Which of the following types of documentary evidence should the auditor consider to be the most reliable?
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Confirmation of an account payable balance mailed by and returned directly to the auditor
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Audit evidence can come in different forms with different degrees of persuasiveness. Which of the following is the least persuasive type of evidence?
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Prenumbered sales invoices
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Which of the following presumptions is correct about the reliability of audit evidence?
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Effective internal control provides more assurance about the reliability of audit evidence.
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For all audits of financial statements made in accordance with auditing standards, the use of analytical procedures is required to some extent
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In the planning stage and in the completion stage but no in the substantive test
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Which of the following situations has the best chance of being detected when a CPA compares 2016 revenues and expenses with the prior year and investigates all changes exceeding a fixed percent?
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The company changed its capitalization policy for small tools in 2016.
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Which of the following would not be considered to be an analytical procedure?
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Projecting the error rate by comparing the results of a statistical sample with the actual population characteristics.
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Which of the following is not a primary purpose of audit documentation?
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To support the financial statements
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Some primary purposes of audit documentation
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-To coordinate the audit
-To assist in preparation of the audit report
-To provide evidence of the audit work performed
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During an audit engagement, pertinent data are compiled and included in the audit files. The audit files primarily are considered to be
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Support for the auditor's representations as to compliance with auditing standards.
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Although the quantity, type, and content of audit documentation will vary with the circumstances, audit documentation generally will include the
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auditing procedures followed and the testing performed in obtaining audit evidence.
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According to PCAOB audit standards, audit documentation must be retained for
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seven years.
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Which of the following types of audit evidence is generally the most reliable?
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A bank confirmation
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An auditor most likely would apply analytical procedures in the overall review stage of an audit to
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identify unusual or unexpected balances that were not previously identified.
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______ the unit selling price times quantity on the duplicate sales invoice and compare the total to the amount on the duplicate sales invoice.
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Recompute
-Type of evidence: Recalculation
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______ whether the accounts receivable bookkeeper is prohibited from handling cash.
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Observe
-Type of evidence: Observation
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______ the ratio of cost of goods sold to sales and compare the ratio to previous years.
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Compute
-Type of evidence: Analytical procedures
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______ the sales journal and ______ the total to the general ledger.
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Foot, Trace
-Type of evidence: Recalculation and Reperformance
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______ the sales journal, looking for large and unusual transactions requiring investigation.
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Scan
-Type of evidence: Analytical procedures
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______ of management whether all accounting employees are required to take annual vacations.
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Inquire
-Type of evidence: Inquiries of client
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______ all marketable securities as of the balance sheet date to determine whether they equal the total on the client's list.
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Count
-Type of evidence: Physical examination
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______ the balance in the bank account directly with the East State Bank.
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Confirm
-Type of evidence: Confirmation
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______ a sample of duplicate sales invoices to determine if the controller's approval is included and ______ each duplicate sales invoice to the sales journal for agreement of name and amount.
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Examine, Compare
-Type of evidence: Inspection
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______ the agreement between Johnson Wholesale Company and the client to determine whether the shipment is a sale or a consignment.
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Read
-Type of evidence: Inspection
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Physical examination
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Inspection or count by the auditor of a tangible asset.
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Confirmation
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The receipt of a direct written response from a third party verifying the accuracy of information that was requested by the auditor.
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Inspection
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Auditor's examination of the client's documents and records to substantiate the information that is, or should be, included in the financial statements.
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Analytical Procedures
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Evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data.
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Inquiry
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Obtaining of written or oral information for the client in response to questions from the auditor.
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Recalculation
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Involves rechecking a sample of calculations made by the client.
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Reperformance
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the auditor's independent tests of client accounting procedures or controls that were originally done as part of the entity's accounting and internal control system.
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Observation
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looking at a process or procedure being performed by others.
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Examine
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A reasonably detailed study of a document or record to determine specific facts about it
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Scan
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A less-detailed examination of a document or record to determine whether there is something unusual warranting further investigation.
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Read
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An examination of written information to determine facts pertinent to the audit.
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Compute
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A calculation done by the auditor independent of the client
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Recompute
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A calculation done to determine whether a client's calculation is correct.
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Foot
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Addition of a column of numbers to determine whether the total is the same as the client's
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Trace
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An instruction normally associated with inspection or reperformance. The instruction should state what the auditor is tracing and where it is being traced from and to.
-Often, an audit procedure that includes the term trace will also include a second instruction, such as compare or recalculate.
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Compare
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A comparison of information in two different locations. The instructions should state which information is being compared in as much detail as practical.
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Count
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A determination of assets on hand at a given time. This term should be associated only with the type of evidence defined as physical examination.
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Observe
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The act of observation should be associated with the type of evidence defined as observation
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Inquire
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The act of inquiry should be associated with the type of evidence defined as inquiry
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Vouch
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The use of documents to verify recorded transactions or amounts
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Permanent files
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auditor's files that contain data of a historical or continuing nature pertinent to the current audit such as copies of articles of incorporation, bylaws, bond indentures, and contracts
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Current files
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all audit files applicable to the year under audit
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Lead schedule
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an audit schedule that contains the detailed accounts from the general ledger making up a line item total in the working trial balance
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Supporting schedules
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detailed schedules prepared by the client or the auditor in support of specific amounts on the financial statements
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Tick marks
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symbols used on an audit schedule that provide additional information or details of audit procedures performed
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