What is evidence? correct answers - any information used by the auditor to determine whether the information being audited is stated in accordance with GAAP
the two determinants of the persuasiveness of evidence correct answers appropriateness and suffciency
appropriateness of evidence correc...
ACCT 5200 Exam 1 || with 100% Errorless Answers.
What is evidence? correct answers - any information used by the auditor to determine whether
the information being audited is stated in accordance with GAAP
the two determinants of the persuasiveness of evidence correct answers appropriateness and
suffciency
appropriateness of evidence correct answers a measure of the quality of evidence; the degree to
which evidence is considered believable or worthy of trust; cannot be improved by selecting a
larger sample size or different population items
characteristics of appropriate evidence correct answers relevance and reliability
relevance correct answers evidence must pertain to or be relevant to the audit objective that the
auditor is testing before it can be reliable
reliability correct answers degree to which evidence is believable or trustworthy
6 types of reliability correct answers 1. independence of provider
2. effectiveness of internal controls
3. auditor's direct knowledge
4. qualifications of individuals providing the information
5. degree of objectivity
6. timeliness
sufficiency of evidence correct answers the quantity of evidence determines it sufficiency; as
sample size increases, the sufficiency increases
types of audit evidence correct answers 1. physical examination
2. observation
3. confirmation
4. inspection
5. inquiries of the client
6. recalculation
7. reperformance
8. analytical procedures (later)
physical examination correct answers the inspection or count of a tangible asset by the auditor; if
an object being examined has no inherent value, the evidence is called inspection
observation correct answers use of the senses to assess certain activities; involves looking at a
process or procedure being performed by others; physical examination is a subset of observation;
, inspection of documents correct answers the auditor's examination of the client's documents and
records to substantiate the information that is or should be included in F/S; documentation can be
classified as internal or external
confirmation correct answers the receipt of a written or oral response from an independent third
party verifying the accuracy of information that was requested by the auditor
inquiry correct answers obtaining written or oral information from the client in response to
questions from the auditor; inquiry cannot be regarded as conclusive because it is not from an
independent source and may be biased in the client's favor
recalculation correct answers rechecking a sample of computations; includes rechecking
arithmetical accuracy and checking computation of depreciation expense
reperformance correct answers auditor's independent tests of client accounting procedures and/or
controls; rechecking transfers of information made by the client during the period under audit;
includes transfer of information and comparing price used on an invoice to the master price list
analytical procedures correct answers evaluation of financial information through analysis of
plausible relationships among financial and nonfinancial data; required during planning and
completion phases of the audit; can be used as an audit procedure during fieldwork
5 types of analytical procedures correct answers 1. compare client and industry data
2. compare client data with prior-period data
3. compare client data with client-determined expected results
4. compare client data with auditor-determined expected results
5. compare client data with expected results, using nonfinancial data
compare client data with client-determined expected results correct answers usually involves
comparison to budgets; good for governmental agencies
steps of audit planning correct answers 1. accept client and perform initial audit planning
2. understand the client's business and industry
3. assess client business risk
4. perform preliminary analytical procedures
5. set materiality and assess acceptable audit risk and inherent risk
6. understand internal control and assess control risk
7. gather information to assess fraud risks
8. develop overall audit strategy and audit program
perform preliminary analytical procedures correct answers evaluate interim financial statements:
examine changes from prior year and consider projected full year financial statements compared
to current year-to-date and prior year/ consider key financial ratios: over time, vs. competitors,
vs. industry averages, vs. compared to benchmarks/budgets
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