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Auditing Principles Quiz

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Questions and Answers

Which of the following presumptions does not relate to the appropriateness of audit evidence?

The more effective internal control, the more assurance it provides about the accounting data and financial statements.

An auditor’s opinion, to be economically useful, is formed within a reasonable time and based on evidence obtained at a reasonable cost. (correct)

Evidence obtained from independent sources outside the entity is more reliable than evidence secured solely within the entity.

The independent auditor’s direct personal knowledge obtained through observation and inspection is more persuasive than information obtained indirectly.

Observation is considered a reliable audit procedure, but one that is limited in usefulness. However, it is used in a number of different situations. Which of the following statements is true regarding observation as an audit technique?

It is the most effective audit methodology to use in filling out internal control questionnaires.

It is most persuasive about the performance of a process but is limited to the point in time at which the observation takes place. (correct)

It is the most persuasive audit technique for determining if fraud has occurred.

Which of the following statements concerning evidence is true?

Appropriate evidence supporting management’s assertions should be convincing rather than merely persuasive.

Effective internal control contributes little to the reliability of the evidence created within the entity.

The cost of obtaining evidence is not an important consideration to an auditor in deciding what evidence should be obtained.

A client’s accounting records cannot be considered sufficient audit evidence to support the financial statements. (correct)

Which of the following procedures would provide the most reliable audit evidence?

Inspection of bank statements obtained directly from the client’s financial institution. Signup and view all the answers

The most reliable forms of documentary evidence are those documents that are

Authorized by a responsible official. Signup and view all the answers

Audit documentation that records the procedures used by the auditor to gather evidence should be

Designed to meet the circumstances of the particular engagement. Signup and view all the answers

Which of the following documentation is not required for an audit in accordance with auditing standards?

A client letter that details the auditor’s planned field work. Signup and view all the answers

Although the quantity and content of audit documentation varies with each particular engagement, an auditor’s permanent files most likely include:

Analyses of capital stock and other equity account Signup and view all the answers

Audit working papers are indexed by means of reference numbers. The primary purpose of indexing is to:

Permit cross-referencing and simplify supervisory review Signup and view all the answers

The audit working paper that reflects the major components of an amount reported in the financial statements is the:

Lead schedule. Signup and view all the answers