4.01 - AUDIT EVIDENCE Flashcards
4.01 - AUDIT EVIDENCE
Which of the following types of audit evidence is the least persuasive?
A) Bank statements obtained from the client.
B) Correspondence from the client’s attorney about litigation.
C) Test counts of inventory performed by the auditor.
D) Pre-numbered purchase order forms.
D) Pre-numbered purchase order forms.
The source of audit evidence is a significant factor in evaluating whether or not the auditor considers it persuasive.
Evidence obtained directly by the auditor, such as through test counts of inventory is the most persuasive.
Evidence obtained directly from outside sources, such as correspondence from the client’s attorney about litigation, is persuasive but less so than evidence obtained directly by the auditor.
Evidence obtained from outside sources through the client, such as bank statements obtained from the client are even less persuasive.
The least persuasive evidence, however, is that generated by the client, such as
pre-numbered purchase-order forms.
4.01 - AUDIT EVIDENCE
Which of the following most likely would cause an auditor to consider whether a client’s financial statements
contain material misstatements?
A) Audit trails of computer-generated transactions exist only for a short time.
B) The results of an analytical procedure disclose unexpected differences.
C) Management did notdisclose to the auditor that it consulted with other accountants about significant
accounting matters.
D) The chief financial officer
will notsign the management representation letter until the last day of the auditor’s field work.
B) The results of an analytical procedure disclose unexpected differences.
When results of analytical procedures disclose unexpected differences, it can only mean that the auditor’s expectations
were erroneous, the client’s data is erroneous, or the client’s data is fraudulently misstated.
A client may consult with other
accountants regarding accounting matters without disclosing it to the auditor for a variety of reasons that would not be indicative of fraud.
The letter of representation is generally signed as of the date of the report, which is the last day of the auditor’s field work.
The fact that electronic audit trails may have short lives are an inherent limitation of the way of doing business but not indicative of fraud.
