Chapter 6 TB Flashcards
Audit evidence used to support an audit opinion is obtained solely from audit procedures.
T or F?
False
The amount of evidence gathered is not important to an auditor since the quality of the evidence is of primary importance.
T or F?
False
The auditor uses professional judgment to determine which audit procedures to perform.
T or F?
True
Audit evidence consists of both information that corroborates management’s assertions and information that contradicts such assertions.
T or F?
True
The reliability of audit evidence relates to the connection between the audit procedure being performed and the assertion being audited.
T or F?
False
The relevance of audit evidence relates to the connection between the audit procedure being performed and the assertion being audited.
The type of audit procedure known as inquiry does not ordinarily provide sufficient audit evidence of the absence of a material misstatement, nor is it alone sufficient to test the operating effectiveness of controls.
T or F?
True
A limitation of observation is that observing a process on one day does not necessarily indicate how the transactions were processed on a different day or over a relevant period of time.
T or F?
True
Relevance and reliability of evidence make up the appropriateness of audit evidence.
T or F?
True
Evidence can be directly or indirectly relevant to an assertion.
T or F?
True
Internal documentation is more reliable to the auditor if the internal control surrounding the documentation is considered strong than if it is considered weak.
T or F?
True
Internal documentation is generally less reliable than external documentation.
T or F?
True
Confirmation statements from banks are an example of third-party external documents.
T or F?
True
Inspection of tangible assets generally provides reliable evidence with respect to the completeness of the assets, but not necessarily about the existence of the assets.
T or F?
False
Inspection of tangible assets generally provides reliable evidence with respect to the existence of the assets, but not necessarily about the rights to the assets or the completeness of the assets.
Vouching recorded transactions involves taking a sample entry from a journal and obtaining the original source documents to ensure the transaction occurred.
T or F?
True
Tracing is a process that helps establish that recorded transactions are valid.
T or F?
False
Tracing is a process that helps establish that recorded transactions are complete.
One strategy used by auditors in testing assertions is to perform directional testing to find overstatements or understatements.
T or F?
True
The direction of testing from recorded amounts toward supporting documentation provides evidence as to existence of assets and revenues.
T or F?
True
Vouching
The direction of testing from the source documents to recorded amounts provides evidence regarding the completeness of
liabilities and expenses.
T or F?
True
Tracing
For an auditor to test the existence assertion of assets, testing will be performed beginning with the recorded asset and ending with the source documents.
T or F?
True
Ulanda and Mudana, CPAs, are performing an audit on McArnee, Inc. Ulanda selects a sample from certain source documents and traces them forward to the accounts payable ledger. The purpose of this test is to determine the possibility of understated liabilities.
T or F?
True
Vouching
The auditor’s concern for potential fraud in the financial statements will most likely result in increased testing for the overstatement of revenues.
T or F?
True
While inspecting documents, auditors should use original documents rather than copies, because copies are easy for management to falsify.
T or F?
True
Auditors should mail third-party confirmations through the client’s mailroom.
T or F?
False
Inspection of an asset generally provides reliable evidence about the rights and obligations assertion related to that asset.
T or F?
False
Audit documentation serves as support for the financial statements.
T or F?
False
Audit documentation serves as support for the auditor’s opinion on the financial statements.
The greatest risk of recording transactions in the incorrect period occurs during the roll-forward period.
T or F?
False
Cutoff period
The primary importance of the audit program is its guidance of the overall conduct of the audit.
T or F?
True
Inquiries of client personnel are not a frequent means of evidence gathering by an auditor.
T or F?
False
The purpose of performing analytical procedures in the planning stage of an audit is to gather audit evidence and make conclusions about account balances.
T or F?
False
An example of physical observation is the auditor’s testing of inventory by counting it to substantiate the existence assertion.
T or F?
True
The auditor multiplies the quantity of inventory on the inventory ledger by the cost of the inventory to arrive at total inventory balance per product number. This is an example of recalculation by footing.
T or F?
False
Testsof extensions involves recomputing items involving multiplication.
Some audit procedures may be performed prior to the end of the year under audit.
T or F?
True
The audit program specifies what the client must do to perform the audit in accordance with generally accepted accounting procedures.
T or F?
False
The audit program specifies what the auditor must do to perform the audit in accordance with generally accepted auditing procedures.
The auditor utilizes the same audit program and the same procedures each year for each client in order to ensure that nothing is missed in the current year audit.
T or F?
False
In a reasonableness test, the auditor develops an expected value of an account by using data wholly or partly independent of the client’s accounting information system.
T or F?
True
Audit planning workpapers are prepared to support the foundation of the audit and are prepared for the client to assist in their understanding of the specific audit procedures that will be performed.
T or F?
False
An outside specialist may assist the auditor in obtaining sufficient, appropriate evidence concerning the analysis of complex tax compliance issues.
T or F?
True
Audit documentation should generally be retained for at least seven years.
T or F?
True
Audit documentation should include the initials or electronic signature in order to identify the audit personnel responsible for the work and the managers and partners reviewing the work.
T or F?
True