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AUDIT EVIDENCE, PROCEDURES ANDDOCUMENTATION To determine the sufficiency of information regarding interpretation of a contract, an auditor uses a. Logical relationship between information and issue. b. Objective evaluation. c. Subjective judgments. d. The best obtainable information. Reliable inform...

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AUDIT EVIDENCE, PROCEDURES AND DOCUMENTATION 3. To determine the sufficiency of information regarding interpretation of a contract, an auditor uses a. Logical relationship between information and issue. b. Objective evaluation. c. Subjective judgments. d. The best obtainable information. 4. Reliable information is a. Competent and the best attainable through the use of appropriate engagement techniques. b. Factual , adequate , and convincing so that a prudent person would reach the same conclusion as the auditor. c. Helpful in assisting the organization in meeting prescribed goals. d. Supportive of the engagement observations and consistent with the engagement objectives. 5. When sampling methods are used, the concept of sufficiency of information means that the sample selected provide a. Absolute assurance that a sample in representation of the population. b. Reasonable assurance that the information has a logical relationship to the engagement objective. c. Reasonable assurance that they are representative of the sampled population. d. The best information that is reasonably obtainable. 6. Which of the following is an essential factor in evaluating the sufficiency of information? The information must a. Be based on references that are considered competent. b. Be convincing enough for a prudent person to reach the same decision. c. Be well documented and cross-referenced in the working papers. d. Bear a direct relationship to the observation and include all of the elements of an observation. 7. An auditor is evaluating the advertising function. The organization has engaged a medium-sized local advertising agency to place advertising in magazine publications. As part of the review of the engagement working papers, the auditing supervisor is as part of the review of the engagement working papers, the auditing supervisor is evaluating the information collected. The auditor reviewed the language in the advertising for its legality and compliance with fair trade regulations by interviewing the organization's advertising manager , the product marketing director (who may not have been objective) , and five of the organization's largest customers (who may not have been knowledgeable). The supervisor can justifiably conclude that the information is a. Conclusive. b. Insufficient. c. Irrelevant. d. Reliable. 8. An auditor has set an engagement objective of determining whether all cash receipts are deposited intact daily. To satisfy this objective, the auditor interviewed the controller who gave assurances that all cash receipts are deposited as soon as reasonably possible. As information

can be used to satisfy the stated engagement objective, the controller’s assurances are a. Sufficient, reliable and relevant b. Sufficient but not reliable or relevant c. Relevant but not sufficient or reliable d. Not sufficient, reliable, and relevant 9. While performing an engagement relating to an organization’s cash controls, the auditor observed that cash receipts are not deposited intact daily. A comparison of a sample of cash receipts listed revealed that each cash receipt list equaled cash journey entry amounts but not daily bank deposits amounts, and cash receipts list total equaled bank deposit totals in the long run. This information as support for the auditor’s observation is a. Sufficient, reliable and relevant b. Sufficient but not reliable or relevant c. Relevant but not sufficient or reliable d. Not sufficient, reliable, and relevant 10. During an engagement, the auditor should consider the following factor(s) in determining the extent to which analytical procedures should be used during the engagement: a. Significance of the area being examined. b. Precision with which the results of analytical audit procedures can be predicted. c. Adequacy of the system of internal control. d. All of the answers are correct. 11. An inexperienced auditor notified the senior auditor of a significant variance from the engagement client’s budget. The senior told the new auditor not to worry because the senior had heard that there had been an unauthorized work stoppage that probably accounted for the difference. Which of the following statements is most appropriate? a. The senior used proper judgement in curtailing what could have been a wasteful investigation. b. The senior should have halted the engagement until the variance was fully explained. c. The senior should have aided the new auditor in formulating a plan for accumulating appropriate information. d. The new auditor should have investigated the matter fully and not bothered the senior. 12. Analytical procedures enable the auditor to predict the balance or quantity of an item. Information to develop this estimate can be obtained by all the following except a. Comparing financial data with data for comparable prior periods, anticipated results (e.g., budgets and forecasts), and similar data for the industry in which the entity operates m. b. Studying the relationships of elements of financial data that would be expected to conform to a predictable pattern based upon the entity’s experience. c. Studying the relationship of financial data with relevant nonfinancial data. d. Tracing transactions through the system to determine whether procedures are being applied as prescribed. 13. A production manager for a moderate-sizes manufacturing organization began ordering raw materials and had them delivered to a wholesaler that the manager

was running as a side business. The manager falsified receiving documents and approved the invoices for payment. Which of the following engagement procedures is most likely to detect this fraud? a. Observe the receiving dock and count materials received; compare the counts with receiving reports completed by receiving personnel. b. Perform analytical tests, comparing production, material purchased, and raw materials inventory level; investigate differences. c. Take a sample of cash disbursement and confirm the amount purchased, purchase price, and date of shipment with the vendors. d. Take a sample of cash disbursements, compare purchase orders, receiving reports, invoices, and check copies. 14. Analytical procedures can best be categorized as a. Budget comparisons. b. Qualitative tests. c. Substantive tests. d. Tests of controls. 15. Analytical procedures in which current financial statements are compared with budgets or previous statements are primarily intended to determine the a. Use of an erroneous cutoff date. b. Overall reasonableness of statement contents. c. Existence of specific errors or omission. d. Adequacy of financial statement disclosure. 16. An adequately documented working paper should a. Not contain copies engagement client records. b. Follow a unique form and arrangement. c. Contain examples of all forms and procedures used by the engagement client. d. Be concise but complete. 17. Which of the substantive fieldwork procedures presented below provides the best information about completeness of recorded revenues? a. Reconciling shipping records to recorded sales. b. Reconciling the sales journal to the ledger control account. c. Vouching charges made to the accounts receivable subsidiary ledger to supporting shipping records. d. Vouching shipping records to the customer order file. 18. Observation is considered a reliable engagement procedure, but one that is limited in usefulness. However, it is used in a number of different engagement situations. Which of the following statements is true regarding observation as an engagement technique? a. It is the most persuasive technique for determining fraud has occurred. b. It is the most persuasive methodology to learn how transactions are really processed during the period under review. c. It is the most effective engagement methodology to use in filling out internal control questionnaires. d. It is most persuasive about the performance of a process but is limited to the moment in time at which the observation takes place.

19. Which of the following types of tests is the most persuasive if an auditor wants assurance of the existence of inventory stored warehouse? a. Examining the shipping documents that support recorded transfers to and form the warehouse. b. Examining warehouse receipts contained in the engagement client's records. c. Obtaining written confirmation from management. d. Physically observing the inventory in the warehouse. 20. Documents provide information with differing degrees of persuasiveness. If the engagement objective is to obtain information that payment has actually been made for a specific invoice from a vendor, which of the following documents ordinarily is the most persuasive? a. A canceled check, made out to the vendor and referenced to the invoice, included in a cutoff bank statement that the auditor received directly from the bank b. A vendor's original invoice stamped “PAID” and referenced to a check number. c. An accounts payable subsidiary ledger that shows payment of the invoice. d. An entry in the engagement client’s cash disbursement journal supported by a voucher package containing the vendor’s invoice. 21. An auditor at a savings and loan concludes that a secured real estate loan is collectible. Which of the following engagement procedures provides the most persuasive information about the loan's collectability? a. Reviewing the loan file for proper authorization by the credit committee. b. Examining the loan application for appropriate borrower's signatures. c. Examining documentation of a recent, independent appraisal of the real estate. d. Confirming the loan balance with the borrower. 22. The most persuasive information about the existence of newly acquired computers for the sales department is a. Physical examination. b. Observation of engagement client's procedure. c. Inquiry of management. d. Documentation prepared externally. 23.The most persuasive information regarding the asset value of newly acquired computers is a. Physical examination. b. Documentation prepared externally. c. Observation of engagement client's procedure. d. Inquiry of management. 24. Which of the following does not describe one of the functions of engagement working papers? a. Provides the principal support for engagement communications b. Facilitates third-party reviews. c. Aids in the professional development of the operating staff. d. Aids in the planning, performance, and review of engagements. 25. Which of the following represents the general order of persuasiveness, from most to least, for the types of information listed below:

I. Inquiry of management. II. Observation of engagement client's procedure. III. Physical examination. IV. Documentation prepared externally. a. IV, III, I, II. b. IV, I, II, III. c. III, IV, II, I. d. II, IV, I, III. 26. The primary purpose of an auditor's working papers is to a. Serve as a means with which to prepare the financial statements. b. Provide documentation of the planning and execution of engagement procedures performed. c. Document weaknesses in internal control with recommendations to management for improvement. d. Comply with the Standards. 27. Which of the following is the most important if working papers are to have the characteristics that will ensure that they achieve their primary purposes? a. Working papers must provide sufficient, reliable, and useful information to support the final engagement communication. b. Working papers must be properly indexed and crossreferenced to the draft final engagement communication. c. Working papers must be of standard format and standard content. d. Working papers must be arranged in logical order following the engagement work program sequence. 28. The primary purpose of an engagement working paper prepared in connection with payroll expense is to a. Verify the work done by the auditor. b. Record the names of all employees. c. Record payroll data and analyses to support reported documentations. d. Provide documentation to support payroll taxes due. 29. Engagement working paper should include a. All working papers prepared during a previous engagement performed in the same area. b. Documentation in the examination and evaluation of the adequacy and effectiveness of the system of internal control. c. Copies of all procedures that were reviewed during the engagement. d. Copies of all source documents examined in the course of the engagement. 30. Which of the following is an unnecessary feature of a working paper prepared in connection with maintenance costs? a. The auditor has initiated and dated the working paper as of the date completed even though the working paper was prepared over preceding 4 working days. b. Total acquisition cost of the property, plant, and equipment for the preceding month is shown. c. Total repair expense for the month preceding the engagement is shown. d. The supervisor has initiated the working paper as reviewer although the working paper was prepared by another person.

31. Each individual working paper should, at a minimum, contain a. An expression of the auditor’s overall opinion. b. A descriptive heading. c. A tick mark legend. d. A complete flowchart of the system of internal controls for the area being reviewed. 32. Engagement working paper are indexed by means of a reference numbers. The primary purpose of indexing is to a. Support the final engagement communication. b. Permit cross-referencing and simplify supervisory review c. Determine that working papers adequately support observations, conclusions, and recommendations. d. Eliminate the need for follow up reviews. 33. When engagement conclusions re challenged, the auditor’s factual rebuttal is best facilitated by a. Cross-referencing of the working papers. b. Explicit procedures in the engagement work program. c. Pro forma working papers. d. Summaries in the engagement work program. 34. Which of the following conditions constitute inappropriate working-paper presentation? a. All forms and directives used by the engagement client are included in the working papers. b. Engagement observations are cross-referenced to supporting documentation. c. Flowcharts are included in the working papers. d. Tick marks are explained in notes. 35. Which of the following engagement procedures provides the best information about the collectibility of notes receivable? a. Confirmation of the note receivable balances with the debtors. b. Examination of the cash receipts records to determine promptness of interest and principal payments. c. Examination of notes for appropriate debtor’s signatures. d. Reconciliation of the details of notes receivable and the provision for the uncollectible amounts to the general ledger control. 36. Ordinarily, what source of information should most affect the auditor's conclusions? a. Oral b. Inquiry c. Informal d. External 37. An auditor's objective is to determine the cause of inventory shortages shown by the physical inventory taken by independent service organization that use some and engagement client personnel. The auditor addresses this objective by reviewing the count sheet, inventory print outs, and memos from the last inventory. The source of information and the sufficiency of this information are a. Both external and internal and not sufficient b. Both external and internal and sufficient c. External and sufficient d. Internal and not sufficient

38. The most conclusive information to support supplier account balances is obtained by a. Reviewing the vendor statement obtained from the accounts payable clerk b. Performing analytical account analysis c. Obtaining confirmations of balances from the suppliers d. Interviewing the accounts payable manager to determine the internal controls maintained over accounts payable processing 39. The supervisor is reviewing the working papers produced by a staff auditor during the fraud investigation. Among the items contained in the working papers is a description of an item of physical information. Which of the following is the most probable source of this item of information? a. Computing variances b. Examining records c. Interviewing people d. Observing condition 40. An auditor takes a photograph of a engagement client's workplace. The photograph is a form of what kind of information? a. Testimonial b. Physical c. Documentary d. Analytical 41. Which of the following is an example of documentary information? a. A photograph of an engagement client's workplace b. A page of a general ledger containing irregularities placed there by perpetrator of a fraud c. A page of auditor's working papers containing the computations that demonstrate the existence of an error or irregularity d. A letter from a former employee alleging of fraud 42. In an engagement to review travel expenses, the auditor calculates average expenses per day travel for all sales personnel and then examines detailed receipts for those with high averages. These procedures represent the identification of which types of information? a. Analytical and physical b. Documentary and analytical c. Documentary and physical d. Physical and testimonial 43. Of the following which is the least perspective type of the audit evidence? a. Documents mailed by outsiders to the auditor. b. Correspondence between auditor and vendors. c. Copies of invoices inspected by the auditor. d. Copies of bank statement. 44. Which of the following presumptions does not relate to the competence pf audit evidence? a. The more effective the internal control structure, the more assurance it provides about the accounting data and financial statements. b. An auditor's opinion, to be economically useful, is formed within reasonable time and based on evidence obtained at reasonable cost.

c. Evidence obtained form independent sources outside the entity is more reliable than evidence secured solely within the entity. d. The independent auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly. 45. Which of the following types of audit evidence is the least persuasive? a. Prenumbered purchase order forms. b. Bank statements obtained from the client. c. Test counts of inventory performed by the auditor. d. Correspondence from the client's attorney about litigation. 46. Which of the following types of audit evidence is the most persuasive a. Prenumbered purchase order forms. b. Clients worksheets supporting cost allocation c. Bank statements obtained from the client. d. Client represented letter. 47. During the initial planning phase of audit, a CPA most likely would a. Identity specific internal control activities that are likely to prevent fraud. b. Evaluate the reasonableness of the client's accounting estimates. c. Discuss the timing of the audit procedures with the client's management. d. Inquire of the client's attorney as to wonder any unrecorded claims are probable of assertion. 48. An auditor should design the written audit program so that a. All material transactions will be selected for substantive testing. b. Substantive test prior to the balances sheet date will be minimized. c. The audit procedures selected will achieve specific audit objectives. d. Each account balance will be tested under either tests of control or tests of transactions. 49. Which of the following circumstances most likely would cause an auditor to consider whether material misstatements exist in an entity's financial statements? a. Management places little emphasis on meeting earnings projections. b. The board of directors makes all major financing decisions. c. Reportable conditions previously communicated to management are not corrected. d. Transactions selected for testing are not supported by proper documentation 50. The in-charge auditor most likely would have a supervisory responsibility to explain to the staff assistants a. That immaterial irregularity is not be reported to the client’s audit committee b. How the results of various auditing procedures performed by the assistants should be evaluated c. What benefits may be attained by the assistants’ adherence to established time budgets d. Why certain documents are being transferred from, the current file to the permanent file....