Ch. 9
Which of the following procedures would provide the most reliable audit evidence?
Audit evidence obtained from knowledgeable independent sources outside the client company is more reliable than audit evidence obtained from nonindependent sources.
Which of the following would not be a reason to increase the extent of a substantive test?
Auditors have time to test more items.
How would an auditor of a nonissuer most appropriately respond to a heightened assessed risk of material misstatement?
By assigning more experienced staff or those with specialized skills to high-risk areas.
Which of the following types of evidence would an auditor most likely examine to determine whether controls are operating as designed?
Client records documenting the use of computer programs.
Before applying principal substantive tests to the details of accounts at an interim date prior to the balance sheet date, an auditor should:
Consider whether the amounts of the year-end balances selected for interim testing are reasonably predictable.
Which assertion is typically related to income statement accounts rather than balance sheet accounts or presentation and disclosure?
Cutoff
Which of the following situations increases the reliability of data being used for substantive analytical procedures?
During the prior-year audit, the data was subjected to audit testing.
Which of the following characteristics of an accounting estimate would lead to lower estimation uncertainty?
Estimate is related to routine transactions.
Which of the following can be used as both a risk assessment procedure and a substantive procedure for the audit of accounting estimates?
Inquire of management about the methods and assumptions used in developing the estimate.
Which of the following procedures would provide the most reliable audit evidence?
Inspection of bank statements obtained directly from the client's financial institution.
Which of the following situations would most likely preclude an auditor from performing substantive procedures during an interim period?
Internal controls are weak and the risk of material misstatement is high.
In a financial statement audit of a nonissuer, an auditor would consider a judgmental misstatement to be a misstatement that
Involves an estimate.
Which of the following procedures would an auditor ordinarily perform first in evaluating management's accounting estimates for reasonableness?
Obtain an understanding of how management developed its estimates.
The procedures to be applied on a particular engagement are a matter of the auditor's professional judgment.
Professional judgment.
Which of the following tends to be most predictable for purposes of analytical procedures applied as substantive tests?
Relationships involving income statement accounts
Which of the following procedures most likely would assist an auditor in determining whether management has identified all accounting estimates that could be material to the financial statements?
Review the lawyer's letter for information about litigation.
A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?
Smaller measure of tolerable misstatement.
A senior auditor conducted a dual-purpose test on a client's invoice to determine whether the invoice was approved and to ascertain the amount and other terms of the invoice. Which of the following lists two tests that the auditor performed?
Tests of controls and tests of details
An auditor of a nonissuer should design tests of details to ensure that sufficient audit evidence supports which of the following?
The planned level of assurance at the relevant assertion level.
Which of the following is an important consideration when deciding the nature of tests to use in a financial statement audit?
The procedures to be applied on a particular engagement are a matter of the auditor's professional judgment.
Which of the following would be the most likely reason to include more unpredictability in the selection and performance of audit procedures?
There is heightened risk of fraud.
Which of the following sample planning factors would influence the sample size for a substantive test of details for a specific account?
Yes Yes
Analytical procedures:
are required during the planning and substantive testing phases of the audit.
When analyzing the results of substantive procedures, auditors should beware of:
confirmation bias.
The nature of an audit procedure refers to:
its purpose and its type.
The auditor's best estimate of the misstatement in a population based on the misstatement found in a sample drawn from the population is called a:
projected misstatement
Designing substantive procedures responds to:
the risk of material misstatement at the assertion level.
All of the following are initial procedures performed on an account balance except:
vouching items from the trial balance to supporting documentation.
