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.
  • 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?

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

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

    <p>Authorized by a responsible official.</p> Signup and view all the answers

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

    <p>Designed to meet the circumstances of the particular engagement.</p> Signup and view all the answers

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

    <p>A client letter that details the auditor’s planned field work.</p> 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:

    <p>Analyses of capital stock and other equity account</p> Signup and view all the answers

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

    <p>Permit cross-referencing and simplify supervisory review</p> 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:

    <p>Lead schedule.</p> Signup and view all the answers

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