CH 7

Question 1

What are the four decisions that decide on how much information is needed and gather?

Answer 1

1) Which audit procedures to use
2) What sample size to select for a given procedure
3) Which items to select from the population
4) When to perform the procedures

Question 2

What are the two determinants of persuasiveness of evidence?

Answer 2

1) appropriateness

2) Sufficiency

Question 3

What are six characteristics of reliable evidence?

Answer 3

1) Independence of provider
2) effectiveness of client’s internal controls
3) Auditor’s direct knowledge
4) qualification of individuals providing the information
5) Degree of objectivity
6) timeliness

Question 4

How is a sample size appropriate?

Answer 4

1) expectation of misstatements

2) Effectiveness of internal controls

Question 5

What are types of audit evidence?

Answer 5

1) Physical examination
2) Confirmation
3) Inspection
4) Analytical procedures
5) Inquiries of the client
6) Recalculation
7) Reperformance
8) Observation

Question 6

What confirmations are (in US) requirements for auditors?

Answer 6

1) confirmation of AR
2) control the mail and receipt of replies
3) Electronic confirmations are permitted

Question 7

What analytical procedures help the auditor to find plausible relationships among financial and non financial.

Answer 7

understanding the client’s industry and business

assess the entity ability to continue as a going concern

Indicate the presence of possible misstatements in the financial statements

Reduce detailed audit tests ( less testing).

Question 8

What are inquiries used to settle?

Answer 8

1) answers from auditor’s questions

Question 9

What are the purposes of audit documentation?

Answer 9

1) Purposes of audit documentation
2) Ownership of audit files
3) Confidentiality of audit files
4) Requirements for retention of audit documentation

Question 10

What are current files?

Answer 10

1) audit program
2) General information
3) Working trial balance
4) Adjusting and reclassification entries
5) Supporting schedules

Question 11

What are supporting schedules?

Answer 11

1) analysis
2) Trail balance or list
3) Reconciliation of amounts
4) Tests of reasonableness
5) Summary of procedures
6) Examination of supporting documents
7) Informational
8) Outside documentation

Question 12

What are the requirements of audit documentation?

Answer 12

1) Proper identification of each file
2) Files indexed and cross-referenced
3) Clear indication of work performed
4) include sufficient information
5) State conclusions reached