MULTIPLE CHOICE QUESTIONS 1 Which of the following statements best describes
1. Which of the following statements best describes what is meant by the term appropriateness of audit evidence?
a. Appropriateness is a measure of the quality of audit evidence.
b. Appropriateness refers to the relevance and reliability of audit evidence.
c. Appropriateness is a measure of the quantity of audit evidence.
d. Both a. and b.

2. Which of the following statements is true regarding the relationship between risk and evidence sufficiency for substantive tests?
a. Evidence sufficiency will be affected by inherent risk, but not control risk.
b. Evidence sufficiency will be affected by control risk, but not inherent risk.
c. Evidence sufficiency will be affected by both inherent and control risks.
d. None of the above statements are true.

3. An auditor determines that management integrity is high, the risk of material misstatement is low, and the client's internal controls are effective. Which of the following conclusions can be reached regarding the need to obtain direct evidence regarding the account balances?
a. Direct evidence can be limited to material account balances, and the extent of testing should be sufficient to corroborate the auditor's assessment of low risk.
b. Direct evidence of account balances is not needed.
c. Direct evidence can be obtained through analytical procedures.
d. Direct evidence should be obtained for all accounts, regardless of the auditor's assessment of control risk.

4. Which of the following factors affects the relevance of audit evidence?
a. The purpose of the audit procedure.
b. The direction of testing.
c. The type of procedure.
d. All of the above factors affect the relevance of audit evidence.

5. The auditor wishes to test the completeness assertion. Which of the following statements is true regarding the auditor's work flow?
a. The auditor would take a sample of recorded transactions and obtain supporting documentation for those transactions.
b. The auditor would perform a process referred to as tracing.
c. The auditor would take a sample of source documents and obtain additional supporting documents for those transactions.
d. For a sample of items recorded in the sales journal, the auditor would obtain the related shipping documents and customer orders.

6. The auditor wishes to gather evidence to test the assertion that the client's capitalization of leased equipment assets is properly valued. Which of the following sources of evidence will the auditor generally find to be of the highest quality (most reliable and relevant)?
a. Inspection of the leased equipment.
b. Inspection of documents, including the lease contract and recalculation of capitalized amount and current amortization.
c. Confirmation of the current purchase price for similar equipment with vendors.
d. Confirmation of the original cost of the equipment with the lessor.

7. Analytical procedures are best used as a substantive audit procedure in which of the following scenarios?
a. The auditor's primary objective is to reduce audit costs to a minimum.
b. Internal control risk is high, and therefore it is not efficient to test controls.
c. Preliminary analytical procedures indicate that misstatements are likely to occur in significant account balances.
d. Substantive analytical procedures would not be appropriate in any of the above scenarios.

8. Which of the following statements is false regarding substantive analytical procedures?
a. Substantive analytical procedures are not required to be performed on all audit engagements.
b. If the results of substantive analytical procedures suggest that an account balance is materially correct, the evidence needed from tests of details can likely be reduced.
c. Substantive analytical procedures would be performed after tests of details.
d. All of the above statements are true.

9. The sufficiency of audit evidence is affected by which of the following factors?
a. The reliability of the audit evidence.
b. The relevance of the audit evidence gathered.
c. The risk of material misstatement of the assertion being examined.
d. All of the above.

10. Which of the following statements is true regarding the sufficiency of evidence needed to test an account?
a. Evidence sufficiency is a measure of evidence quality.
b. Evidence sufficiency is affected by the quality of evidence.
c. A relationship does not exist between evidence sufficiency and evidence quality.
d. For a specific client, evidence sufficiency will be the same across all accounts.

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