AUDIT EVIDENCE AND DOCUMENTATION

1. Which statement is incorrect regarding audit evidence?

a. Audit evidence is all the information used by the auditor in arriving at the conclusions on which
the audit opinion is based.
b. Audit evidence includes the information contained in the accounting records underlying the
financial statements and other information.
c. Audit evidence is cumulative in nature.
d. Auditors are expected to address all information that may exist.
2. Accounting records least likely include
a. The records of initial entries and supporting records.
b. The general and subsidiary ledgers.
c. Work sheets and spreadsheets supporting cost allocations.
d. Comparable data about competitors (benchmarking).
3. Other information that the auditor may use as audit evidence least likely includes
a. Minutes of meetings.
b. Confirmations from third parties.
c. Information obtained by the auditor from such audit procedures as inquiry, observation, and
inspection.
d. Adjustments to the financial statements that are not reflected in formal journal entries.

4. Which statement is correct regarding the sufficiency and appropriateness of audit evidence?
a. Sufficiency is the measure of the quality of audit evidence.
b. Appropriateness is the measure of the quantity of audit evidence; that is, its relevance and its
reliability in providing support for, or detecting misstatements in, the classes of transactions,
account balances, and disclosures and related assertions.
c. The quantity of audit evidence needed is affected by the risk of misstatement (the greater the
risk, the more audit evidence is likely to be required) and also by the quality of such audit
evidence (the higher the quality, the less may be required).
d. Merely obtaining more audit evidence may compensate for its poor quality.
5. Which of the following statements is incorrect regarding relevance of audit evidence?
a. A given set of audit procedures may provide audit evidence that is relevant to certain
assertions, but not others.
b. The auditor often obtains audit evidence from different sources or of a different nature that is
relevant to the same assertion.
c. Obtaining audit evidence relating to a particular assertion is a substitute for obtaining audit
evidence regarding another assertion.
d. None of the above.

6. The auditor uses assertions in assessing risks by considering the different types of potential
misstatements that may occur, and thereby designing audit procedures that are responsive to the
assessed risks. Assertions used by the auditor fall into the following categories:
I. Assertions about classes of transactions and events for the period under audit.
II. Assertions about account balances at the period end.
III. Assertions about presentation and disclosure.

a. I, II and III b. I and II only c. II and III only d. II only

7. Assertion about account balances at period end which means assets, liabilities, and equity
interests are included in the financial statements at appropriate amounts is

a. Existence c. Completeness
b. Rights and obligations d. Valuation and allocation

8. Accuracy and valuation assertions about presentation and disclosure means

a. Disclosed events, transactions, and other matters have occurred and pertain to the entity.
b. All disclosures that should have been included in the financial statements have been included.
c. Financial information is appropriately presented and described, and disclosures are clearly
expressed.
d. Financial and other information are disclosed fairly and at appropriate amounts.

9. The auditor obtains audit evidence to draw reasonable conclusions on which to base the audit
opinion by performing audit procedures to:
a. Obtain an understanding of the entity and its environment, including its internal control, to
assess the risks of material misstatement at the financial statement and assertion levels.
b. Test the operating effectiveness of controls in preventing, or detecting and correcting, material
misstatements at the assertion level.
c. Detect material misstatements at the assertion level.
d. All of the above.
10. The auditor is not always required to perform
a. Risk assessment procedures. c. Substantive procedures.
b. Test of controls. d. Both a and c
11. Which statement is incorrect regarding Inspection as an audit procedure?
a. Inspection consists of examining records or documents or physical examination of assets.
b. Inspection of tangible assets may provide reliable audit evidence with respect to their
existence and about the entity’s rights and obligations on the assets.
c. Inspection of individual inventory items ordinarily accompanies the observation of inventory
counting.
d. Some documents represent direct audit evidence of the existence of an asset.
12. Which statement is incorrect regarding Inquiry?
a. Responses to inquiries may provide the auditor with information not previously possessed or
with corroborative audit evidence.
b. Responses to inquiries might provide information that differs significantly from other
information that the auditor has obtained.
c. Responses to inquiries may provide a basis for the auditor to modify or perform additional
audit procedures.
d. Inquiry alone is sufficient to test the operating effectiveness of controls.

13. Observation
a. Consists of looking at a process or procedure being performed by others.
b. Consists of seeking information of knowledgeable persons, both financial and non-financial,
throughout the entity or outside the entity.
c. Is the process of obtaining a representation of information or of an existing condition directly
from a third party.
d. Is the auditor’s independent execution of procedures or controls that were originally performed
as part of the entity’s internal control.
14. This consists of checking the mathematical accuracy of documents or records.
a. Reperformance b. Recalculation
c. Confirmation d. Inspection
15. It means the materials prepared by and for, or obtained and retained by the auditor in connection
with the performance of the audit.
a. Documentation c. Engagement letter
b. Audit evidence d. Audit report

16. Which of the following is not a purpose of working papers?

a. Assist in the planning and performance of the audit.
b. Assist in the supervision and review of the audit work.
c. Record the audit evidence resulting from the audit work performed to support the auditor’s
opinion.
d. Support the client’s financial statements.

17. Why does an auditor document audit evidence?

a. To comply with the requirements of gathering all available evidence.
b. To provide client reference for all account balances and correcting entries.
c. To support audit opinion and to provide evidence that the audit was carried out in accordance
with PSA.
d. To document all records of misstatements noted in the financial statements.

18. Working papers that record the procedures used by the auditor to gather evidence should be
a. Considered the primary support for the financial statements being audited.
b. Viewed as the connecting link between the books of accounts and the financial statements.
c. Designed to meet the circumstances of the particular engagement.
d. Destroyed when the audited entity ceases to be a client.
19. Which of the following conditions constitutes inappropriate working paper preparation?
a. Flowcharts are included in the working papers.
b. Findings are cross-referenced to supporting documentation.
c. Tick marks are explained in working papers.
d. All forms and directives used by the auditee department are included in the working papers.
20. The form and content of working papers are affected by matters such as the:

I. Nature of the engagement.

II. Form of the auditor’s report.
III. Nature and complexity of the business.
IV. Nature and condition of the entity’s accounting and internal control systems.
V. Needs in the particular circumstances for direction, supervision and review of work performed
by assistants.
VI. Specific audit methodology and technology used in the course of the audit.

a. All of the above c. I, II and III only

b. All except V and VI d. All except VI