ACC450: Audit Chapter 5

a. Yes Yes

Financial statement assertions are established for classes of transactions Account Balances Disclosures a. Yes Yes b. Yes No c. No Yes d. No No

True

True or False: A vendor's invoice is an example of documentary evidence created by a third party and held by the client

False

True or False: The use of lead schedules is designed to increase the detail of the working trial balance

False

True or False: The auditors should propose an adjusting journal entry for all material related-party transactions

False

True or False: Working papers of continuing audit interest usually are filed with the administrative working papers

d. Estimation.

What type of transactions ordinarily have high inherent risk because they involve management judgments or assumptions in formulating accounting balances? a. Qualified. b. Nonroutine. c. Routine. d. Estimation.

c. Confirm the amounts

. Which of the following is not a primary approach to auditing an accounting estimate? a. Review and test management's process for developing the estimate b. Review subsequent transactions c. Confirm the amounts d. Develop an independent estimate

d. Horizontal analysis

An auditor is performing an analytical procedure that involves comparing a client's account balances over time. This technique is referred to as a. Comparison analysis. b. Cross-sectional analysis. c. Vertical analysis. d. Horizontal analysis

c. Vertical analysis.

An auditor is performing an analytical procedure that involves developing common-size financial statements. This technique is referred to as: a. Cross-sectional analysis. b. Horizontal analysis. c. Vertical analysis. d. Comparison analysis.

b. Unusual transactions

Analytical procedures are most likely to detect: a. Weakness of material nature in internal controls b. Unusual transactions c. Noncompliance with prescribed control activities d. Improper separation of accounting and other financial duties

d. A part of the final overall review

Analytical procedures are required at the risk assessment stage and as a. Substantive procedures. b. Tests of internal control. c. Computer generated procedures. d. A part of the final overall review

Observation

Fill in the Blank: During a site visit to a branch warehouse, the auditor noted unauthorized personnel have access to the inventory_____

Inspection of tangible assets

Fill in the Blank: During the physical inventory count, the auditor requested that certain containers of inventory items be opened to ensure they were not empty_____

a. Date of the auditor's report

The date of the management representation letter should coincide with the a. Date of the auditor's report b. Balance sheet date. c. Date of the latest subsequent event referred to in the notes to the financial statements. d. Date of the engagement agreement.

c. A manager or partner who has a comprehensive knowledge of the client's business and industry.

To be effective, analytical procedures performed near the end of the audit should be performed by a. A beginning staff accountant who has had no other work related to the engagement. b. The CPA firm's quality control manager. c. A manager or partner who has a comprehensive knowledge of the client's business and industry. d. The partner performing the quality review of the audit.

True

True or False: Adjusting journal entries are ordinarily recorded by the client, while reclassifying journal entries need not be recorded

b. Support for the auditors' representations as to compliance with generally accepted auditing standards.

During an audit engagement pertinent data are prepared and included in the audit working papers. The working papers primarily are considered to be a. A record to be used as a basis for the following year's engagement. b. Support for the auditors' representations as to compliance with generally accepted auditing standards. c. A client-owned record of conclusions reached by the auditors who performed the engagement. d. Evidence supporting financial statements.

b. Detection risk.

During financial statement audits, auditors seek to restrict which type of risk a. Control risk. b. Detection risk. c. Inherent risk. d. Account risk.

a. Performing substantive procedures

Failure to detect material dollar errors in the financial statements is a risk which the auditors primarily mitigate by a. Performing substantive procedures b. Performing tests of controls. c. Assessing control risk. d. Obtaining a client representation letter

d. Document the assistant auditor's position and how the difference of opinion was resolved

A difference of opinion concerning accounting and auditing matters relative to the particular phase of the audit arises between an assistant auditor and the auditor responsible for the engagement. After appropriate consultation, the assistant auditor asks to be disassociated from the resolution of the matter. The working papers would probably: a. Remain silent on the matter since it is an internal matter of the auditing firm b. Note that the assistant auditor is completely dissociated from responsibility for the auditors' opinion c. Document the additional work required, since all disagreements of this type will require expanded substantive procedures d. Document the assistant auditor's position and how the difference of opinion was resolved

d. Support the auditors' opinion

A primary purpose of the audit working papers is to: a. Aid the auditors by providing a list of required procedures b. Provide a point of reference for future audit engagements c. Support the underlying concepts included in the preparation of the basic financial statements d. Support the auditors' opinion

a. Working trial balance

A schedule listing account balances for the current and previous years, and columns for adjusting and reclassifying entries proposed by the auditors to arrive at the final mount that will appear in the financial statement, is referred to as a a. Working trial balance b. Lead schedule. c. Summarizing schedule. d. Supporting schedule.

d. Lead schedule

A schedule set up to combine similar general ledger accounts, the total of which appears on the working trial balance as a single amount, is referred to as a a. Supporting schedule. b. Reconciling schedule. c. Corroborating schedule. d. Lead schedule

d. Auditing procedures followed and the testing performed in obtaining audit evidence.

Although the quantity, type, and content of working papers will vary with the circumstances, the working papers generally would include the a. Evaluation of the efficiency and competence of the audit staff assistants by the partner responsible for the audit. b. Auditor's comments concerning the efficiency and competence of client management personnel. c. Copies of those client records examined by the auditor during the course of the engagement. d. Auditing procedures followed and the testing performed in obtaining audit evidence.

a. Analytical procedures

An auditor compared the current-year gross margin with the prior-year gross margin to determine if cost of sales is reasonable. What type of audit procedure was performed a. Analytical procedures b. Test of transactions. c. Test of controls. d. Test of details.

b. Cross-sectional analysis.

An auditor is performing an analytical procedure that involves comparing a client's ratios with other companies in the same industry. This technique is referred to as a. Comparison analysis. b. Cross-sectional analysis. c. Vertical analysis. d. Horizontal analysis

d. Potentially increases the risk that errors that exist at the balance sheet date will not be detected

An auditor plans to apply substantive tests to the details of asset and liability accounts as of an interim date rather than as of the balance sheet date. The auditor should be aware that this practice a. Eliminates the use of certain statistical sampling methods that would otherwise be avail-able. b. Presumes that the auditor will reperform the tests as of the balance sheet date. c. Should be especially considered when there are rapidly changing economic conditions d. Potentially increases the risk that errors that exist at the balance sheet date will not be detected

c. Measurement date (ordinarily the date of the financial statements).

An auditor should expect that fair value is the price that would be received to sell an asset in an orderly transaction between the market participants at the a. Expected replacement date of the asset. b. Acquisition date of the asset. c. Measurement date (ordinarily the date of the financial statements). d. Audit report date.

b. Financial information with similar information regarding the industry in which the entity operates.

An example of an analytical procedure is the comparison of a. Results of a statistical sample with the expected characteristics of the actual population. b. Financial information with similar information regarding the industry in which the entity operates. c. Recorded amounts of major disbursements with appropriate invoices. d. EDP generated data with similar data generated by a manual accounting system.

b. Related party transactions.

An independent auditor finds that the Simmer Corporation occupies office space, at no charge, in an office building owned by a shareholder. This finding indicates the existence of: a. Management fraud. b. Related party transactions. c. Window dressing. d. Weak internal control.

c. Considering unusual or unexpected account balance that were not previously identified

Analytical procedures performed near the end of the audit assist the auditor in forming an overall conclusion on the financial statements are aimed primarily at: a. Gathering evidence concerning account balances that have not changed from the prior year b. Retesting internal control procedures c. Considering unusual or unexpected account balance that were not previously identified d. Performing a test of transactions to corroborate management's financial statements assertions

d. To increase the efficiency of the audit by eliminating the need for other audit procedures

As part of their audit, auditors obtain a representation letter for their client. Which of the following is not a valid purpose of such letter? a. To increase the efficiency of the audit by eliminating the need for other audit procedures b. To remind the client's management of its primary responsibility for the financial statements c. To document in the audit working papers the client's responses to certain verbal inquiries made by the auditors during the engagement d. To provide evidence in those areas dependent upon management's future intentions

a. Find smaller misstatements.

As planning materiality is decreased, the auditor should plan more work on individual accounts to. a. Find smaller misstatements. b. Find larger misstatements. c. Increase the tolerable misstatement in the accounts. d. Decrease the risk of assessing control risk too low

a. Relevant assertions

Assertions that have a meaningful bearing on whether an account balance, transaction class or disclosure is fairly stated are referred to as a. Relevant assertions b. Appropriate assertions. c. Reliable assertions. d. Sufficient assertions.

d. Routine transactions

Assertions with high inherent risk are least likely to involve a. Difficult accounting issues. b. Significant judgment by management. c. Complex calculations d. Routine transactions

a. Violates professional standards.

CPA wishes to use a representation letter as a substitute for performing other audit procedures. Doing so: a. Violates professional standards. b. Is acceptable and desirable under all conditions. c. Is acceptable, but should only be done when cost justified. d. Is acceptable, but only for non-public clients.

d. Requires retention for at least 7 years

Concerning retention of working papers, the Sarbanes-Oxley Act a. Has no provisions. b. Requires retention for a period of 4 or less years. c. Requires permanent retention d. Requires retention for at least 7 years

b. Inventory held on consignment.

Confirmation would be most effective in addressing the existence assertion for the a. Payment of payroll during regular course of business. b. Inventory held on consignment. c. Granting of a patent for a special process developed by the organization. d. Addition of a milling machine to a machine shop.

Recalculation

Fill in the Blank: The auditing firm's computer assisted audit specialist obtained an electronic billing file from the company and checked the accuracy of the summarized billings file_____

Inspection of records or documents

Fill in the Blank: The auditor obtained a copy of the company's accounting manual and read the section on inventory to prepare for the physical inventory observation_____

Analytical Procedures*

Fill in the Blank: The auditor scanned the repairs and maintenance account for unusually large amounts_____

Reperformance

Fill in the Blank: The auditor selected a sample of invoices and agreed the vendor to the approved vendor list, as had been required by the client's internal control procedures_____

Inquiry

Fill in the Blank: The auditor sent a letter to the company's outside attorney accompanied by management's request for information concerning pending or threatened litigation, claims, and assessments___

d. Tests of controls

Further audit procedures include a. Tests of account balances b. Tests of classes of transactions c. Tests of disclosures d. Tests of controls

a. A price for a similar asset obtained from an active market

In auditing an asset valued at fair value, which of the following potentially provides the auditor with the strongest evidence a. A price for a similar asset obtained from an active market b. An appraisal obtained discounting future cash flows. c. Management's judgment of the cost to purchase an equivalent asset. d. The historical cost of the asset.

c. Anticipated costs of audit completion

In developing an expectation for analytical procedures, the auditors are least likely to consider: a. Financial information for comparable prior periods b. Relationships between financial information and relevant nonfinancial data c. Anticipated costs of audit completion d. Relationships among elements of financial information within a period

b. Reasonable in the circumstances.

In evaluating an entity's accounting estimates, one of the auditor's objectives is to determine whether the estimates are a. Consistent with industry guidelines. b. Reasonable in the circumstances. c. Prepared in a satisfactory control environment. d. Based on verifiable objective assumptions.

a. The working papers may be obtained by third parties where they appear to be relevant to issues raised in litigation

In general, which of the following statements is correct with respect to ownership, possession, or access to working papers prepared by a CPA firm in connection with an audit a. The working papers may be obtained by third parties where they appear to be relevant to issues raised in litigation b. The working papers are subject to the privileged communication rule which, in a majority of jurisdictions, prevents third-party access to the working papers. c. The working papers are the property of the client after the client pays the fee. d. The working papers must be retained by the CPA firm for a period of ten years.

a. Yes Yes

In obtaining sufficient appropriate audit evidence, the work of which type or types of specialists may be relied upon Client Engaged Auditor Engaged a. Yes Yes b. Yes No c. No Yes d. No No

b. Auditors, as a result of the specialist's findings, give a qualified opinion on the financial statements

In using the work of a specialist, the auditors referred to the specialist's findings in their report. This would be an appropriate reporting practice if the: a. Client is not familiar with the professional certification, personal reputation, or particular competence of the specialist b. Auditors, as a result of the specialist's findings, give a qualified opinion on the financial statements c. Client understands the auditors' corroborative use of specialist's findings in relation to the representations in the financial statements d. Auditors, as a result of the specialist's findings, decide to indicate a division of responsibility with the specialist

b. Permanent working paper file

In what section of the audit working papers would a long-term lease agreement be filed? a. Current working paper file b. Permanent working paper file c. Lead schedule file d. Corroborating documents file

a. Completeness: h. All assets have been recorded b. Cutoff: k. Transactions are recorded in the correct accounting period c. Existence and occurrence: j. There is such an asset d. Presentation and disclosure: g. Assets are properly classified e. Rights and obligations: i. The company legally owns the assets f. Valuation: l. Assets are recorded at proper amounts

Matching Auditors consider financial statements assertions to identify appropriate audit procedures. For items a-f, match each assertion with the statement that most closely approximates its meaning. (Each statement may be used only once) Term a. Completeness b. Cutoff c. Existence and occurrence d. Presentation and disclosure e. Rights and obligations f. Valuation Definition g. Assets are properly classified h. All assets have been recorded i. The company legally owns the assets j. There is such an asset k. Transactions are recorded in the correct accounting period l. Assets are recorded at proper amounts

a. Prepare a flow chart of internal control over sales: h. Risk assessment procedures (other than analytical procedures) b. Calculate the ratio of bad debt expense to credit sales: g. Analytical procedures c. Determine whether disbursements are properly approved: i. Tests of controls d. Confirm accounts receivable f. Tests of details of account balances, transactions, or disclosures e. Compare current financial information with comparable prior periods g. Analytical procedures

Matching Auditors perform audit procedures to obtain audit evidence that will allow them to draw reasonable conclusions as to whether the client's financial statements follow generally accepted accounting principles. Match each audit procedure by selecting the most appropriate type of procedure. (Each type of audit procedure is used; one is used twice.) Terms a. Prepare a flow chart of internal control over sales b. Calculate the ratio of bad debt expense to credit sales c. Determine whether disbursements are properly approved d. Confirm accounts receivable e. Compare current financial information with comparable prior periods g Definitions f. Tests of details of account balances, transactions, or disclosures g. Analytical procedures h. Risk assessment procedures (other than analytical procedures) i. Tests of controls

b. Correspondence between the auditors and suppliers

Of the following, which is the least reliable type of audit evidence? a. Confirmations mailed by outsiders to the auditors b. Correspondence between the auditors and suppliers c. Copier of sales invoice inspected by the auditors d. Canceled checks returned in the year-end bank statement directly to the client

a. Achieve audit objectives related to a particular assertion

Performing analytical procedures may help an auditor to: a. Achieve audit objectives related to a particular assertion b. Develop an effective system of quality control c. Meet PCAOB requirements that analytical procedures be performed relating to every major account d. Increase the level of detection risk

b. An administrative working paper.

The audit time budget is an example of a. A supporting schedule. b. An administrative working paper. c. A lead schedule. d. A corroborative working paper.

a. 12.5%

The auditors of Smith Electronics wish to limit the audit risk of material misstatement in the test of accounts receivable to 5 percent. They believe that inherent risk is 100%, and there is a 40% risk that material misstatement could have bypassed the client's system of internal control. What is the maximum detection risk the auditors should specify in their substantive procedures of details of accounts receivable a. 12.5% b. 42.7%. c. 5%. d. 60%.

a. Investigation of significant variations and unusual relationships

The auditors use analytical procedures during the course of an audit. The most important phase of performing these procedures is the a. Investigation of significant variations and unusual relationships b. Vouching of all data supporting various ratios. c. Comparison of client-computed statistics with industry data on a quarterly and full-year basis. d. Recalculation of industry date

b. Yes Yes No

The components of the risk of misstatement are Inherent Risk, Control Risk, Detection Risk a. Yes Yes Yes b. Yes Yes No c. Yes No No d. No Yes Yes

a. Low

The cost of analysis procedures in terms in terms of time needed to perform, when compared to other tests, is ordinarily considered a. Low b. High c. Identical d. Indeterminate

b. Documentation completion date.

The date on which no information may be deleted from audit documentation is the a. Client's year-end. b. Documentation completion date. c. Last date of significant fieldwork d. All of these are incorrect in that no information may ever be deleted from audit documentation.

c. Documentary evidence about occurrence of a transaction.

The inspection of a vendor's invoice by the auditors is a. Direct evidence about occurrence of a transaction. b. Physical evidence about occurrence of a transaction. c. Documentary evidence about occurrence of a transaction. d. Part of the client's accounting system.

a. Narrative descriptions of the client's accounting procedures and controls

The permanent file section of the working papers that is kept for each audit client most likely contains a. Narrative descriptions of the client's accounting procedures and controls b. Correspondence with the client's legal counsel concerning pending litigation. c. A schedule of time spent on the engagement by each individual auditor. d. Review notes pertaining to questions and comments regarding the audit work performed

True

True or False: In performing analytical procedures, the auditors may use dollar amounts, physical quantities, or percentages

False

True or False: The most reliable form of documentary evidence generally is considered to be documents created by the client

False

True or False: The primary purpose of a letter of representations is to obtain additional evidence about specific accounts

True

True or False: When the risk of material misstatement for an account is high, the auditors may perform additional substantive procedures to restrict detection risk to a lower level

c. Ratio analysis

What type of analytical procedure would an auditor most likely use in developing relationships among balance sheet accounts a. Trend analysis b. A detailed test of balance analysis c. Ratio analysis d. Risk analysis

b. Complement, but do not replace, substantive procedures designed to support the assertion.

When considering the use of management's written representations as audit evidence about the completeness assertion, an auditor should understand that such representations a. Are generally sufficient audit evidence to support the assertion regardless of the assessed level of control risk. b. Complement, but do not replace, substantive procedures designed to support the assertion. c. Replace the assessed level of control risk as evidence to support the assertions. d. Constitute sufficient evidence to support the assertion when considered in combination with a moderate assessed level of control risk.

a. Fraud.

When performing a financial statement audit, auditors are required to explicitly assess the risk of material misstatement due to: a. Fraud. b. Misappropriation. c. Illegal Acts. d. Business risk.

c. Lack of comparability.

Which of the following best describes the problem with the use of published industry averages for analytical procedures a. Lack of sufficiency. b. Lack of accuracy. c. Lack of comparability. d. Lack of availability.

d. Material related party transactions must be disclosed in the notes to the financial statements

Which of the following best describes the reason that auditors are concerned with the detection of related party transactions a. The financial statements must often be adjusted for the effects of material related party transactions. b. In a related party transaction one party has the ability to exercise significant influence over the other party. c. The substance of related party transactions will differ from their form. d. Material related party transactions must be disclosed in the notes to the financial statements

d. a large amount of assets

Which of the following business characteristics is NOT indicative of high inherent risk? a. opening results that are highly sensitive to economic factors b. large likely misstatements detected in prior audits c. substantial turnover of management d. a large amount of assets

d. Management acknowledges responsibility for illegal actions committed by employees.

Which of the following expressions is least likely to be included in a client's representation letter? a. Management has made available all financial statements, including notes. b. No events have occurred subsequent to the balance sheet date that require adjustment to, or disclosure in, the financial statements. c. The company has complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance. d. Management acknowledges responsibility for illegal actions committed by employees.

a. Internal auditors

Which of the following groups are not considered a specialist by AICPA Professional Standards a. Internal auditors b. Geologists. d. Engineers. d. Appraisers.

d. effectiveness of internal control

Which of the following is NOT a financial statement assertion made by management? a. existence of recorded assets & liabilities b. completeness of recorded assets & liabilities c. valuation of assets & liabilities d. effectiveness of internal control

a. Reviewing subsequent events or transactions

Which of the following is a basic approach often used by auditors to evaluate the reasonableness of accounting estimates a. Reviewing subsequent events or transactions b. Analyzing corporate organizational structure. c. Confirmation. d. Observation

a. It may affect the auditor's assessment of fraud risk.

Which of the following is correct concerning a "fraud risk factor"? a. It may affect the auditor's assessment of fraud risk. b. It is also a material weakness in internal control. c. If it involves senior management, it is likely to result in resignation of the auditor. d. It requires modification of planned audit procedures.

a. The amount of evidence that is sufficient varies inversely with the acceptable risk of material misstatement.

Which of the following is generally true about the sufficiency of audit evidence a. The amount of evidence that is sufficient varies inversely with the acceptable risk of material misstatement. b. The amount of evidence concerning a particular account varies inversely with the inherent risk of the account. c. The amount of evidence concerning a particular account varies inversely with the materiality of the account. d. When evidence is appropriate with respect to an account it is also sufficient.

c. Confirmation of amounts.

Which of the following is not a basic approach often used by auditors to evaluate the reasonableness of accounting estimates a. Review of management's process of development. b. Review of subsequent events. c. Confirmation of amounts. d. Independent development of an estimate.

d. Tests of direct evidence

Which of the following is not a basic procedure used in an audit a. Risk assessment procedures. b. Substantive procedures. c. Tests of controls d. Tests of direct evidence

b. Recorded value and discounts.

Which of the following is not a financial statement assertion relating to account balances a. Completeness b. Recorded value and discounts. c. Rights and obligations. d. Existence.

a. Assist management in illustrating that the financial statements are in accordance with generally accepted accounting principles

Which of the following is not a function of audit working papers? a. Assist management in illustrating that the financial statements are in accordance with generally accepted accounting principles b. Assist audit team members responsible for supervision in reviewing the work c. Assist auditors in planning future engagements d. Assist peer reviewers and inspectors in performing their roles

b. Provide support for the accounting records.

Which of the following is not a function of working papers? a. Provide support for the auditors' report. b. Provide support for the accounting records. c. Aid partners in planning and conducting future audits. d. Document staff compliance with generally accepted auditing standards.

c. To support the financial statements.

Which of the following is not a primary purpose of audit working papers a. To coordinate the examination. b. To assist in preparation of the audit report. c. To support the financial statements. d. To provide evidence of the audit work performed.

c. Comparison of recorded amounts of major disbursements with appropriate invoices.

Which of the following is not a typical analytical procedure a. Study of relationships of the financial information with relevant nonfinancial information. b. Comparison of the financial information with similar information regarding the industry in which the entity operates. c. Comparison of recorded amounts of major disbursements with appropriate invoices. d. Comparison of the financial information with budgeted amounts

b. Sufficiency

Which of the following is not an assertion relating to classes of transactions a. Accuracy. b. Sufficiency c. Cutoff. d. Classification

a. Comparisons of financial statement amounts with source documents

Which of the following is not considered to be an analytical procedure a. Comparisons of financial statement amounts with source documents b. Comparisons of financial statement amounts with nonfinancial data. c. Comparisons of financial statement amounts with budgeted amounts. d. Comparisons of financial statement amounts with comparable prior year amounts

c. A written audit program.

Which of the following is required documentation in an audit a. A list of major accounts. b. A memo setting forth the scope of the audit. c. A written audit program. d. A flowchart of the client's organization.

a. Analytical procedures are used in risk assessment, as a substantive procedure for specific accounts, and near the completion of the audit of the audited financial statements.

Which of the following is true about analytical procedures? a. Analytical procedures are used in risk assessment, as a substantive procedure for specific accounts, and near the completion of the audit of the audited financial statements. b. Performing analytical procedures results in the most reliable form of evidence. c. Analytical procedures are tests of controls used to evaluate the quality of a client's internal control. d. Analytical procedures are used for planning, but they should not be used to obtain evidence as to the reasonableness of specific account balances.

b. The substance of related party transactions may differ from their form

Which of the following statements best describes why auditors investigate related party transactions? a. Related party transactions generally are illegal acts b. The substance of related party transactions may differ from their form c. All related party transactions must be eliminated as a step in preparing consolidated financial statements d. Related party transactions are a form of management fraud

a. The auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly from independent outside sources

Which of the following statements is generally correct about audit evidence? a. The auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly from independent outside sources b. To be appropriate, audit evidence must be sufficient. c. Accounting data alone may be considered sufficient appropriate audit evidence to issue an unqualified opinion on financial statements. d. Appropriateness of audit evidence refers to the amount of corroborative evidence to be obtained.

a. The auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly from independent outside sources.

Which of the following statements is generally correct about audit evidence? a. The auditor's direct personal knowledge, obtained through observation and inspection, is more persuasive than information obtained indirectly from independent outside sources. b. Accounting data alone may be considered sufficient appropriate audit evidence to issue an unqualified opinion on financial statements. c. To be appropriate, audit evidence must be sufficient. d. Appropriateness of audit evidence refers to the amount of corroborative evidence to be obtained.

d. The auditor must obtain sufficient appropriate audit evidence

Which of the following statements relating to audit evidence is the most accurate statement a. Audit evidence gathered by an auditor from outside an enterprise is reliable. b. Accounting data developed under satisfactory conditions of internal control are more relevant than data developed under unsatisfactory internal control conditions. c. Oral representations made by management are not valid evidence. d. The auditor must obtain sufficient appropriate audit evidence

a. The auditors' judgment.

Which of the following ultimately determines the specific audit procedures necessary to provide independent auditors with a reasonable basis for the expression of an opinion a. The auditors' judgment. b. Generally accepted accounting quality standards. c. The audit time budget. d. The auditors' working papers.

d. Payment of a bonus to the president

Which of the following would not necessarily be considered a related party transaction a. Sale of land to the corporation by the spouse of a director. b. Loan from the corporation to a major stockholder. c. Purchases from another corporation that is controlled by the corporation's chief stockholder. d. Payment of a bonus to the president

b. Designed to meet the circumstances of the particular engagement.

Working papers that record the procedures used by the auditor to gather evidence should be a. Viewed as the connecting link between the books of account and the financial statements. b. Designed to meet the circumstances of the particular engagement. c. Considered the primary support for the financial statements being examined. d. Destroyed when the audited entity ceases to be a client.