Topic 13 - Multiple Choice

A 'concurring partner' is a partner in a different firm that reviews the work of the audit team assigned to the audit engagement. a. true b. false

Answer: False This statement is false. A concurring partner comes from within the same audit firm that is conducting the audit.

Audit documentation should include information regarding who performed the audit work, and it is recommended, but not necessary to indicate the date it was performed or who reviewed the work. a. true b. false

Answer: False This statement is false. It is necessary to document who performed the work, when they performed it, who reviewed the work, and when it was reviewed.

The primary source of review of audit documentation comes from outside of the auditing firm, with little review occurring from within the firm itself. a. true b. false

Answer: False This statement is false. While there are many sources of potential review of audit work outside of the firm, most auditing firms have many layers of review within the firm to ensure accuracy, adequacy, professionalism, and compliance with regulation and firm policy.

Under PCAOB rules, auditors are not allowed to delete or modify any documentation following the completion of audit documentation. a. true b. false

Answer: True This statement is true, while auditors can add to the documentation following its completion with the appropriate explanation, they cannot modify or delete existing documentation.

Auditors should document an understanding of clients internal controls through methods such as flowcharts or narratives. a. true b. false

Answer: True This statement is true.

The form of audit documentation depends on the nature of the type of audit test performed. a. true b. false

Answer: True This statement is true.

In addition to providing documentation regarding the factors that support their conclusions, the auditor should document evidence that contradicts their final decision as well as how the auditor resolved the conflict. a. true b. false

Answer: True This statement is true. Auditors should document both supporting evidence as well as any evidence that they found that contradicted their ultimate decision along with how they resolved the conflict between the two sets of evidence.

'Work papers' is another term used by auditors to describe some types of audit documentation. a. true b. false

Answer: True This statement is true. The term work papers, or working papers is a common term describing some types of the auditor's documentation.

One benefit of audit documentation is to provide a defense to the auditor in lawsuits where it is alleged that the auditor did not comply with GAAS. a. true b. false

Answer: True This statement is true. When an auditor is sued for negligence, their audit documentation can provide evidence that their work was performed in compliance with GAAS.

An audit program is a form of audit documentation that provides evidence that the audit was planned and that the necessary audit steps were performed. a. true b. false

Answer: True This statement is true. The audit program indicates the steps to be taken in the audit. As such, it provides evidence that the audit was properly planned and that it was carried out.

Which of the following methods might the auditor use to document their discussion regarding the susceptibility of the financial statements to material misstatements? a. Include transcripts from their meeting b. Write a note in a memo that the discussion occurred and the date it occurred c. Include a check mark in the audit program next to the step requiring this discussion d. Each of the above is an appropriate method for documenting this discussion.

Answer: a. Include transcripts from their meeting Providing the transcript of the meeting is the only method out of these options that provides adequate documentation of this meeting. Indicating that it happened is not enough information.

PCAOB standards require that the auditor compile a completed set of audit documentation within _________ days following the report release date. a. 90 b. 45 c. 60 d. 30

Answer: b. 45 PCAOB standards allow the auditor 45 days to compile a completed set of audit documentation following the report release date.

ASB and IAASB auditing standards allow the auditor ______ days following the report release date to compile a completed set of audit documentation. a. 90 b. 60 c. 30 d. 45

Answer: b. 60 ASB and IAASB standards allow the auditor 60 days following the report release date to compile a completed set of audit documentation.

PCAOB standards require that the auditor retain audit documentation for _______ years from the report release date, while ASB and IAASB standards require audit documentation to be retained for _______ years from the report release date. a. 5, 5 b. 7, 7 c. 5, 7 d. 7, 5

Answer: d. 7, 5 PCAOB standards require that documentation be retained for 7 years following the report release date, while ASB and IAASB standards require that documentation be retained for 5 years.

Which of the following is NOT a type of audit documentation that auditors should include in their files? a. The audit program b. The engagement letter c. Copies of the client's financial statements d. Each of the above is a type of audit documentation that the auditor should include in the file

Answer: d. Each of the above is a type of audit documentation that the auditor should include in the file Each of these is a type of audit documentation that the auditor should consider including in the file.

Each of the following is a potential source of review of audit documentation except: a. The PCAOB inspection program b. The AICPA peer review program c. Concurring partner review d. Reviews by other clients to decide whether to hire the auditor e. All of the above are potential sources of review of the audit documentation

Answer: d. Reviews by other clients to decide whether to hire the auditor Other audit clients do not have access to audit documentation since it contains confidential client information.

When an auditor needs to add documentation following the completion period, he or she must include all of the following except: a. The date the new material was added b. The name of the person who prepared the additional documentation c. The specific reason(s) for adding the documentation d. The documentation form that the new documentation is replacing e. Each of the above is required to be included along with the new documentation

Answer: d. The documentation form that the new documentation is replacing Since documentation cannot be deleted or modified (or replaced) under PCAOB rules, there is no need to document which form the new documentation is replacing.

Which of the following is NOT one of the purposes of audit documentation? a. Provide support for the conclusions reached by the auditor b. Provide evidence that the audit was carried out in accordance with GAAS c. Facilitate the planning, performance, and supervision of the audit engagement d. Serves as the basis for review of the work performed e. Each of the above IS a purpose of audit documentation

Answer: e. Each of the above IS a purpose of audit documentation Each of these is a purpose of audit documentation as outlined in Auditing Standard Number 3.

Audit documentation is meant to provide support for conclusions drawn by the auditor, to provide evidence that the audit was performed in compliance with GAAS, and facilitates the planning, performance, and supervision of the engagement as well as the review of the quality of work. a. true b. false

Each of these four purposes of audit documentation is listed in Auditing Standard Number 3.

Evidence that is contrary to the final conclusion drawn must include documentation of both: Procedures performed in response to the information of contradiction and Records documenting *consultations or resolutions* on differences in professional judgement among members. a. true b. false

a. true

Which one of the following DOES NOT require supporting documents for conclusions reached? a. Documents showing compliance with GAAS (in planning and conducting the audit) b. Documentation of Teams findings c. Documentation of auditor's boss' name d. Documentation of logical step between findings and conclusion.

c. Documentation of auditor's boss' name

Which one of these process should have supporting documents for conclusions reached? a. Documents showing compliance with GAAS (in planning and conducting the audit) b. Documentation of Teams findings c. Documentation of logical step between findings and conclusion. d. all of the above

d. all of the above