10. Auditors perform a reasonableness test comparing their

estimate to the amount shown in the trial balance. What type

of evidence is this?

a. Analytical review

b. Confirmation

c. Reperformance

d. Inspection of documents

e. None of the above

Answer ____

11. The accounting clerk steals a customers check meant to pay

their account balance. To remove the accounts receivable

from the accounting records, the clerk writes off

[debit allowance for doubtful accounts, credit accounts

receivable] the customers account. This scheme is likely to

be discovered because:

a. The customer will demand repayment.

b. The customer will be told that it will be necessary to

pay cash for purchases in the future since their account

had been written off in the past.

c. The clerk will forget which account was written off.

Answer ____

12. Testing sales for completeness (i.e. UNDERstatement),

an auditor selects 50 sales invoices and vouches them to

the respective shipping documents. This evidence is not

appropriate because of the violation of:

a. Auditor's direct knowledge.

b. Objectivity

c. Reliability

d. Relevance

Answer ___

13. Auditors sometimes use ratios as audit evidence. For example

an unexplained INCREASE in the ratio of gross profit

to sales may suggest which of the following possibilities?

a. Fictitious purchases. b. Unrecorded purchases.

c. Unrecorded sales. d. Selling expense recorded as general expense.

Answer ____

14. In discussing audit procedures for contingent liabilities, we

discussed the analysis of legal expense. Say the auditor

asks the controller for the file containing attorney invoices

[i.e. bills from lawyers]. In reviewing the invoices, the

auditor notes that they sum to [total] $1,000,000, while the

amount shown in the general ledger account for legal expense

totaled $1,500,000. In this context, what did we suggest as

the auditors chief concern?

a. Too much is being spent on attorney fees.

b. There is likely a misclassification of an expense.

c. The auditor did not receive all the attorney invoices.

d. Legal expense is overstated.