Question: Multiple Choice 1 Which of the following procedures would an

Multiple Choice

1. Which of the following procedures would an auditor most likely rely on to verify management’s assertion of completeness?
a. Reviewing standard bank confirmations for indications of cash manipulations.
b. Comparing a sample of shipping documents to related sales invoices.
c. Observing the entity’s distribution of payroll checks.
d. Confirming a sample of recorded receivables by direct communication with the debtors.

2. In testing the existence assertion for an asset, an auditor ordinarily works from the
a. Financial statements to the potentially unrecorded items.
b. Potentially unrecorded items to the financial statements.
c. Accounting records to the supporting documents.
d. Supporting documents to the accounting records.

3. Which of the following statements concerning audit evidence is correct?
a. To be appropriate, audit evidence should be either persuasive or relevant but need not be both.
b. The measure of the reliability of audit evidence lies in the auditor’s judgment.
c. The difficulty and expense of obtaining audit evidence concerning an account balance are a valid basis for omitting the test.
d. An entity’s general ledger may be sufficient audit evidence to support the financial statements.

4. Which of the following procedures would provide the most reliable audit evidence?
a. Inquiries of the entity’s internal accounting staff.
b. Inspection of prenumbered entity purchase orders filed in the vouchers payable department.
c. Observation of procedures performed by the entity’s personnel on the entity’s trial balance.
d. Inspection of bank statements obtained directly from the entity’s financial institution.

5. Which of the following types of audit evidence is the least reliable?
a. Prenumbered purchase order forms prepared by the entity.
b. Bank statements obtained from the entity.
c. Test counts of inventory performed by the auditor.
d. Correspondence from the entity’s attorney about litigation.

6. Audit evidence can come in different forms with different degrees of reliability. Which of the following is the most persuasive type of evidence?
a. Bank statements obtained from the entity.
b. Computations made by the auditor.
c. Prenumbered entity sales invoices.
d. Vendors’ invoices included in the entity’s files.

7. An auditor would be least likely to use confirmations in connection with the examination of
a. Inventory held in a third- party warehouse.
b. Refundable income taxes.
c. Long- term debt.
d. Stockholders’ equity.

8. The assurance bucket is filled with all of the following types of evidence except
a. Test of controls.
b. The audit report.
c. Substantive analytical procedures.
d. Tests of details.

9. The primary objective of final analytical procedures is to
a. Obtain evidence from details tested to corroborate particular assertions.
b. Identify areas that represent specific risks relevant to the audit.
c. Assist the auditor in assessing the validity of the conclusions reached.
d. Satisfy doubts when questions arise about an entity’s ability to continue in existence.

10. The substantive analytical procedure known as trend analysis is best described by
a. The comparison, across time or to a benchmark, of relationships between financial statement accounts or between an account and nonfinancial data.
b. Development of a model to form an expectation using financial data, non-financial data, or both to test account balances or changes in account balances between accounting periods.
c. The examination of changes in an account over time.
d. The comparison of common- size financial statements over time.

11. The current file of the auditor’s working papers should generally include
a. A flowchart of the accounting system.
b. Organization charts.
c. A copy of the financial statements.
d. Copies of bond and note indentures.

12. 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 entity’s legal counsel concerning pending litigation.
d. Narrative descriptions of the entity’s accounting system and control procedures.

13. An audit document that reflects the major components of an amount reported in the financial statements is referred to as a (n)
a. Lead schedule
b. Supporting schedule.
c. Audit control account.
d. Working trial balance.

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