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Exam II auditing Questions With Verified
Answers
The sufficiency of audit evidence refers to: - answer✔The quantity of evidence gathered.
When an auditor selects transactions from the sales journal or ledger and then examines the
underlying source documents, such as shipping document and an invoice to the customer, this is
known as: - answer✔Vouching.
The specific procedures auditors will use to gather evidence are detailed in the: - answer✔audit
program.
A common audit procedure that involves watching a process or procedure being carried out by
client personnel or another party is known as: - answer✔Observation.
The information that auditors use when arriving at their opinion on the fair presentation of the
clients financial statements is called: - answer✔Audit evidence.
In audit evidence, which of the following refers to the logical connection with the assertion being
tested? - answer✔relevance.
Positive confirmation is correspondence sent directly by an auditor to a third party, who must
respond in: - answer✔all circumstances.
which of the following helps discover and analyze patterns, identify anomalies, and extract other
useful information in data underlying the subject matter of an audit? - answer✔ADA (Audit Data
Analytics)
selecting source documents and working forward to follow the transaction through to recording
in the journal and ledger is called: - answer✔tracing.
when reporting inventory on the financial statements, management claims that the items exist,
are owned by the entity, represent a complete list of the inventory owned, and are valued
appropriately. these are examples of: - answer✔assertions.
Stella and Tony, tow relatively inexperienced audit staff associates are discussing audit evidence
in a meeting. Stella and Tony are part of a team auditing a large audit client. the audit manager
running the meeting has advised the team that as part of gathering audit evidence, they should
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take a reasonable steps to ensure the evidence is persuasive. which of the following statements
would most accurately describe the concept of persuasive audit evidence? - answer✔There is
generally an inverse relationship between the quality and quantity of audit evidence gathered,
with more persuasive evidence being gathered if the risk of material misstatement is high.
two audit staff associates have been assigned the task of auditing the clients revenue accounts. at
the beginning of the engagement, the two staff associates are discussing how best to perform this
audit, and what procedures this would most likely involve. which of the following most
accurately describes the procedures that the staff associates will use to audit these accounts? -
answer✔The staff associates are likely to start with the underlying source documents pertaining
to selected entries in the revenue account, and then work forwards to match thesis entries with
either cash received or accounts receivable balances.
During the audit of hornet inc., a large nationwide distributor of pest control products, there has
been considerable discussion with the clients top management as to how the evidence required to
issue an appropriate audit opinion will be obtained. management has offered various suggestions
with respect to how the information can be passed to the external auditors. which of the
following suggestions would be the most problematic for the auditor? - answer✔Management
has advised that all information will first be gathered by the internal audit function to cut down
on the cost of the external audit, and will then be passed to the auditors.
During the audit of Somerset Enterprise, a distributor of mechanical parts across the United
States and Canada, a question has been raised by an audit staff associate with respect to the
balances listed by management for the accounts receivable and associated allowance accounts.
the assertion that would most directly relate to this issue would be: - answer✔the valuation
assertion, as the auditor will be focused on ensuring that the gross and net amounts of receivables
along with the associated allowance, are fairly and accurately valued.
an important part of any audit is gathering of sufficient and appropriate audit evidence by the
auditing team assigned to the engagement. which of the following choices most accurately
describes the types of audit evidence that an auditor might collect in order to support his or her
opinion on the financial statements? - answer✔The auditor is likely to collect a wide breadth of
information to either corroborate or refute the financial statement assertions made by
management. the questions of how much evidence and types of evidence to collect are generally
a matter of auditor judgment.
During the audit of ransom enterprises, a large manufacturer of personal computing devices, the
auditor, strongbow CPAs, is concerned that it will take them an inordinate amount of time to
effectively audit some accounts due to the sheer volume of transactions in these accounts. A
viable suggestion to handle this problem could be: - answer✔To consider employing audit data
analytics (ADA) as an automated tool to search for issues and areas that may require further
investigation.
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Considering the risk of overstatement of receivables due to premature revenue recognition that
inflates revenues and receivables, which assertion for the accounts receivable balance most
relevant? - answer✔existence
Johnny and Rebecca are discussing the different types of evidence they plan to collect as part of
the audit of major client; there has been some disagreement between them as to which types of
audit evidence might be considered the most reliable, so they have approached you to settle the
dispute. which of the following responses would be the most appropriate in this scenario? -
answer✔the legitimacy and reliability of the audit evidence will be determined by how and from
whom it was gathered. for example, evidence obtained externally is usually more reliable than
evidence obtained internally.
As part of the audit of table top llc a manufacturer of high-end specialized furniture, the partners
of the external auditors, cpi auditing inc are meeting to discuss which audit procedures may be
more appropriate in this case. the auditors are interested in learning more about the quantities of
material that go into the products sold by table top llc. A method the auditor could use to achieve
this would be to: - answer✔perform an observation procedure, which may involve either the
auditor or a specialist observing the materials used and the processes conducted in order to
manufacture the products.
As part of the external audit of candle co., a regional distributor of candles and other wax
products, you have been assigned to audit the clients liability accounts. you are aware that since
the last audit, the client conducted a bond issue. which of the following best represents the types
of evidence that you would collect to audit assertions pertaining to this area? - answer✔it is
likely that you would conduct an inspection procedure to inspect documents related to the bond
issue, as well as analytical procedures to calculate interest expense related to the bonds.
The quality of audit evidence is determined by its ________________________ in providing
support for the conclusions on which the auditors opinions is based. - answer✔relevance and
reliability.
what do you call a statement or representation, explicit or implied, made by management
regarding the recognition, measurement, presentation and disclosure of items included in the
financial statement and notes? - answer✔assertion.
Auditors do the following when considering rights and obligations? - answer✔gather evidence to
verify that recorded assets are owned by the entity and recorded liabilities represent
commitments of the entity.
Auditors inspecting purchase orders to proper authorization by a manager before a purchase is
made would be an example of a: - answer✔Test of controls.
when considering classification, auditors gather evidence that transactions and events have been
recorded in: - answer✔in the proper accounts.
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Relevance of audit refers to: - answer✔its relationship to the assertion being tested.
an important component of any external audit is the gathering of sufficient and appropriate audit
evidence by the audit team assigned to the engagement. during which phase of the audit does the
team typically collect audit evidence? - answer✔auditors generally will gather appropriate and
sufficient audit evidence at all stages of the audit, including the risk assessment phase, testing of
controls, and when performing substantive procedures.
a fundamental premise of any external audit is checking assertions and searching for evidence to
either corroborate or refute these assertions. which of the following statements best describes the
idea of an assertion and who holds responsibility for the assertions made? - answer✔Assertions
are made by the clients management, and are implicit within the financial statements.
management holds ultimate responsibility for the accuracy of these assertions.
If an auditor has determined that inherent risk for accounts receivable is high and wishes to
verify the balance as accurate, the best corroborating evidence would be: - answer✔a positive
confirmation sent to the entity on question.
During the audit of a clients inventory account by the external auditors, which of the following
assertions pertaining to inventory are likely to be evaluated by the external auditor, and for what
reason? - answer✔The existence assertion is likely to be audited to ensure that inventory levels
stayed by the clients accounts exist, and the valuation assertion to ensure that the inventory is
appropriately valued.
The primary assertion being tested when using receivable confirmation is: - answer✔Existence.
selecting source documents and working forwards to follow the transaction through to recording
in the journal and ledger is called: - answer✔Tracing.
when considering classification, auditors gather evidence that transactions and events have been
recorded: - answer✔in the proper accounts.
auditors spend a considerable amount of total audit time on the process of obtaining and
evaluating audit evidence in support of management assertions, which is sourced primarily from
the clients : - answer✔accounting records.
reliability of audit evidence refers to: - answer✔the source of the evidence and form or nature of
the evidence.
the responsibility of ensuring sufficient appropriate audit evidence is gathering to arrive at an
opinion is: - answer✔the responsibility of the auditor.
using audit data analytics (ADA) software typically makes the audit : - answer✔more
comprehensive and more efficient.
