Auditing and Assurance Services

Discuss three of the following characteristics of relevant evidence. 1. Independence of provider 2. Effectiveness of client's internal controls 3. Auditor's direct knowledge 4. Qualification of individuals providing the information 5. Degree of objectivity 6. Timeliness

1. Independence of provider — Evidence obtained from a source outside the entity is more reliable and persuasive than that obtained from within. 2. Effectiveness of client's internal controls — When a client's internal controls are effective, evidence obtained is more reliable than when the controls are not effective. 3. Auditor's direct knowledge — Evidence obtained directly by the auditor through physical examination, observation, computation and inspection is more reliable than information obtained indirectly. 4. Qualification of individuals providing the information — Although the source of information is independent, the evidence will not be reliable unless the individual providing it is qualified to do so. Communications from attorneys and bank confirmations are typically more highly regarded than accounts receivable confirmations from persons not familiar with the business world. Also, evidence obtained directly by the auditor may not be reliable if the auditor lacks the qualifications to evaluate the evidence. 5. Degree of objectivity — Objective evidence is more reliable than evidence that requires considerable judgment to determine whether it is correct. 6. Timeliness — The timeliness of audit evidence can refer either to when it is accumulated or to the period covered by the audit. Evidence is usually more reliable for balance sheet accounts when it is obtained as close to the balance sheet date as possible.

Match nine of the terms (a-k) with the definitions provided below (1-9): a. foot b. compute c. scan d. inquire e. count f. trace g. reperform h. read i. examine j. observe k. compare ________ 1. a calculation done by the auditor independent of the client ________ 2. addition of a column of numbers to determine if the total is the same as the client's ________ 3. a comparison of information in two different locations ________ 4. a use of the senses to assess certain activities ________ 5. following details of transactions from original documents to journals ________ 6. a less detailed examination of a document or record to determine if there is something unusual warranting further investigation ________ 7. obtaining information from the client in response to specific questions ________ 8. a determination of assets on hand at a given time ________ 9. an examination of written information to determine facts pertinent to the audit

1. b 2. a 3. k 4. j 5. f 6. c 7. d 8. e 9. h

Match five of the terms (a-h) with the definitions provided below (1-5): a. audit documentation b. audit procedures c. audit objectives d. analytical procedures e. budgets f. reliability of evidence g. sufficiency of evidence h. persuasiveness of evidence ________ 1. use of comparisons and relationships to assess the reasonableness of account balances ________ 2. detailed instructions for the collection of a type of audit evidence ________ 3. the degree to which evidence can be considered believable or trustworthy ________ 4. contains all the information that the auditor considers necessary to conduct an adequate audit and to provide support for the audit report ________ 5. this is determined by the amount of evidence obtained

1. d 2. b 3. f 4. a 5. g

Define the following terms commonly used in audit procedures: 1. examine 2. scan 3. compute 4. foot 5. compare 6. count 7. vouch

1. examine — a reasonably detailed study of a specific document or record to determine specific facts about it 2. scan — a less detailed examination of a document or record to determine whether there is something unusual warranting further investigation 3. compute — a calculation done by the auditor independent of the client 4. foot — addition of a column of numbers to determine whether the total is the same as the client's 5. compare — a comparison of information in two different locations 6. count — a determination of assets on hand at a given time. This term is associated only with the type of evidence defined as physical examination. 7. vouch — the use of documents to verify recorded transactions or amounts Terms: Audit procedures

Below are 10 documents typically examined during an audit. Classify each document as either internal or external. Type of Document Documents 1. canceled checks for payments of accounts payable 2. payroll time cards 3. duplicate sales invoices 4. vendors' invoices 5. bank statements 6. minutes of the board of directors' meetings 7. signed lease agreements 8. notes receivable 9. subsidiary accounts receivable records 10. remittance advices

1. external 6. internal 2. internal 7. external 3. internal 8. external 4. external 9. internal 5. external 10. external

Below are 12 audit procedures. Classify each procedure according to the following types of audit evidence: (1) physical examination, (2) confirmation, (3) documentation, (4) observation, (5) inquiry of the client, (6) reperformance, and (7) analytical procedure. Type of Evidence Audit Procedures 1. Watch client employees count inventory to determine whether company procedures are being followed. 2. Count inventory items and record the amount in the audit files. 3. Trace postings from the sales journal to the general ledger accounts. 4. Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative to the preceding year. 5. Obtain information about the client's internal controls by asking questions of client personnel. 6. Trace column totals from the cash disbursements journal to the general ledger. 7. Examine a piece of equipment to make sure a recent purchase of equipment was actually received and is in operation. 8. Review the total of repairs and maintenance for each month to determine whether any month's total was unusually large. 9. Compare vendor names and amounts on purchase invoices with entries in the purchases journal. 10. Foot entries in the sales journal to determine whether they were correctly totaled by the client. 11. Make a surprise count of petty cash to verify that the amount of the petty cash fund is intact. 12. Obtain a written statement from the client's bank stating the client's year-end balance on deposit.

1. observation 2. physical examination 3. reperformance 4. analytical procedure 5. inquiry of the client 6. reperformance 7. physical examination 8. analytical procedure 9. documentation 10. reperformance 11. physical examination 12. confirmation

A benefit obtained from using industry averages is that it provides a(n) A) benchmark to compare the company's results. B) indication where errors exist in the statements. C) benchmark to be used in evaluating a client's budgets. D) comparison of "what is" with "what should be."

A

Analytical procedures A) performed during the audit planning phase generally use aggregate data. B) are never performed during the testing phase of an audit. C) are declining in importance as a type of audit evidence. D) performed during the audit planning stage help the auditor take a final objective look at the audited financial statements.

A

Audit evidence obtained directly by the auditor will not be reliable if A) the auditor lacks the competence to evaluate the evidence. B) it is provided by the client's attorney. C) the client denies its veracity. D) it is impossible for the auditor to obtain additional corroboratory evidence.

A

Audit procedures can result in significant, unexpected differences. The auditor should investigate further if A) Significant differences are not expected but do exist Significant differences are expected but do not exist Yes Yes B) Significant differences are not expected but do exist Significant differences are expected but do not exist No No C) Significant differences are not expected but do exist Significant differences are expected but do not exist Yes No D) Significant differences are not expected but do exist Significant differences are expected but do not exist No Yes

A

Auditors must make decisions regarding what evidence to gather and how much to accumulate. Which of the following is a decision that must be made by auditors related to evidence? A) Sample size Timing of audit procedures Yes Yes B) Sample size Timing of audit procedures No No C) Sample size Timing of audit procedures Yes No D) Sample size Timing of audit procedures No Yes

A

Evidence is usually more persuasive for balance sheet accounts when it is obtained A) as close to the balance sheet date as possible. B) only from transactions occurring on the balance sheet date. C) from various times throughout the client's year. D) from the time period when transactions in that account were most numerous during the fiscal period.

A

Industry comparisons can be used as A) an aid to understanding the client's business. B) an indicator of errors. C) an indicator of fraud. D) an aid to internal controls

A

Physical examination A) is a direct means of verifying that an asset really exists. B) is sufficient evidence to verify that the existing assets are owned by the client. C) can be used for both tangible assets and documents. D) is not generally a reliable type of audit evidence.

A

The evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data is the definition of A) analytical procedures. B) tests of transactions. C) tests of balances. D) auditing.

A

When can audit procedures be performed? A) Prior to the fiscal year-end of the client Subsequent to the fiscal year-end of the client Yes Yes B) Prior to the fiscal year-end of the client Subsequent to the fiscal year-end of the client No No C) Prior to the fiscal year-end of the client Subsequent to the fiscal year-end of the client Yes No D) Prior to the fiscal year-end of the client Subsequent to the fiscal year-end of the client No Yes

A

When comparing client data with similar prior-period data, A) if there has been no significant changes in the client's operations in the current year, much of the detail making up the totals in the financial statements should remain unchanged. B) comparison of details must take the form of details over time. C) comparing totals with previous years considers growth in the business activity. D) percent relationships fail to consider declines in the business activity

A

When the auditor uses the audit procedure vouching she is primarily concerned with which of the following audit objectives when testing classes of transactions? A) occurrence B) completeness C) authorization D) classification

A

Which of the following forms of evidence would be least persuasive in forming the auditor's opinion about marketable securities and other investments held by the company? A) responses to auditor's questions by the president and controller regarding the investments account B) correspondence with a stockbroker regarding the quantity of client's investments held in street name by the broker C) minutes of the board of directors authorizing the purchase of stock as an investment D) the auditor's count of marketable securities

A

Which of the following statements regarding the relevance of evidence is correct? A) To be relevant, evidence must pertain to the audit objective of the evidence. B) To be relevant, evidence must be persuasive. C) To be relevant, evidence must relate to multiple audit objectives. D) To be relevant, evidence must be derived from a system including effective internal controls.

A

________ generally provide the most reliable evidence. A) Confirmations B) Recalculations C) Reperformances D) Observations

A

________ is the auditor's examination of the client's documents and records to substantiate that the information is included in the financial statements. A) Inspection B) Recalculation C) Observation D) Verification

A

Why is the appropriateness of audit evidence obtained by the auditor important in forming an audit opinion? Describe the qualities information should have to be considered appropriate by the auditor.

Appropriateness is a measure of the quality of evidence. Audit evidence that is considered appropriate contains the characteristics of relevance and reliability. Relevant evidence relates to the assertion being tested. Reliability refers to the degree to which evidence can be believable or worthy of trust.

One purpose of performing analytical procedures in the planning phase of an audit is to assess the client's financial condition. Explain how the assessment of a client's financial condition can affect the auditor's decisions concerning evidence accumulation in later phases of the audit.

Auditors must obtain knowledge about a client's industry and business as a part of planning an audit. By conducting analytical procedures in which the current year's unaudited information is compared with prior years' audited information or industry data, changes are highlighted. These changes can represent important trends or specific events, all of which will influence audit planning.

A(n) ________ is the detailed instruction that explains the audit evidence to be obtained during the audit. A) audit objective B) audit procedure C) audit assertion D) audit program

B

An example of an external document that provides reliable information for the auditor is: a(n) A) employees' time report. B) bank statement. C) purchase order for company purchases. D) carbon copies of a check.

B

Analytical procedures are so important that they are required during the A) planning and test of control phases. B) planning and completion phases. C) test of control and completion phases. D) planning, test of control, and completion phases

B

Analytical procedures must be used during which phase(s) of the audit? A) Test of Controls Planning Completion Yes Yes Yes B) Test of Controls Planning Completion No Yes Yes C) Test of Controls Planning Completion Yes No No D) Test of Controls Planning Completion No No No

B

Analytical procedures performed during the completion stage of the audit A) help the auditor understand the client's business and industry. B) are typically performed by a senior partner with extensive knowledge of the client's business. C) help the auditor identify significant matters requiring special attention later in the engagement. D) all of the above

B

Analytical procedures performed during the planning phase of the audit A) are used as a substantive test in support of account balances. B) are used to assist in determining the nature, extent, and timing of audit procedures C) are used to detect fraud. D) are mandatory only for public companies.

B

Appropriateness of evidence is a measure of the A) quantity of evidence. B) quality of evidence. C) sufficiency of evidence. D) meaning of evidence.

B

Audit evidence has two primary qualities for the auditor; relevance and reliability. Given the choices below, which provides the auditor with the most reliable audit evidence? A) general ledger account balances B) confirmation of accounts receivable balance received from a customer C) internal memo explaining the issuance of a credit memo D) copy of month-end adjusting entries

B

Auditors may decide to replace tests of details with analytical procedures when possible because the A) analytical procedures are more reliable. B) analytical procedures are considerably less expensive. C) analytical procedures are more persuasive. D) tests of details are more difficult to interpret.

B

Calculating the gross margin for the current audit year as a percent of sales and comparing it with previous years is what type of evidence? A) physical examination B) analytical procedures C) observation D) inquiry

B

For audit evidence to be compelling to the auditor it must be sufficient and appropriate. Which statement below is not correct regarding the appropriateness of audit evidence? A) The more effective the internal control system, the more assurance it provides the auditor about the reliability of financial reporting by the client. B) An auditor's opinion, to be economically useful and profitable to the auditing firm needs to be formed within a reasonable time and based on evidence obtained that assures profits for the auditing firm. C) Evidence obtained from independent sources outside the entity is generally more reliable than evidence secured solely within the entity. D) The independent auditor's direct personal knowledge, obtained through inquiry, observation and inspection, is generally more persuasive than information obtained indirectly.

B

Indicate whether confirmation of accounts receivable and accounts payable, provided they each are significant accounts, is required or optional. A) Accounts Receivable Accounts Payable Required Required B) Accounts Receivable Accounts Payable Required Optional C) Accounts Receivable Accounts Payable Optional Required D) Accounts Receivable Accounts Payable Optional Optional

B

The auditor is concerned that a client is failing to bill customers for shipments. An audit procedure that would gather relevant evidence would be to A) select a sample of duplicate sales invoices and trace each to related shipping documents. B) trace a sample of shipping documents to related duplicate sales invoices. C) trace a sample of Sales Journal entries to the Accounts Receivable subsidiary ledger. D) compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable account in the general ledger.

B

To be considered reliable evidence, confirmations must be controlled by A) the client's employee responsible for accounts receivable. B) the external auditor. C) the client's internal audit department. D) the client's controller or CFO.

B

When practical and reasonable, U.S. auditing standards require the confirmation of A) individual transactions between organizations, such as sales transactions. B) accounts receivable. C) fixed asset additions. D) payroll expenses

B

When the auditor uses tracing as an audit procedure for tests of transactions, she is primarily concerned with which audit objective? A) occurrence B) completeness C) cutoff D) classification

B

Which of the following is accurate regarding the comparison of client data? A) Since budgets are only projections, auditors can ignore the differences between budgeted and actual results. B) One approach to overcome the limitations of industry averages is to compare the client to one or more benchmark firms in the industry. C) It is impractical to relate one account balance to another balance sheet or income statement account. D) it is extremely difficult to get industry data for comparative purposes.

B

Which of the following is not a characteristic of the reliability of evidence? A) effectiveness of client internal controls B) education of auditor C) independence of information provider D) timeliness

B

Which of the following is not one of the four decisions about what evidence to gather and how much of it to accumulate? A) which audit procedures to use B) which accounts must agree to the general ledger C) when to perform the procedures D) what sample size to select for a given procedure

B

Which of the following is the most objective type of evidence? A) a letter written by the client's attorney discussing the likely outcome of outstanding lawsuits B) the physical count of securities and cash C) inquiries of the credit manager about the collectability of noncurrent accounts receivable D) observation of cobwebs on some inventory bins

B

Which of the following statements is not a correct statement regarding audit evidence? A) Evidence obtained from an independent source outside the client organization is more reliable than that obtained from within. B) Documentary evidence is more reliable when it is received by the auditor indirectly rather than directly. C) Documents that originate outside the company are considered more reliable than those that originate within the client's organization. D) External evidence, such as communications from banks, is generally regarded as more reliable than answers obtained from inquiries of the client.

B

Which of the following statements is not correct? A) It is possible to vary the sample size from one unit to 100% of the items in the population. B) Cost is an adequate justification for not gathering an adequate sample size. C) The decision of how many items to test must be made by the auditor for each audit procedure. D) The sample size for any given procedure is likely to vary from audit to audit.

B

You are auditing the company's purchasing process for goods and services. You are primarily concerned with the company not recording all purchase transactions. Which audit procedure below would be the most effective audit procedure in this case? A) vouching from the accounts payable account to the vendor invoices B) tracing vendor invoices to recorded amounts in the accounts payable account C) confirmation accounts payable recorded amounts D) reconciling the accounts payable subsidiary ledger to the accounts payable account

B

An example of a document the auditor receives from the client, but which was prepared by someone outside the client's organization is a A) confirmation. B) sales invoice. C) vendor invoice. D) bank reconciliation

C

Evidence is generally considered appropriate when A) it has been obtained by random selection. B) there is enough of it to afford a reasonable basis for an opinion on financial statements. C) it is relevant to the audit objective being tested. D) it consists of written statements made by managers of the company under audit.

C

Given the economic and time constraints in which auditors can collect evidence regarding management assertions about the financial statements, the auditor normally gathers evidence that is A) irrefutable. B) conclusive. C) persuasive. D) completely convincing.

C

Substantive analytical procedures performed during the testing phase of the audit A) are required under generally accepted auditing standards. B) are always done independently from other audit procedures. C) are used as a substantive test in support of account balances. D) do not need to be documented in the working papers

C

The primary purpose of audit procedures is to A) detect all errors or fraudulent activities as well as illegal activities. B) comply with auditing standards promulgated by the PCAOB for publicly held clients. C) gather corroborative audit evidence about management's assertions regarding the client's financial statements. D) determine the amount of errors in the balance sheet accounts in order to adjust the accounts to actual.

C

The two characteristics of the appropriateness of evidence are A) relevance and timeliness. B) relevance and accuracy. C) relevance and reliability. D) reliability and accuracy.

C

Two determinants of the persuasiveness of evidence are A) competence and sufficiency. B) relevance and reliability. C) appropriateness and sufficiency. D) independence and effectiveness. Answer: C

C

When auditors use documentation to support recorded transactions and amounts, the process is usually called A) tracing. B) confirmations. C) vouching. D) reperformance

C

When making audit evidence decisions, A) the auditor decides which items in the population to test before determining the sample size. B) the sample size for any given procedure must remain constant from audit to audit. C) audit engagement software can assist the auditor in making evidence decisions. D) the auditor is required to use the sample sizes that are determined by the PCAOB.

C

When the auditor uses supporting evidence for amounts posted to account balances with documentary evidence, that process is called A) inquiry. B) confirmation. C) vouching. D) physical examination.

C

Which items affect the sufficiency of evidence when choosing a sample? A) Selecting items with a high likelihood of misstatement The randomness of the items selected Yes Yes B) Selecting items with a high likelihood of misstatement The randomness of the items selected No No C) Selecting items with a high likelihood of misstatement The randomness of the items selected Yes No D) Selecting items with a high likelihood of misstatement The randomness of the items selected No Yes

C

Which of the following is a correct statement regarding audit evidence? A) A large sample of evidence provided by an independent party is always considered persuasive evidence. B) A small sample of only one or two pieces of highly appropriate evidence is always considered persuasive evidence. C) The auditor must obtain a sufficient amount of relevant and reliable evidence to form an opinion on the fairness of the financial statements. D) Evidence is usually more reliable for balance sheet accounts when it is obtained within six months of the balance sheet date.

C

Which of the following is an accurate statement regarding audit evidence? A) Responses to the auditor's questions by client employees is considered highly persuasive evidence. B) Audit evidence should provide an absolute level of assurance. C) The auditor uses evidence to determine whether the statements are fairly presented. D) All evidence must be highly persuasive.

C

Which of the following is not a weakness of using industry averages for auditing? A) The industry data are broad averages. B) Different companies follow different accounting methods. C) They can be helpful in identifying potential misstatements. D) All of the above are weaknesses

C

Which of the following statements is true? A) Evidence must be relevant to all of the audit objectives. B) If evidence is subjective, it cannot be reliable. C) Evidence obtained directly by the auditor may not be reliable if the auditor lacks the qualifications to evaluate the evidence. D) The persuasiveness of evidence can be evaluated after considering its sufficiency.

C

"Physical examination" is the inspection or count by the auditor of items such as A) cash, inventory, and payroll timecards. B) cash, inventory, canceled checks, and sales documents. C) cash, inventory, canceled checks, and tangible fixed assets. D) cash, inventory, securities, notes receivable, and tangible fixed assets

D

Auditors compare client data with A) industry data. B) client-determined expected results. C) similar prior-period data. D) all of the above

D

Determine which of the following is most correct statement regarding the reliability of audit evidence. A) Information that is indirectly obtained from external sources is the most reliable audit evidence. B) Reliability of audit evidence is dependent upon the evidence being subjective. C) Reliability of evidence refers to the amount of evidence obtained. D) If internal controls are effective, evidence obtained is more reliable than when the controls are not effective.

D

Factors that determine the auditor's willingness to accept a document as reliable evidence include A) whether it is internal or external. B) whether it was created and processed under conditions of effective internal control. C) whether it is an original document or a photocopy. D) all of the above

D

The auditor must gather sufficient and appropriate evidence during the course of the audit. Sufficient evidence must A) be well documented and cross-referenced in the audit documents. B) be based on sources that are external to company. C) provide evidence that prove or disprove an audit objective/assertion. D) be persuasive enough to enable the auditor to issue an audit report.

D

When the auditor scans the sales journal looking for large and unusual transactions, he is gathering what type of evidence? A) inspection B) recalculation C) physical examination D) analytical procedures

D

Which of the following discoveries through the use of analytical procedures would most likely indicate a relatively high risk of financial failure? A) a decline in gross margin percentages B) an increase in the balance in fixed assets C) an increase in the ratio of allowance for uncollectible accounts to gross accounts receivable, while at the same time accounts receivable turnover also decreased D) a higher than normal ratio of long-term debt to net worth as well as a lower than average ratio of profits to total assets

D

Which of the following is a correct statement regarding confirmations? A) Confirmations can be in oral or written form. B) Electronic confirmations are not acceptable under generally accepted auditing standards. C) Confirmations are generally used in the audit of fixed asset additions. D) Auditors consider alternative evidence available when determining if confirmations should be used.

D

Which of the following is not a correct combination of terms and related type of audit evidence? A) inquire — inquiries of client B) count — physical examination C) recompute — recalculation D) read — documentation

D

Which of the following statements is correct regarding the costs involved in obtaining evidence? A) Physical examination is usually the least expensive type of audit evidence Cost of obtaining evidence may be a factor in deciding whether to obtain that evidence Yes Yes B) Physical examination is usually the least expensive type of audit evidence Cost of obtaining evidence may be a factor in deciding whether to obtain that evidence No No C) Physical examination is usually the least expensive type of audit evidence Cost of obtaining evidence may be a factor in deciding whether to obtain that evidence Yes No D) Physical examination is usually the least expensive type of audit evidence Cost of obtaining evidence may be a factor in deciding whether to obtain that evidence No Yes

D

Which of the following statements relating to the competence of evidential matter is always true? A) Evidence from outside an enterprise is always reliable. B) Accounting data developed under satisfactory conditions of internal control is not reliable. C) Oral representations made by management are not reliable evidence. D) Evidence must be both reliable and relevant to be considered appropriate.

D

A canceled check written by the client, made payable to a local supplier and drawn on the client's bank account is one type of internal document T/F

False

Accounts receivable confirmations must be controlled by the client from the time they are prepared until the time they are returned to the auditor T/F

False

All evidence must have the same level of persuasiveness T/F

False

Audit evidence to support an opinion about the fairness of a client's financial statements consists entirely of written information. T/F

False

Inquiries of the client are usually sufficient to provide appropriate evidence to satisfy an audit objective. T/F

False

Inspection consists of looking at a process or procedure being performed by others T/F

False

Substantive analytical procedures performed in all phases of the audit generally use aggregate data to help understand where misstatements are more likely to occur. T/F

False

The two most important factors when determining the appropriate sample size in an audit are the auditor's expectation of misstatements and the objectivity of the evidence. T/F

False

When analytical procedures reveal unusual fluctuations in an account balance, the auditor will probably perform fewer tests of details for that account and increase the tests of controls related to the account T/F

False

When the auditor foots the journals and the subsidiary ledgers, it is considered reperformance. T/F

False

Distinguish between internal documentation and external documentation as types of audit evidence. Give two examples of each. Which type is considered more reliable?

Internal documentation involves the auditor's examination of documents that have been prepared and used within the client's organization and are retained without ever going to an outside party. Examples would include duplicate sales invoices, employees' time reports, and inventory receiving reports. External documentation involves the auditor's examination of documents that have been in the hands of someone outside the client's organization. Examples include vendors' invoices, cancelled checks, cancelled notes payable, and insurance policies. External documents are regarded as more reliable evidence than internal documents

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The reliability of evidence refers to the degree to which evidence is considered believable or trustworthy. There are six factors that affect the reliability of audit evidence. One factor is the independence of the provider; i.e., evidence obtained from a source outside the client company is more reliable than that obtained within. Identify and discuss any two of the remaining five factors.

The remaining four factors that affect the reliability of evidence are: 1. Effectiveness of client's internal control 2. Auditor's direct knowledge 3. Qualifications of individuals providing the information 4. Degree of objectivity 5. Timeliness

An audit program is the list of audit procedures for an audit area or an entire audit. T/F

True

Analytical procedures must be used in the planning and completion phases of the audit T/F

True

Auditor judgment is the primary determinant in determining the amount of evidence gathered. T/F

True

Auditors use evidence to help them draw conclusions. T/F

True

Confirmations are among the most expensive type of evidence to obtain T/F

True

Confirmations are ordinarily used to verify account balances, but may be used to verify transactions T/F

True

Cost is never an adequate justification for omitting a necessary procedure or not gathering an adequate sample size. T/F

True

Inquiries of clients and recalculations normally have a low cost associated with them T/F

True

Objective evidence is more reliable, and hence more persuasive, than subjective evidence. T/F

True

The relevance of audit evidence depends on the audit objective being tested T/F

True

The type of audit evidence known as inquiry requires the auditor to obtain oral or written information from the client in response to questions T/F

True

There has been an increased emphasis on the use of analytical procedures during an audit. T/F

True

Whenever practical and reasonable, the confirmation of accounts receivable is required of CPAs. T/F

True

State the three phases of the audit where analytical procedures can be performed and describe the specific procedures performed in each phase

• Planning phase — Auditing procedures are required during this phase. They are performed as part of the risk assessment procedures to understand the client's business and to assist in determining the nature, extent, and timing of audit procedures. • Testing phase — Analytical procedures done during this phase are substantive tests in support of account balances. These procedures are often done in conjunction with other audit procedures. • Completion phase — Analytical procedures are required to be performed during this phase. Such tests serve as a final review for material misstatements or financial problems and help the auditor take a final "objective look" at the audited financial statements