluctuations, the implication is that a. there are no material errors or fraud. b. there are no material errors. c. there are no material fraud. d. the possibility of a material error or fraud is lessened. A 17.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.
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