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Audit Evidence Quizzer

Auditing theory

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Rica Mae Testa
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594 views9 pages

Audit Evidence Quizzer

Auditing theory

Uploaded by

Rica Mae Testa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
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idit Documentati ‘According to PSA 230 Redrafted ‘Documentation’, working papers do not ‘a. Assist the planning and performance of the aucit. , Assis in the supervision and review of the audit work. &. Record the audit evidence resulting from the audit work performed to support an aucitor’s ‘pinion, 4. Support the client's financial statements. 1 statement ~ Working papers are the property ofthe auditor. 2 statement ~ Although portions of or extracts from the working papers maybe made available to the entity atthe discretion ofthe auditor, they may be substitute for the entily’s accounting records. a. tststatement is True; 2nd statement is False b. fst stalement is False; 2nd statement is True ©. Both statements are Truc 4d. Both statements are False 4" statement — The auditor should prepare working papers which are sufficiently complete and detailed to provide an overall understanding of the aucit. 2 statement ~ The auditor should record in the working papers information on planning the audit, Work, the nature, timing and extent of the audit procedures performed, the results thereof, and the cconciusions dravin from the audit evidence obtained. a. 1 statement is True; 2% statements False . 1 statement is False | 2% statement is True ©. Both statements are True 4. Both statements are False Why does an auditor document audit evidence? ‘a. To comply with the requirements of gathering all avalable evidence. '. To provide client reference for all account balances and correcting entries. c.To support audit opinion and to provide evidence that the audit was carried out in accordance with PSA. 4. To document all records of misstatements noted in the financial statements Working papers that record the procedures used by the aualtor to gather evidence should be ‘a. Considered the primary support forthe financial statements being auclted. bb. Viewed as the connecting link between the books of accounts and the financial statements, c.Designed to meet the circumstances of the particular engagement. 4. Dastrayed when the auclted entity ceases to be a client. ‘Which of the following conditions constitutes inappropriate working paper preparation? ‘a. Flowcharts are included in the working papers. b. Findings are cross-referenced to supporting documentation. ‘c. Tick marks are explained in working papers. 4. Allforms and directives used by the aucitee department are included in the working papers. ‘An auditor's working papers will ordinarily be least likely to include documentation showing how the a. Client's schedules were prepared. b. Engagement was planned. c. Understanding of the client's internal control was obtained and control risk was assessed. d. Unusual matters were resolved.10, 1. 12. 13, Which of the following is usually included or shown in the auditor's working papers? ‘a. The procedures used by the auditor to verify the personal financial status of members of the clent’s management team bb. Analyses that are designed to be a part of, or a substitute for, the client's accounting records cc. Excerpts from authoritative pronouncements that support'the underlying generally accepted ‘accounting principles used in preparing the financial statements 4d, The manner in which exceptions and unusual matters disclosed by the auditors procedures were resolved or treated Which of the following is not generally included in the working papers fle? 2. An indication as to who performed the audit procedures and when they were performed. b. Documentation ofthe auditor's understanding ofthe accounting and internal control systems. ©. Copy ofthe internal audit's audit program, ._ Analyses of significant ratios and trends. ‘Although the quantity and content of audit working papers vary with each particular engagement, an ‘auditors permanent files most likely include a. Schedules that suppor the curtent year's adjusting entries. '. Prior years’ accounts receivable confirmations that were classified as exceptions, ©. Documentation indicating that the audit work was adequately planned and supervised. 4. Analyses of share capital and other owners’ equity accounts. ‘Audit working papers are indexed by means of reference numbers. The primary purpose of indexing sto a. Permit cross-referencing and simplify supervisory review. Support the audit report. Eliminate the need for follow-up reviews. 4. Determine that working papers adequately support findings, conclusions, and reports. ‘The audit working paper that reflects the major components of an amount reported in the financial statements is the 1. Interbank transfer schedule ‘©. Supporting schedule b. Camryforward schedule d. Lead schedule ‘An auditor ordinary uses a working trial balance resembling the financial statements without footnotes, bul containing columns for a. Cash flow increases and decreases ‘¢. Reclassifcations and adjustments . Audit objectives and assertions 1d. Reconciliations and tickmarks14. 45. 16. 1. In the course of the audit of financial statements for the purpose of expressing an opinion thereon, the auditor will normally prepare @ schedule of unadjusted differences for which he did not propose adjustment when they were uncovered. The primary purpose served by this schedule is to ‘a. Point out to the responsible client officials the errors made by various company personnel. b. Summarize the adjustments that must be made before the company can prepare and submit its income tax retums. cc. Identify the potential financial statement effects of errors or disputed items that were considered immaterial when discovered, 4. Summarize the errors made by the company so that corrections can be made after the audited financial statements are released. \Which of the following analyses appearing in a predecessor's working papers is the successor auditor least likely to be interested in reviewing? ‘a. Analysis of noncurrent balance sheet accounts. ¢, Analysis of income statement accounts. . Analysis of current balance sheet accounts. d. Analysis of contingencies. Inn intemal audit, the audit supervisor determines that working papers are complete a. When satisfied that the audit objectives have been met and the working papers support the conclusions. . When working papers refer tothe steps outlined in the aucit program. c. Only after the auditor who prepared the working papers has signed and dated them. d._When proper cross-references to other working papers are noted, Standardized working papers are offen used, chiefly because they allow working papers to be prepared more, a. Efficiently. Professionally Neatly 4. Accurately18 Ordinarily, the auat may use schedules, analyses and other documentation prepared by entity personnel in order to: 2 Lessen auditor's responsibly, Eliminate the need to apply any aust procedures on verifying thelr correctness. Emphasize thatthe responsibilty on financial statements resis withthe cient management, d._ Improve audit efficiency. \Working papers which contain information relating primarily to the audit of a single period. a. Current auait es ‘c. Financial reporting fles b. Permanent audit fles 4. Comrespondence fies ‘high fhe oon i the ast req othe aut working papers? ‘Substitute for the entity's accounting recor. Confidentiality of information included in the working papers. Safe custody ofthe working papers. Retention fora period sufficient to meet the needs of the practice, The form and content of working papers are affected by matters such asthe following except: ‘a. Nature of the engagement 5. Type of opinion tobe rendered by the auctor ©. Nature ane complexity of the business 1d. Needs in the particular crcumetancas for the direction, supervision and review of work performed by assistants ‘Audit working papers should not ‘a. Include any client-prepared papers or documents other than those prepared by the CPA or his ‘assistant. Be kept by the CPA after review and completion of the audit except for tems required for the inoome tax retum or the permanent fe. Be submited to the client to support the financial statements and to provide evidence ofthe aucit ‘work performed. d._ Be themselves be expected lo provide sufficient support forthe auditor's opinion. Using laptop computers in auditing may affect the methods used to review the work of staf assistants because Supervisory personnel may not have an understanding of the capabilties and limitations of ‘computers. ‘Working paper documentation may not contain realy observable deals of calculations. “The aud eldwork standards for supervision may dif. Documenting the supervisory review may require assistance of management services personnel. acs24. The current fle of the auditor's working papers generally should include a. Aflowchart of the internal controls. c. A copy ofthe financial statements, . Copies of bond and note indentures. d. Organization charts 25. Which of the following eliminates voluminous details from the auditor's working trial balanoe by classifying and summarizing similar or related items? a. Account analyses: b. Supporting schedules &. Control accounts d. Lead schedules 26. Documentation is a form of evidence ‘a. Used in every financial statement aust b. Used in most financial statement audit. c. Used on the rare occasions when it is both readily available and less costly than other procedures, 4d. Used when nothing is available that is more competent 27. An audit working paper that shows the detailed evidence and procedures regarding the balance in the ‘accumulated depreciation account in the year under audit will be found in the ‘Current fle of working papers. Permanent fle of working papers. Other information working papers in the current file. Planning memorandum in the current fie.28. In the case of recurring audits, some working papers files may be classified as audit files which are, updated with new information of continuing importance. This type of aucit file is known as: a. Current auait file. ©. Electronic audit file. b. Permanent audit fe, 4. Planning memorandum file 29. A schedule listing account balances for the current and previous years, and columns for adjusting and reclassifying entries proposed by the auditors to arrive at the final amount that will appear in the financial statements, is referred to as a a. Working trial balance, c. Summarizing schedule b. Lead schedule. d. Supporting schedule 30. A schedule set up to combine similar general ledger accounts, the total of which appears on the ‘working trial balance as a single amount, is referred to as a ‘a. Supporting schedule, ©. Corroborating schedule b. Lead schedule. d. Reconciling schedule 31. What do you call the type of working paper where matters of importance are noted down for further verification? a. Summary sheet, c. Agenda sheet b. Audit program. d. Supporting schedules 22. The permanent file portion of the auditor's working papers generally should include a. Acopy of the engagement letter. b. Acopy of key customer confirmation. c. Names and addresses of audit staff personnel on the engagements. d._ Time and expense reports. 33. The permanent file section of the working papers that is kept for each aualt cient most likely contains, ‘a. Review notes pertaining to questions and comments regarding the audit work performed. b. Aschedule of ime spent on the engagement by each individual auditor. ‘&, Correspondence withthe client's legal counsel conceming pending Iigation. d._ Narrative descriptions of the client's accounting procedures and internal controls. 34. In general, which of the following statements is correct with respect to ownership, possession, or ‘access fo working papers prepared by a GPA firm in connection with an audit? a. The working papers may be oblained by third parties where they appear lo be relevant to issues raised iniigation b. The working papers are subject to the privileged communication rule which, in a majority of jurisdictions, prevents third-party access to the working papers. .¢ The working papers are the property ofthe client after the client pays the fees 4, The working papers must be relained by the CPA firm for @ period of ten years.‘35. For what minimum period should audit working papers be retained by the independent GPA? ‘a. For the period during which the entity remains a client of the independent CPA. . For the period during which an auditor-client relationship exists but not more than six (6) years. ‘c. For the statutory period within which legal action may be brought against the independent CPA, d. For as long as the CPA is in public practice. 36. Which of the following documentation is required for an audit in accordance with PSA? ‘a. An internal control questionnaire. b. Acliant engagement letter. ‘c. Aplanning memorandum or checklist 4d. Aclient representation letter. ‘37 Audit documentation is the record of audit procedures performed, relevant audit evidence, and the auditor's conclusions. Which of the following statements concerning audit documentation is incorrect? a. Audit documentation should include superseded drafts of working papers and financial ‘statements, . Audit documentation prepared after the performance of the audit work is likely to be less accurate than documentation prepared at the time such work is performed, c. Audit documentation may include abstracts or copies of the entily’s records such as significant ‘and specific contracts and agreements d. Audit documentation is not a substitute for the entity's accounting records, 38 The auditor is required to complete the administrative process of assembling the final audit fle on a timely basis after the date of the auditors report. The time limit within which to complete the assembly ofthe audit fle is ordinarily ‘a. Not more than 30 days after the date of the aucltor's report. b. Not more than 60 days after the date of the auditor's report. ‘©. Not more than 80 days after the end of the entity's reporting period. 1d. Not more than 60 days after the date the entiy’s financial statements are authorized for issue. ‘39. Audit documentation (working papers) should ‘a. Be considered the primary suppor forthe financial statements being audited. 'b. Show that the accounting records agree or reconcile with the financial statements c. Evaluate management's performance against company goals for the year under aust 4. Be provided tothe client upon request. 440. Audit documentation (working papers) ‘a. Provides evidence of the auditor's compliance with generally accepted auditing standards. 'b._ Isa record to be used as a basis forthe following year's engagement. fc. Includes an analysis of the clients marketing strategies. d._ Isa client-owned record of conclusions reached by the auditors. 41. In-using the work of a specialist, an understanding should exist among the auditor, the client, and the specialist as to the nature of the work to be performed by the specialist. Preferably, the understanding should be documented and would include all ofthe following except ‘The objectives and scope of the specialist's work ‘The specialist's representations as to his relationship, if any, to the client ‘The specialist's understanding of the auditor's corroborative use of the specialist's findings in relation to the representations in the financial statements. d.Asstaterent that the methods or assumptions to be used are not inconsistent with those used by the client pes 42, Which ofthe following is an invalid description of why working papers are developed? Faciltates third-party reviews ‘Aids in the planning, performance and review of auclts Provides the principal evidential support for the auditor's report ‘Aids in the professional development of the operating staff pose43, 45, a7. 49. ‘The main advantage of property indexed working papers is to a. Reduce the siz of the file Better organize the working papers ‘c. Allow division of labor within the audit team 4. Facilitate the efficient use of audit staf! Which ofthe following statements about working papers is correct? ‘2. Working papers are not permited to be used as a reference source by the client '. The auditor should document his understanding of the client's internal control which is to be Used to plan the audit ce. Working papers may be regarded as a substitute for the client's accounting records 4. When reporting on comparative financial statements, the independent auditor may discard Working papers after two years Which of the following is a basic tool used by the auditor to control the audit work and review the progress of the audit? a. Time and expense summary b. Engagement letter Progress flowcharts 4. Audit program During the working paper review, an audit supervisor finds that the auditor's reported findings are not adequately cross-relerenced to supporting documentation. The supervisor will most likely instruct the auditor to fa. Prepare a working paper to indicate that the fll scope ofthe audit was carried out b. Familarize himself with the sequence of working papers so thal he will be able to answer {questions about the conclusions stated in the report cc. Eliminate any cross-references to other working papers since the system is unclear 4d. Provide @ working paper indexing system that shows the relationship between findings, ‘conclusions, and the related facts ‘Which of the following working papers would one normally expect to find in the permanent fle? a. Accopy of a long-term bond indenture b. The working trial balance ‘c. An analysis of additions and disposals relating to marketable securities, 1d. Aworkpaper analyzing customer replies to confirmation requests, ‘The permanent file section of the working papers that is Kept for each aucit cient most likely contains ‘a. Review notes pertaining to questions and comments regarding the audit work performed b. Aschedule of time spent on the engagement by each individual auditor ‘&. Correspondence withthe clients legal counsel conceming pending itgation d._ Narrative descriptions of the client's internal control policies and procedures Which of the following statements is correct with respect to ownership of audit documentation? ‘a. The audit frm owns the audit documentation b. The audit cient owns the audit documentation ‘c. The audit client and aucit fim have joint ownership of the audit documentation 4. The law is not explicit with respect to the ownership of audit documentation ‘After the fieldwork audit procedures are completed, 2 partner of the CPA firm who has not been involved in the audit performs a second or wrap-up working paper review. This second review ‘actually focuses on ‘a. The fair presentation of the financial statements in conformity with applicable reporting framework. . Fraud involving the client's management and its employees c.The materiality of the adjusting entries proposed by the audit staff 4. The communication of internal contol weaknesses to the client's audit committeei ow wi N > Co > x a wi Ss a z

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