SB HW Ch 5 Evidence & Documentation

Which of these are generally low-reliability types of evidence because they require further corroboration by the auditor? Observation Inquiry Recalculation Scanning

Observation Inquiry

True or false: Although the auditor owns the audit documents, they cannot be shown to outside parties without the entity's consent, except under certain circumstances. True False

True

True or false: Audit evidence includes information developed by the auditor that permits him or her to reach conclusions through valid reasoning. True False

True

The functions of audit documentation are to ______. aid in the planning, performance and supervision of the audit provide the basis for the review of the quality of work provide principal support that the audit was conducted in accordance with GAAP provide justification for the fees charged for audit services rendered provide principal support that the audit was conducted in accordance with GAAS

aid in the planning, performance and supervision of the audit provide the basis for the review of the quality of work provide principal support that the audit was conducted in accordance with GAAS

The audit documentation needs to be organized so that ______ can find the audit evidence that supports each financial statement account. entity management any member of the audit team the Board of Directors reviewers

any member of the audit team reviewers

Expressed or implied representations by management regarding the recognition, measurement, presentation and disclosure of information in the financial statements and related disclosures are referred to as _____ .

assertions

The auditor can issue an unqualified/unmodified report when audit evidence supports management's _____

assertions

The basic framework for the auditor's understanding of audit evidence and its use in supporting the auditor's opinion on the financial statements is (are) ______. management assertions regarding the financial statements generally accepted auditing principles generally accepted accounting principles auditing standards

auditing standards

Inquiry may ______. be considered sufficient evidence on its own in most cases be formal or informal provide corroborative audit evidence

be formal or informal provide corroborative audit evidence provide new audit evidence

Audit documentation should ______. enable a knowledgeable reviewer to determine who performed the work include a detailed breakdown of how the fees were set for the engagement demonstrate how the audit complied with appropriate standards show that standards of fieldwork have been followed

enable a knowledgeable reviewer to determine who performed the work demonstrate how the audit complied with appropriate standards show that standards of fieldwork have been followed

A management statement that the inventory shown on the balance sheet was available for sale at the balance sheet date is an example of the _____ assertion.

existence

A management statement that the property, plant and equipment shown on the balance sheet was owned and available for sale at the balance sheet date is an example of the ______ assertion. completeness rights and obligations existence valuation and allocation

existence

There is a(n) ______ relationship between the sufficiency and appropriateness of audit evidence. inverse material direct indirect

inverse

Evidence obtained from a source outside the entity is generally considered ______ evidence obtained solely from within the entity. less reliable than equally reliable to more reliable than

more reliable than

Whether all recorded transactions and events have happened and pertain to the entity is the basis of the ______ assertion. occurrence completeness authorization accuracy

occurrence

Because the entity's personnel might have incentives to record fictitious transactions, the _____ assertion is relevant for revenue transactions.

occurrence or validity

The measure of the quantity of audit evidence is referred to as _____ .

sufficiency

The heading of all audit documentation should include the ______. title of the working paper identity of the auditor name of the entity entity's year-end date name of the audit firm

title of the working paper name of the entity entity's year-end date

In evaluating audit evidence, the auditor must ______. only consider evidence that is 100% reliable understand the types of evidence available be unbiased remain objective

understand the types of evidence available be unbiased remain objective

The reliability of inspection of records and documents depends primarily on ______. the dollar amount involved in the record whether the document is internal or external who prepared the document when the record or document was prepar

whether the document is internal or external

The auditor's exercise of professional judgment to review accounting data to identify significant or unusual items to test is referred to as _____ .

Blank 1: scanning

Audit documentation is referred to as _____ _____ or the audit file.

Blank 1: working Blank 2: papers

This is useful in helping auditors understand the entity's processes but is generally not considered very reliable. Confirmation Inspection Inquiry Observation

Observation

Who is responsible for the fair presentation of the financial statements? Board of directors External auditors Management Internal auditors

Management

This consists of evaluations of financial information through the examination of plausible relationships among both financial and non-financial data. Analytical Procedures Recalculation Inquiry of tangible assets Reperformance

Analytical Procedures

Checks, invoices, contracts, ledgers, worksheets and spreadsheets are all part of auditing evidence referred to as _____ _____ .

Blank 1: accounting Blank 2: records

The document that outlines the auditor's understanding of the entity and potential risks as well as the strategy to be followed by the auditor is called the _____ _____ .

Blank 1: audit Blank 2: plan

Specific acts performed by the auditor to gather evidence about whether specific assertions are being met are referred to as _____ .

Blank 1: audit Blank 2: procedures

Specific acts performed by the auditor to gather evidence about whether specific assertions are being met are referred to as _____ _____ .

Blank 1: audit Blank 2: procedures

Audit evidence obtained by the auditor as a direct written response to the auditor from a third party in paper form or by electronic or other medium is called a(n) _____

Blank 1: confirmation

In regards to applying the audit testing hierarchy, starting with tests of _____ is generally more effective and efficient than starting with tests of _____ .

Blank 1: controls or control Blank 2: details or detail

Documents originating within the entity but circulated to independent sources outside the entity and documents generated outside the entity are referred to as _____ documents.

Blank 1: external

Counting cash on hand and examining inventory are examples of _____ of tangible assets.

Blank 1: inspection

Looking at a process or procedure being performed by others is referred to as _____ .

Blank 1: observation, observing, or observations

Footing, crossfooting, reconciling subsidiary ledgers and testing postings are all examples of _____ .

Blank 1: recalculation

The auditor's independent execution of procedures or controls that were originally performed by company personnel is referred to as _____ .

Blank 1: reperformance

Searching for large and unusual items in the accounting records and reviewing transactions for errors are examples of _____ .

Blank 1: scanning

True or false: Auditing standards base the need for substantive procedures for significant account balances on the assessed risk of material misstatement. True False

False

True or false: Inspecting tangible assets provides significant assurance for the rights and obligations assertion. True False

False

This is an important audit procedure that is used extensively throughout the audit and is often complementary to performing other audit procedures. Recalculation Inquiry Observation Confirmation

Inquiry

The reliability of analytical procedures is a function of the ______. recalculation of analytical procedures and confirmation of tangible assets plausibility and predictability of the relationship being tested assertions made by management precision of the expectation and the rigor of the investigation availability and reliability of the data used in the calculations

plausibility and predictability of the relationship being tested precision of the expectation and the rigor of the investigation availability and reliability of the data used in the calculations

Confirmations ______. provide reliable evidence for the existence assertion are used extensively on audits do not provide evidence about the rights and obligations assertion may provide evidence about the completeness assertion

provide reliable evidence for the existence assertion are used extensively on audits may provide evidence about the completeness assertion

Checking the mathematical accuracy of documents or records is referred to as _____ .

recalculation

The independent execution by the auditor of procedures or controls that were originally performed by company personnel is called ______. recalculation reperformance observation confirmation

reperformance

Assume an entity has 2,500 customers. If the auditor mails confirmation to 25 of the largest customers and only 20 respond the auditor must ______. discard the sample and select a different set of 25 customers still gather sufficient evidence on each of the 25 accounts base his or her evaluation on the 20 accounts that responded

still gather sufficient evidence on each of the 25 accounts