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AUDIT THEORY: Audit Evidence and Audit Programs quizzer (from Audit Theory book by Alvin Arens)
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Questions with Answers from Alvin Arens' Audit and Assurance book 15th Edition.
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Audit Evidence and Audit ProgramsMULTIPLE CHOICE:
1. The permanent file section of the working papers that is
kept for each audit client most likely contains
a. Review notes pertaining to questions and comments
regarding the audit work performed.
b. A schedule of time spent on the engagement by each
individual auditor.
c. Correspondence with the client's legal counsel
concerning pending litigation.
d. Narrative descriptions of the client's internal control
policies and procedures
ANSWER: D
2. Of the following procedures, which is not considered part of
“obtaining an understanding of the client’s environment?”
a. Examining trade publications to gain a better
understanding of the client's industry.
b. Confirming customer accounts receivable for existence
and valuation.
c. Touring the client's manufacturing and warehousing
facilities to gain a clearer understanding of
operations.
d. Studying the internal controls over cash receipts and
disbursements.
ANSWER: B
3. If working papers are to have the characteristics that will
ensure that they achieve their primary purposes, which of
the following is the most important?
a. Working papers must be of standard format and standard
content.
b. Working papers must be properly indexed and cross-
referenced to the draft audit report.
c. Working papers must provide sufficient, competent, and
useful information to support the audit report.
d. Working papers must be arranged in logical order
following the audit program sequence.
ANSWER: C
36
,37 Chapter 4 Audit Evidence and Audit Programs
4. Which of the following is not an example of analytical
evidence?
a. Compared inventory turnover by major class with the
prior year on a monthly and quarterly basis.
b. Compared gross profit percentages by major product
classes with the prior year.
c. Examined invoices for plant asset additions to
determine whether the client had erroneously recorded
ordinary repairs as plant assets.
d. Examined monthly performance reports and investigated
significant variations from budgeted amounts.
ANSWER: C
5. Choose the best illustration of objective audit evidence
from the following
a. The paid invoice file containing invoices matched with
receiving reports and purchase orders.
b. Management's assertion that payment procedures require
matching of invoice with receiving report and purchase
order.
c. Clerical staff assurances that management policy
regarding payment of invoices--matching of invoice with
receiving report and purchase order--is always
followed.
d. The treasurer's statement of not remembering any
exceptions in which an invoice was submitted for
payment that was not accompanied by a matching
receiving report and purchase order.
ANSWER: A
6. An initial (first-time) audit requires more audit time to
complete than a recurring audit. One of the reasons for
this is that
a. New auditors are usually assigned to an initial audit.
b. Predecessor auditors need to be consulted.
c. The client's business, industry, and internal control
are unfamiliar to the auditor and need to be carefully
studied.
d. A larger proportion of customer accounts receivable
need to be confirmed on an initial audit.
ANSWER: C
, Chapter 4 Audit Evidence and Audit Programs 38
7. Which of the following is a basic tool used by the auditor
to control the audit work and review the progress of the
audit?
a. Time and expense summary.
b. Engagement letter.
c. Progress flowchart.
d. Audit program.
ANSWER: D
8. An auditor wants to develop an audit test to evaluate the
reasonableness of the quantity of scrap material resulting
from a certain production process compared to industry
standards. Which would be the most competent type of
evidence available to satisfy this objective?
a. Documentary.
b. Hearsay.
c. Physical.
d. Analytical.
ANSWER: D
9. As part of audit planning, CPAs should design audit programs
for each individual audit and should include audit steps and
procedures to
a. Detect and eliminate fraud.
b. Increase the amount of management information
available.
c. Provide assurances that the objectives of the audit are
met.
d. Ensure that only material items are audited.
ANSWER: C
10. Of the following audit procedures, which best supports the
valuation objective?
a. Performing a lower of cost or market test of the
client's inventories.
b. Reviewing a contingent liability footnote for proper
wording.
c. Searching for unrecorded liabilities.
d. Observing the client's year-end physical inventory
taking.
ANSWER: A
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