A4 - Audit Evidence

Question 1

When an analytical procedure is used as the principal substantive test of a significant financial statement assertion, the auditor is required to document:

Answer 1

Both the auditor’s expectation and the factors considered in developing that expectation.

Question 2

An analytical procedure involves comparison of:

Answer 2

An independently developed expectation to a recorded amount.

Question 3

What type of audit evidence is generally one of the most reliable?

Answer 3

Confirmations

Question 4

An auditor’s decision whether to apply analytical procedures as substantive tests usually is determined by the:

Answer 4

Precision and reliability of the data used to develop expectations.

Question 5

Auditors try to identify predictable relationships when applying analytical procedures. Relationships involving transactions from which accounts most likely would yield the highest level of evidence?

Answer 5

Income Statement Accounts. They tend to be more predictable than balance sheet accounts. Also, relationships involving transactions subject to management discretion (travel and entertainment) are less predictable.

Question 6

The objective of tests of details of transactions performed as substantive tests is to:

Answer 6

Detect material misstatements in the financial statements.

Question 7

If an auditor has doubts about a material assertion, he should:

Answer 7

Gather sufficient evidence to eliminate the doubt.

Question 8

An auditor tests an entity’s control of obtaining credit approval before shipping goods to customers in support of management’s financial statement assertion of:

Answer 8

Valuation and allocation.

Question 9

Relevant Assertions - Account Balances

Answer 9

CVER
Completeness
Valuation, Allocation, and Accuracy
Existence and Occurrence
Rights and Obligations.

Question 10

Analytical procedures are required for

Answer 10

Audit Planning and Final Review