Exam (elaborations)
Chapter 5 - Audit Evidence (1
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Chapter 5 - Audit Evidence (1
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Chapter 5 - Audit EvidenceCH. 5
Under which of the following circumstances should an auditor consider confirming the terms of a
large complex sale?
a. When the assessed level of control risk over the sale is low.
b. When the assessed level of detection risk over the sale is high.
c. When the combined assessed level of inherent and control risk over the sale is moderate.
d. When the combined assessed level of inherent and control risk over the sale is high. - ANS-D
CH. 5
When assessing the competence of the internal auditors, an independent CPA should obtain
information about the
a. Organizational level to which the internal auditors report.
b. Quality of the internal auditors' working paper documentation.
c. Policies prohibiting internal auditors from auditing sensitive matters.
d. Internal auditors' preliminary assessed level of control risk. - ANS-B
CH. 5
Under which of the following circumstances would the use of the blank form of confirmations of
accounts receivable most likely be preferable to negative confirmations?
a. The recipients are likely to sign the confirmations without devoting proper attention to them.
b. Subsequent cash receipts are unusually difficult to verify.
c. Analytical procedures indicate that few exceptions are expected.
d. The combined assessed level of inherent risk and control risk is low. - ANS-A
CH. 5
To reduce the risks associated with accepting fax responses to requests for confirmations of
accounts receivable, an auditor most likely would
a. Examine the shipping documents that provide evidence for the existence assertion.
b. Verify the sources and contents of the faxes in telephone calls to the senders.
c. Consider the faxes to be nonresponses and evaluate them as unadjusted differences.
d. Inspect the faxes for forgeries or alterations and consider them to be acceptable if none are
noted. - ANS-B
CH. 5
In assessing the competence and objectivity of an entity's internal auditor, an independent
auditor would be least likely to consider information obtained from
, a. Discussions with management personnel.
b. External quality reviews of the internal auditor's activities.
c. Previous experience with the internal auditor.
d. The results of analytical procedures. - ANS-D
CH. 5
An internal auditor's work would most likely affect the nature, timing, and extent of an
independent CPA's auditing procedures when the internal auditor's work relates to assertions
about the
a. Existence of contingencies.
b. Valuation of intangible assets.
c. Existence of fixed asset additions.
d. Valuation of related party transactions. - ANS-C
CH. 5
In which of the following circumstances would the use of the negative form of accounts
receivable confirmation most likely be justified?
a. A substantial number of accounts may be in dispute and the accounts receivable balance
arises from sales to a few major customers.
b. A substantial number of accounts may be in dispute and the accounts receivable balance
arises from sales to many customers with small balances.
c. A small number of accounts may be in dispute and the accounts receivable balance arises
from sales to a few major customers.
d. A small number of accounts may be in dispute and the accounts receivable balance arises
from sales to many customers with small balances. - ANS-D
CH. 5
When considering the objectivity of internal auditors, an independent auditor should
a. Test a sample of the transactions and balances that the internal auditors examined.
b. Determine the organizational level to which the internal auditors report.
c. Evaluate the quality control program in effect for the internal auditors.
d. Examine documentary evidence of the work performed by the internal auditors. - ANS-B
CH. 5
For which of the following judgments may an independent auditor share responsibility with an
entity's internal auditor who is assessed to be both competent and objective? (materiality of
misstatements; evaluation of accounting estimates)
a. Yes; No
b. No; Yes
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