Chapter 7

Question 1

audit procedure

Answer 1

the detailed instruction that explains the audit evidence to be obtained during the audit

Question 2

audit program

Answer 2

list of audit procedures for an audit area or an entire audit

Question 3

appropriateness of evidence

Answer 3

a measure of quality of evidence, meaning its relevance and reliability in meeting audit objectives for classes of transactions, account balances , and related disclosures

Question 4

relevance of evidence

Answer 4

evidence has to be appropriate

Question 5

reliability characteristics

Answer 5

independence of provider
effectiveness of client’s internal controls
auditor’s direct knowledge
qualifications of individuals providing the information
degree of objectivity
timeliness

Question 6

sufficiency of evidence

Answer 6

measured primarily by the sample size the auditor selects

Question 7

types of audit evidence

Answer 7

1. physical examination
2. confirmation
3. inspection
4. analytical procedures
5. inquiries of the client
6. recalculation
7. reperformance
8. observation

Question 8

physical examination

Answer 8

the inspection or count by the auditor of a tangible asset

Question 9

confirmation

Answer 9

the receipt of a direct written response from a third party verifying the accuracy of info that was requested by the auditor

Question 10

inspection

Answer 10

the auditor’s examination of the client’s documents and records to substantiate the info that is or should be, included in the financial statements

Question 11

internal document

Answer 11

document used within the client’s organization and is retained without ever going to an outside party

Question 12

external document

Answer 12

has been handled by someone outside the client’s organization who is a party to the transaction being documented, but which is either currently held by the client or readily accessible

Question 13

vouching

Answer 13

when auditors use documentation to support recorded transactions or amounts, the process is called this

Question 14

tracing

Answer 14

when an auditor traces from receiving reports to the acquisitions journal to satisfy the completeness objective it is called this

Question 15

unusual fluctuations

Answer 15

significant unexpected differences between the current year’s unaudited financial data and other data used in comparisons

Question 16

inquiry

Answer 16

obtaining of written or oral info from the client in response to questions from the auditor

Question 17

recalculation

Answer 17

rechecking a sample of calculations made by the client

Question 18

reperformance

Answer 18

the auditor’s independent tests of client accounting procedures or controls that were originally done as part of the entity’s accounting and internal control system

Question 19

observation

Answer 19

consists of looking at a process or procedure being performed by others

Question 20

audit documentation

Answer 20

record of the audit procedures performed, relevant audit evidence, and conclusions the auditor reached

Question 21

301 Code of Professional Conduct

Answer 21

a member shall not disclose any confidential information obtained in the course of a professional engagement except with the consent of the client

Question 22

SEC requires that auditors maintain the following documentation

Answer 22

working papers or other documents that form the basis for the audit of the company’s annual financial statements or review of the company’s quarterly financial statements
memos, correspondence, communications, other documents and records, including electronic records, related to the audit or review

Question 23

permanent files

Answer 23

contain data of a historical or continuing nature pertinent to the current audit
usually includes:
extracts or copies of company documents
analyses from previous years accounts that continue
info related to understanding internal control
results of anlytical procedures form previous years audits

Question 24

current file

Answer 24

include all audit documentation applicable to the year under audit

Question 25

working trial balance

Answer 25

general ledger accounts and their year end balances

Question 26

lead schedule

Answer 26

contains detail for the corresponding line on the trial balance

Question 27

supporting schedules

Answer 27

prepared by the client or the auditors in support of specific amounts on the financial statements

Question 28

analysis

Answer 28

designed to show the activity in a general ledger account during the entire period under audit, tying together beginning and ending balances

Question 29

trial balance or list

Answer 29

this type of schedule consists of the details that make up a year end balance of a general ledger account

Question 30

reconciliation of amounts

Answer 30

supports a specific amount and is normally expected to tie the amount recorded in the client’s records to another source of information

Question 31

tests of reasonableness

Answer 31

contains info that enables the auditor to evaluate whether the clients balance appears to include a misstatement considering the circumstances in the engagement

Question 32

summary of procedures

Answer 32

summarizes the results of a specific audit procedure

Question 33

examination of supporting documents

Answer 33

designed to show detailed tests perfomred

Question 34

informational

Answer 34

contains info as opposed to the audit evidence

Question 35

outside documentation

Answer 35

documentation gathered by the auditor in the course of the audit