QUIZ #2 – ACCT 422‐ Auditing – SPRING 2017
There are 26 questions on this Quiz. Please attempt all questions. Record your answers on a separate sheet(s) and submit the file into your Assignment folder for Quiz #2. The following questions concern persuasiveness of evidence. Choose the best response. 1. Which of the following types of documentary evidence should the auditor consider to be the most
reliable? a. A sales invoice issued by the client and supported by a delivery receipt from an outside
trucker. b. Confirmation of an account payable balance mailed by and returned directly to the auditor. c. A check, issued by the company and bearing the payee’s endorsement, that is included with
the bank statements mailed directly to the auditor. d. An audit schedule prepared by the client’s controller and reviewed by the client’s treasurer.
2. The most reliable type of audit evidence that an auditor can obtain is a. Physical examination by the auditor. b. Calculations by the auditor from company records. c. Confirmations received directly from third parties. d. External documents.
3. Audit evidence can come in different forms with different degrees of persuasiveness. Which of the following is the least persuasive type of evidence?
a. Vendor’s invoice. b. Bank statement obtained from the client. c. Computations made by the auditor. d. Pre‐numbered sales invoices.
4. Which of the following is the least persuasive documentation in support of an auditor’s opinion? a. Schedules of details of physical inventory counts conducted by the client. b. Notation of inferences drawn from ratios and trends. c. Notation of appraisers’ conclusions documented in the auditor’s files. d. Lists of negative confirmation requests for which no response was received by the auditor.
QUIZ #2 – ACCT 422‐ Auditing – SPRING 2017 PAGE 2 Please write a sentence or two that responds to the following seven (7) questions concerning the reliability of evidence: 5. Why is confirmation normally more reliable evidence than asking the client? 6. When would a confirmation NOT be highly reliable? 7. Under what circumstances is the physical observation of inventory considered relatively unreliable
evidence? 8. Why is a re‐performance test used? 9. What are one example of relatively reliable documentation and one example of less reliable
documentation? . 10. When does the qualification and experience of the client’s representative make a significant
difference in the reliability of the evidence? 11. When would analytical procedures be used? Please provide one example of an analytical procedure.
The following three questions pertain to client acceptance. Choose the best response. 12. In assessing whether to accept a client for an audit engagement, a CPA should consider
Client Business Risk Acceptable Audit Risk
a. Yes Yes b. Yes No c. No Yes d. No No
13. When approached to perform an audit for the first time, the CPA should make inquiries of the
predecessor auditor. This is a necessary procedure because the predecessor may be able to provide the successor with information that will assist the successor in determining whether
a. The predecessor’s work should be used. b. The company follows the policy of rotating its auditors. c. In the predecessor’s opinion internal control of the company has been satisfactory. d. The engagement should be accepted.
QUIZ #2 – ACCT 422‐ Auditing – SPRING 2017 PAGE 3 14. What is the responsibility of a successor auditor with respect to communicating with the
predecessor auditor in connection with a prospective new audit client?
a. The successor auditor has no responsibility to contact the predecessor auditor. b. The successor auditor should obtain permission from the prospective client to contact the
predecessor auditor. c. The successor auditor should contact the predecessor regardless of whether the prospective
client authorizes contact. d. The successor auditor need not contact the predecessor if the successor is aware of all
available relevant facts. The following questions deal with materiality. Choose the best response. 15. Which one of the following statements is correct concerning the concept of materiality?
a. Materiality is determined by reference to guidelines established by the AICPA. b. Materiality depends only on the dollar amount of an item relative to other items in the
financial statements. c. Materiality depends on the nature of an item rather than the dollar amount. d. Materiality is a matter of professional judgement.
The following three questions concern materiality and risk. Choose the best response. 16. Edison Corporation has a few large accounts receivable that total $1,400,000. Victor Corporation has
a great number of small accounts receivable that also total $1,400,000. The importance of a misstatement in any one account is therefore greater for Edison than for Victor. This is an example of the auditor’s concept of
a. Materiality. b. Comparative analysis. c. Reasonable assurance. d. Relative risk.
17. Which of the following elements ultimately determines the specific auditing procedures that are
necessary in the circumstances to afford a reasonable basis for an opinion?
a. Auditor judgment. b. Materiality. c. Inherent risk. d. Reasonable assurance.