cpa audit review ch10 review 2

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Joens1313
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cpa audit review ch10 review 2
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2014-09-13 23:28:04
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cpa audit review ch10 review 2
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  1. For an audit of a nonissuer, audit documentation does not

    A.Demonstrate that the audit was performed in accordance with GAAS. `

    B.Belong to the auditor.

    C.Provide the principal support for the financial statement assertions.

    D.Show that accounting records agree with the financial statements.
    C.Provide the principal support for the financial statement assertions.

    Audit documentation should provide (1) a sufficient and appropriate record of the basis for the auditor's report and (2) evidence that the audit was planned and performed in accordance with GAAS (AU-C 230). Management is responsible for the preparation and fair presentation of the assertions in the financial statements.
  2. Which of the following presumptions is correct about the reliability of audit evidence?

    A.To be reliable, audit evidence should be convincing rather than persuasive.

    B.Information obtained indirectly from outside sources is the most reliable audit evidence.

    C.Effective internal control provides more assurance about the reliability of audit evidence.

    D.Appropriateness of audit evidence refers to the amount of corroborative evidence obtained.
    C.Effective internal control provides more assurance about the reliability of audit evidence.

    The more effective the internal control, the more reliable the evidence generated internally by the entity, e.g., the accounting records and financial statements.
  3. Which of the following statements is ordinarily true about the reliability of evidence?

    A.Reliability of evidence refers to the audit evidence obtained from outside the entity.

    B.Information obtained indirectly from independent outside sources is more persuasive than the auditor’s direct personal knowledge obtained through observation and inspection.

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

    D.Reliability of evidence refers to the amount of evidence obtained.
    C.The more effective internal control, the more assurance it provides about the reliability of the accounting data and financial statements.

    Appropriate audit evidence is relevant and reliable. Evidence is usually more reliable when it (1) is obtained from independent sources; (2) is generated internally under effective internal control; (3) is obtained directly by the auditor; (4) is in documentary form, whether paper, electronic, or other medium; and (5) consists of original documents (AU-C 500).
  4. The most reliable forms of documentary evidence are those documents that are

    A.Easily duplicated.

    B.Prenumbered.

    C.Internally generated.

    D.Authorized by a responsible official.
    D.Authorized by a responsible official.

    Documents generated externally by independent sources are more reliable than those produced by the auditee. However, the reliability of internal evidence is enhanced if it is subject to effective control. Accordingly, authorization by an appropriate party lends credibility to a document because it increases the probability that the underlying transaction is valid.
  5. The current file of an auditor’s audit documentation most likely would include a copy of the

    A.Flowchart of the internal control activities.

    B.Bank reconciliation.

    C.Articles of incorporation.

    D.Pension plan contract.
    B.Bank reconciliation.

    The current file of an auditor’s audit documentation includes all working papers applicable to the current year under audit. A bank reconciliation supports a specific amount on the audited year’s financial statements. Thus, it belongs in the current file.
  6. When compared with a nineteenth-century auditor, today’s auditor places less relative emphasis upon

    A.Physical observation.

    B.External confirmation.

    C.Overall tests of ratios and trends.

    D.Examination of documentary support.
    D.Examination of documentary support.

    The auditor ordinarily should perform certain auditing procedures, such as external confirmation of receivables (AU-C 505), observation of inventory (AU-C 501), and analytical procedures (AU-C 520), instead of relying completely on documentary evidence.

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