Audit Chapter 7
Recompute
A calculation done to determine whether a client's calculation is correct.
______ all marketable securities as of the balance sheet date to determine whether they equal the total on the client's list.
Count -Type of evidence: Physical examination
______ the sales journal and ______ the total to the general ledger.
Foot, Trace -Type of evidence: Recalculation and Reperformance
______ of management whether all accounting employees are required to take annual vacations.
Inquire -Type of evidence: Inquiries of client
Reperformance
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.
Some primary purposes of audit documentation
-To coordinate the audit -To assist in preparation of the audit report -To provide evidence of the audit work performed
Which of the following types of audit evidence is generally the most reliable?
A bank confirmation
Compute
A calculation done by the auditor independent of the client
Compare
A comparison of information in two different locations. The instructions should state which information is being compared in as much detail as practical.
Count
A determination of assets on hand at a given time. This term should be associated only with the type of evidence defined as physical examination.
Scan
A less-detailed examination of a document or record to determine whether there is something unusual warranting further investigation.
Examine
A reasonably detailed study of a document or record to determine specific facts about it
Foot
Addition of a column of numbers to determine whether the total is the same as the client's
Read
An examination of written information to determine facts pertinent to the audit.
Trace
An instruction normally associated with inspection or reperformance. The instruction should state what the auditor is tracing and where it is being traced from and to. -Often, an audit procedure that includes the term trace will also include a second instruction, such as compare or recalculate.
Inspection
Auditor's examination of the client's documents and records to substantiate the information that is, or should be, included in the financial statements.
______ the ratio of cost of goods sold to sales and compare the ratio to previous years.
Compute -Type of evidence: Analytical procedures
______ the balance in the bank account directly with the East State Bank.
Confirm -Type of evidence: Confirmation
Which of the following types of documentary evidence should the auditor consider to be the most reliable?
Confirmation of an account payable balance mailed by and returned directly to the auditor
Which of the following presumptions is correct about the reliability of audit evidence?
Effective internal control provides more assurance about the reliability of audit evidence.
Analytical Procedures
Evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data.
______ a sample of duplicate sales invoices to determine if the controller's approval is included and ______ each duplicate sales invoice to the sales journal for agreement of name and amount.
Examine, Compare -Type of evidence: Inspection
For all audits of financial statements made in accordance with auditing standards, the use of analytical procedures is required to some extent
In the planning stage and in the completion stage but no in the substantive test
Physical examination
Inspection or count by the auditor of a tangible asset.
Recalculation
Involves rechecking a sample of calculations made by the client.
______ whether the accounts receivable bookkeeper is prohibited from handling cash.
Observe -Type of evidence: Observation
Inquiry
Obtaining of written or oral information for the client in response to questions from the auditor.
Audit evidence can come in different forms with different degrees of persuasiveness. Which of the following is the least persuasive type of evidence?
Prenumbered sales invoices
Which of the following would not be considered to be an analytical procedure?
Projecting the error rate by comparing the results of a statistical sample with the actual population characteristics.
______ the agreement between Johnson Wholesale Company and the client to determine whether the shipment is a sale or a consignment.
Read -Type of evidence: Inspection
______ the unit selling price times quantity on the duplicate sales invoice and compare the total to the amount on the duplicate sales invoice.
Recompute -Type of evidence: Recalculation
______ the sales journal, looking for large and unusual transactions requiring investigation.
Scan -Type of evidence: Analytical procedures
During an audit engagement, pertinent data are compiled and included in the audit files. The audit files primarily are considered to be
Support for the auditor's representations as to compliance with auditing standards.
Inquire
The act of inquiry should be associated with the type of evidence defined as inquiry
Observe
The act of observation should be associated with the type of evidence defined as observation
Which of the following situations has the best chance of being detected when a CPA compares 2016 revenues and expenses with the prior year and investigates all changes exceeding a fixed percent?
The company changed its capitalization policy for small tools in 2016.
Confirmation
The receipt of a direct written response from a third party verifying the accuracy of information that was requested by the auditor.
Vouch
The use of documents to verify recorded transactions or amounts
Which of the following is not a primary purpose of audit documentation?
To support the financial statements
Current files
all audit files applicable to the year under audit
Lead schedule
an audit schedule that contains the detailed accounts from the general ledger making up a line item total in the working trial balance
Although the quantity, type, and content of audit documentation will vary with the circumstances, audit documentation generally will include the
auditing procedures followed and the testing performed in obtaining audit evidence.
Permanent files
auditor's files that contain data of a historical or continuing nature pertinent to the current audit such as copies of articles of incorporation, bylaws, bond indentures, and contracts
Supporting schedules
detailed schedules prepared by the client or the auditor in support of specific amounts on the financial statements
An auditor most likely would apply analytical procedures in the overall review stage of an audit to
identify unusual or unexpected balances that were not previously identified.
Observation
looking at a process or procedure being performed by others.
According to PCAOB audit standards, audit documentation must be retained for
seven years.
Tick marks
symbols used on an audit schedule that provide additional information or details of audit procedures performed