SU 10: Evidence -- Objectives and Nature

Question 1

1.) Test count of Inventory

Answer 1

a. Test of details of a balance – is the term most associated with test count of inventory

Question 2

2.) Ownership rights

Answer 2

a. Assertion – is the term most associated with ownership rights

Question 3

3.) Payroll Register

Answer 3

a. Accounting record – is the term most associated with payroll register

Question 4

4.) Control Manual

Answer 4

a. Other information – is the term most associated with control manual

Question 5

5.) Completeness

Answer 5

a. Assertion – is the term most associated with completeness

Question 6

6.) Measure of Importance

Answer 6

a. Materiality – is the term most associated with measure of importance

Question 7

7.) Tracing Purchase into Ledger

Answer 7

a. Test of the details of a transaction – is the term most associated with tracing a purchase into a ledger

Question 8

8.) Confirmation of A/R

Answer 8

a. Test of details of a balance – is the term most associated with confirmation of A/R

Question 9

9.) Occurrence

Answer 9

a. Assertion – is the term most associated with occurrence

Question 10

10.) Minutes of Meetings

Answer 10

a. Other information – is the term most associated with meeting minutes

Question 11

1.) The working paper was not initialed and dated by the audit assistant

Answer 11

a. Correct – the box in the upper right-hand corner of the working paper would typically contain the initials of the assistant and date working paper was completed.

Question 12

2.) Negative confirmations not returned can be considered to be accounts “confirmed without exception”

Answer 12

a. Incorrect – the unreturned negative confirmations did not necessarily confirm the accounts because there can be other reasons that the confirmations were not returned

Question 13

3.) All confirmations are accounted for

Answer 13

a. Incorrect – There were 200 confirmations selected for testing. The working paper reports: 164 confirmed without exception, 18 total no adjustment, 10 total with adjustment, and 6 that the client asked not to be confirmed. This totals 198, leaving 2 unaccounted for.

Question 14

4.) There is no documentation of alternative procedures, possible scope limitation, or other working paper reference for the six accounts selected for confirmation that the client asked the auditor not to confirm

Answer 14

a. Correct – The auditor should perform alternative procedures to determine the existence of those 6 accounts. The conclusions from those procedures should be documented in the working papers

Question 15

5.) The dollar amount and percent of the six accounts selected for confirmation that he client asked the auditor not to confirm are properly omitted from the “Dollars” columns for the “Total selected for testing”

Answer 15

a. Incorrect – the 6 accounts should be included and, based on alternative procedures, should be used to project findings to the population

Question 16

6.) The “Dollars-Percent” for “Confirmation Requests-Negatives” is correctly calculated at 10%

Answer 16

a. Incorrect – This should be $20,000/2,000,000, or 1%

Question 17

7.) There is no indication of follow-up or cross-referencing of the account confirmed-related party transaction

Answer 17

a. Correct – Although the difference in amount is noted as resolved, related-party transaction typically require disclosure in the f/s. This should be resolved in the working paper.

Question 18

8.) The tickmark ± is used but not explained in the tickmark legend

Answer 18

a. Correct – there is no reference in the legend

Question 19

10.) The overall conclusion reached is appropriate

Answer 19

a. Incorrect – The working paper, as presented, does not appear to support the conclusion that the account is fairly stated. The sample was not projected to the population, thus, the fairness cannot be determined

Question 20

11.) There is no notation that a projection from the sample to the population was made.

Answer 20

a. Correct – The ample should be projected to the population

Question 21

12.) There is no reference to second request

Answer 21

a. Correct – It is unlikely that all positive confirmation were returned on the first request. In any case, the auditor should address the issue that either all confirmations were returned based on first request or second requests were used.