Audit Evidence Practice Exam Quiz
Which of the following is the primary reason for documenting audit work?
a) To prevent litigation by other parties that question the audit performance.
b) To provide evidence of the auditor’s basis for conclusions.
c) To comply with legal requirements.
d) To assist in the preparation of the audit report.
Which of the following is considered the most reliable type of audit evidence?
a) Oral representations from management.
b) Bank statements obtained directly from the bank.
c) Internal memoranda.
d) Photocopies of invoices.
What is the primary purpose of performing analytical procedures during the planning phase of an audit?
a) To detect fraud.
b) To identify areas that may represent specific risks relevant to the audit.
c) To test the operating effectiveness of controls.
d) To obtain evidence from details tested to corroborate particular assertions.
Which of the following audit procedures would most likely be used to test the completeness assertion for accounts payable?
a) Confirming a sample of recorded payables with creditors.
b) Reviewing subsequent cash disbursements.
c) Observing the entity’s physical count of inventory.
d) Comparing a sample of receiving reports to related purchase orders.
Which of the following is an example of audit evidence obtained through observation?
a) Reviewing the entity’s bank statements.
b) Inspecting the entity’s inventory records.
c) Observing the entity’s physical count of inventory.
d) Confirming accounts receivable balances with customers.
Which of the following assertions is most directly related to the auditor’s concern with the existence of recorded assets?
a) Completeness.
b) Rights and obligations.
c) Valuation.
d) Existence.
Which of the following is the most reliable form of audit evidence?
a) Oral representations from management.
b) Bank statements obtained directly from the bank.
c) Internal memoranda.
d) Photocopies of invoices.
Which of the following procedures would an auditor most likely perform to test the valuation assertion for accounts receivable?
a) Confirming a sample of recorded receivables by direct communication with the debtors.
b) Reviewing subsequent cash receipts.
c) Comparing a sample of shipping documents to related sales invoices.
d) Reviewing the entity’s aging schedule for reasonableness.
Which of the following is an example of audit evidence obtained through inspection?
a) Reviewing the entity’s bank statements.
b) Observing the entity’s physical count of inventory.
c) Confirming accounts receivable balances with customers.
d) Inspecting the entity’s inventory records.
Which of the following is the most reliable form of audit evidence?
a) Oral representations from management.
b) Bank statements obtained directly from the bank.
c) Internal memoranda.
d) Photocopies of invoices.
Which of the following assertions is most directly related to the auditor’s concern with the existence of recorded assets?
a) Completeness.
b) Rights and obligations.
c) Valuation.
d) Existence.
Which of the following procedures would an auditor most likely perform to test the valuation assertion for accounts receivable?
a) Confirming a sample of recorded receivables by direct communication with the debtors.
b) Reviewing subsequent cash receipts.
c) Comparing a sample of shipping documents to related sales invoices.
d) Reviewing the entity’s aging schedule for reasonableness.
Which of the following is an example of audit evidence obtained through inspection?
a) Reviewing the entity’s bank statements.
b) Observing the entity’s physical count of inventory.
c) Confirming accounts receivable balances with customers.
d) Inspecting the entity’s inventory records.
Which of the following is the most reliable form of audit evidence?
a) Oral representations from management.
b) Bank statements obtained directly from the bank.
c) Internal memoranda.
d) Photocopies of invoices.
Which of the following assertions is most directly related to the auditor’s concern with the existence of recorded assets?
a) Completeness.
b) Rights and obligations.
c) Valuation.
d) Existence.
Which of the following procedures would an auditor most likely perform to test the valuation assertion for accounts receivable?
a) Confirming a sample of recorded receivables by direct communication with the debtors.
b) Reviewing subsequent cash receipts.
c) Comparing a sample of shipping documents to related sales invoices.
d) Reviewing the entity’s aging schedule for reasonableness.
Which of the following is the most reliable form of audit evidence?
a) Oral representations from management.
b) Bank statements obtained directly from the bank.
c) Internal memoranda.
d) Photocopies of invoices.
What type of audit evidence is obtained when the auditor directly communicates with a third party?
a) Physical evidence
b) Documentary evidence
c) Testimonial evidence
d) External evidence
Which of the following would an auditor most likely use to verify the existence of liabilities?
a) Reviewing subsequent payments
b) Confirming with customers
c) Analyzing the general ledger
d) Observing the physical inventory count
Which of the following is an example of audit evidence obtained through confirmation?
a) Reviewing a client’s internal control procedures
b) Sending a request to a bank to confirm balances
c) Inspecting shipping documents
d) Observing the client’s internal financial review process
When auditing inventory, which of the following assertions is most closely related to the auditor’s concern with the proper inclusion of inventory in the financial statements?
a) Existence
b) Completeness
c) Valuation
d) Presentation and disclosure
Which of the following types of evidence is most likely to be used to verify the completeness assertion of the financial statements?
a) Inspection of the underlying documents
b) Confirmation with external parties
c) Recalculation of the amounts stated in the records
d) Reviewing subsequent payments for unrecorded liabilities
What is the main advantage of obtaining audit evidence through external confirmations?
a) It is more cost-effective than other procedures
b) It provides highly reliable evidence, especially for balances that are subject to significant risk
c) It provides quicker evidence compared to other methods
d) It is more subjective and allows the auditor to use their judgment
Which of the following is the most appropriate audit procedure for testing the completeness of revenue recognition?
a) Confirming accounts receivable balances with customers
b) Sending positive confirmations to customers
c) Examining shipping documents and related sales invoices
d) Reviewing the company’s minutes for related disclosures
An auditor wishes to assess the risk of fraud in a company’s accounts payable. Which procedure would most likely help address this concern?
a) Confirming accounts payable balances with creditors
b) Comparing accounts payable to the last year’s records
c) Reviewing subsequent payments to vendors for unrecorded liabilities
d) Examining the supporting documentation for accounts payable transactions
Which of the following is an example of audit evidence obtained through recalculation?
a) Verifying the physical count of inventory against the recorded amounts
b) Confirming accounts payable balances with suppliers
c) Recalculating the depreciation expense based on the company’s policies
d) Reviewing contracts for legality and terms
Which of the following assertions is most relevant when an auditor is concerned with whether transactions are recorded in the proper period?
a) Existence
b) Accuracy
c) Cutoff
d) Completeness
Which of the following best describes “audit evidence”?
a) Information obtained by the auditor to support the audit opinion.
b) Proof that management is truthful in financial reporting.
c) A report generated from the auditor’s analysis of financial statements.
d) Observations made during the physical count of inventory.
When reviewing a sample of inventory items, which of the following assertions is most directly tested?
a) Completeness
b) Valuation
c) Existence
d) Presentation and disclosure
Which of the following is a characteristic of the best audit evidence?
a) It is obtained from a reliable and independent source outside the organization.
b) It is obtained through inquiry and discussion with management.
c) It is easily obtained at minimal cost.
d) It supports the client’s assertions without the need for further evaluation.
An auditor is reviewing the entity’s financial statements and performing substantive tests. Which of the following audit procedures would provide the most reliable evidence for testing the existence of cash?
a) Reviewing the cash receipts journal.
b) Reviewing the client’s bank reconciliation.
c) Confirming the bank balance directly with the bank.
d) Observing the client’s internal controls for cash handling.
When an auditor uses a bank confirmation to obtain audit evidence, which assertion is most directly being tested?
a) Completeness
b) Existence
c) Rights and obligations
d) Valuation and allocation
Which of the following best describes “sufficient appropriate audit evidence”?
a) Evidence that is obtained at the lowest possible cost.
b) Evidence that allows the auditor to make a reasonable conclusion.
c) Evidence that confirms the auditor’s suspicions about fraud.
d) Evidence that is easily understood by management.
In which of the following circumstances would the auditor most likely rely on oral representations from management?
a) When confirming year-end balances with third parties.
b) When verifying the company’s internal control effectiveness.
c) When examining the authenticity of supporting documents.
d) When clarifying specific issues or gaining insight into management’s intent.
Which of the following is the most effective procedure for obtaining evidence regarding the completeness assertion for liabilities?
a) Reviewing accounts payable confirmations from creditors.
b) Recalculation of liabilities based on documented agreements.
c) Examining the subsequent payments made after the balance sheet date.
d) Confirming accounts payable balances with suppliers.
In obtaining audit evidence, which of the following procedures provides the most reliable evidence when testing the valuation assertion for fixed assets?
a) Reviewing depreciation schedules and comparing them to accounting policies.
b) Reviewing sales contracts related to asset disposals.
c) Observing the physical inspection of assets.
d) Confirming the assets’ purchase prices with vendors.
What type of audit evidence is obtained by the auditor reviewing the client’s internal records and procedures?
a) Physical evidence
b) Documentary evidence
c) External evidence
d) Testimonial evidence
What is the primary purpose of using substantive testing during an audit?
a) To evaluate the effectiveness of the company’s internal controls.
b) To confirm the completeness of financial statement assertions.
c) To detect material misstatements in financial statements.
d) To gather evidence on compliance with laws and regulations.
An auditor performing a test of controls is trying to obtain evidence on the effectiveness of a client’s internal controls. Which of the following audit procedures would be most appropriate?
a) Inspecting a sample of the client’s invoices for proper approval.
b) Reviewing the accounts payable ledger for unusual transactions.
c) Confirming cash balances directly with the bank.
d) Observing the client’s process for inventory counting.
What would most likely prompt an auditor to perform a test of details of balances as opposed to analytical procedures?
a) When significant risks are identified regarding the accuracy of a balance.
b) When the auditor needs to verify compliance with tax regulations.
c) When the auditor has insufficient time to complete the audit.
d) When audit evidence is readily available from reliable sources.
Which of the following audit procedures would most likely be used to test the presentation and disclosure assertions for a client’s debt covenants?
a) Reviewing the client’s debt agreements for compliance.
b) Confirming the balance of debt directly with the lender.
c) Inspecting the debt covenant compliance letters sent to the client.
d) Recalculating the client’s interest expense based on debt levels.
What is the purpose of performing an external confirmation of accounts receivable during an audit?
a) To confirm the existence and accuracy of recorded amounts.
b) To determine if accounts receivable balances are understated.
c) To ensure that sales transactions are complete.
d) To evaluate the collectibility of the receivables.
In the context of auditing, what does the term “audit evidence” refer to?
a) Information used to support the auditor’s opinion.
b) Information used to assess the auditor’s judgment.
c) Documents prepared by the client to summarize financial statements.
d) The auditor’s final report on the accuracy of financial statements.
Which of the following audit procedures would most likely help an auditor test the rights and obligations assertion for fixed assets?
a) Inspecting the asset register and related invoices.
b) Reviewing the purchase agreement for ownership details.
c) Observing the physical existence of the assets at year-end.
d) Reviewing the depreciation schedule for consistency with accounting policies.
Which of the following types of audit evidence would an auditor most likely use to evaluate the cut-off assertion for sales transactions?
a) Comparing shipping documents with sales invoices.
b) Reviewing customer payments after the balance sheet date.
c) Inspecting year-end bank reconciliations.
d) Confirming accounts receivable balances with customers.
Which of the following is an example of audit evidence obtained through inspection of records?
a) Reviewing the company’s financial statements.
b) Reviewing the inventory count results.
c) Inspecting contracts with suppliers and customers.
d) Observing the client’s physical count of inventory.
When an auditor observes the client’s physical inventory count, which assertion is being tested?
a) Completeness
b) Existence
c) Valuation
d) Rights and obligations
When performing a substantive procedure to test the accuracy of an expense account, which of the following would the auditor most likely perform?
a) Confirming the amount with the supplier.
b) Reviewing the supporting documentation for the expense.
c) Recalculating the expense based on the company’s records.
d) Inspecting the expense classification in the general ledger.
Which type of audit evidence is generally considered the least persuasive in the audit process?
a) Evidence obtained through direct observation.
b) Evidence obtained from third-party confirmations.
c) Evidence obtained from management’s oral representations.
d) Evidence obtained from external experts.
Which of the following is the most reliable form of audit evidence in terms of evaluating the completeness of a company’s financial reporting?
a) Management’s oral representations
b) Internal audit reports
c) Third-party confirmations from customers
d) Reviewing the company’s internal accounting records
Which audit procedure would an auditor most likely use to test the valuation assertion of accounts payable?
a) Reviewing invoices and subsequent payments for accuracy.
b) Confirming accounts payable balances with suppliers.
c) Inspecting shipping documents and inventory records.
d) Observing the physical inventory count at year-end.
When the auditor is gathering evidence about the existence of a company’s intangible assets, which of the following procedures would most likely be used?
a) Confirming the asset’s value with external parties.
b) Reviewing legal agreements and contracts for proper authorization.
c) Inspecting the company’s books for proper classification.
d) Recalculating the amortization of intangible assets.
Which of the following would be the most effective audit procedure for testing the rights and obligations assertion related to a company’s property, plant, and equipment?
a) Reviewing the company’s property ownership documents and purchase agreements.
b) Inspecting the company’s financial statements for proper disclosure of assets.
c) Confirming fixed asset balances with the company’s external auditors.
d) Observing the client’s physical inspection of machinery and equipment.
What is the purpose of using analytical procedures in the audit process?
a) To detect fraud by performing detailed examination of transactions.
b) To assess the consistency of financial information and identify unusual transactions.
c) To inspect and evaluate the company’s internal controls.
d) To evaluate the physical existence of assets.
When testing the completeness assertion of a company’s liabilities, which of the following audit procedures would be most appropriate?
a) Examining subsequent payments and comparing them to recorded liabilities.
b) Sending positive confirmations to customers for outstanding balances.
c) Reviewing accounts payable aging reports for accuracy.
d) Reviewing the client’s minutes for discussions regarding any unrecorded liabilities.
Which of the following procedures would most likely help an auditor assess the client’s financial reporting accuracy for income tax provisions?
a) Reviewing the general ledger for tax-related entries.
b) Confirming the amounts with external tax advisors.
c) Reviewing tax returns and comparing them to the company’s recorded tax liabilities.
d) Recalculating tax provisions based on the client’s records.
Which of the following types of audit evidence is obtained through observation?
a) Inspection of inventory records
b) Confirmation of accounts receivable balances
c) Physical observation of the company’s operations and processes
d) Review of the client’s bank statements
In performing an audit, which of the following assertions is the auditor most concerned with when reviewing financial statement disclosures for accuracy?
a) Existence
b) Completeness
c) Rights and obligations
d) Presentation and disclosure
Which of the following best describes the relationship between the sufficiency and appropriateness of audit evidence?
a) Both sufficiency and appropriateness refer to the quantity of audit evidence.
b) Sufficiency refers to the quantity of audit evidence, while appropriateness refers to the quality of the evidence.
c) Both sufficiency and appropriateness refer to the quality of audit evidence.
d) Sufficiency refers to the quality of audit evidence, while appropriateness refers to the quantity.
Which of the following is an example of audit evidence obtained through re-performance?
a) Reviewing the company’s financial statements and comparing them to external confirmations.
b) Recalculating depreciation expenses based on company policies and asset schedules.
c) Inspecting physical assets and comparing them to the general ledger.
d) Sending confirmation requests to customers regarding outstanding balances.
What type of audit evidence is most effective for verifying the valuation of securities held by a company?
a) Reviewing the broker’s statements and obtaining third-party confirmations of securities values.
b) Inspecting the client’s records for proper accounting policies.
c) Reviewing the company’s minutes and sales contracts.
d) Confirming the amount of securities held directly with management.
What is the primary concern of an auditor when testing the completeness assertion for a company’s revenue transactions?
a) Ensuring that all revenue transactions are accurately recorded.
b) Ensuring that all sales invoices are generated properly.
c) Ensuring that all amounts owed to the company are collected.
d) Ensuring that all valid revenue transactions have been recorded.
When the auditor tests the valuation of inventory, which assertion is most relevant?
a) Completeness
b) Existence
c) Valuation and allocation
d) Rights and obligations
Which of the following audit procedures would most effectively test the existence of a company’s intangible assets, such as patents and trademarks?
a) Confirming the existence of intangible assets with external parties.
b) Reviewing legal documentation and patents/trademark registration records.
c) Inspecting the company’s accounting policies for intangible assets.
d) Observing the company’s internal process for intangible asset development.
Which of the following is the primary concern when auditing a company’s revenue recognition process?
a) Ensuring the company’s assets are accurately stated.
b) Ensuring that revenue transactions are properly recorded in the correct period.
c) Ensuring that revenue is recognized in compliance with tax laws.
d) Ensuring the company has valid accounts receivable balances.
Which of the following audit procedures is most effective in testing the completeness assertion for accounts payable?
a) Reviewing purchase orders and comparing them to accounts payable records.
b) Confirming accounts payable balances with suppliers.
c) Reviewing subsequent payments for liabilities recorded before the year-end.
d) Inspecting internal audit reports on the accounts payable process.
An auditor uses an external confirmation procedure to verify the existence of a client’s accounts receivable. What assertion is being primarily tested?
a) Completeness
b) Valuation
c) Existence
d) Cutoff
What type of audit evidence is typically considered the least reliable for verifying a company’s financial position?
a) Bank confirmations
b) Physical inspection of assets
c) Oral representations from management
d) Third-party confirmations from customers
Which of the following is an appropriate method for obtaining audit evidence regarding the valuation of inventory?
a) Confirming balances with customers
b) Inspecting inventory records and performing cost calculations
c) Reviewing bank statements for evidence of purchases
d) Confirming inventory with suppliers
Which of the following audit procedures is most effective in obtaining evidence regarding the completeness of a client’s financial reporting for revenue transactions?
a) Inspecting the sales ledger
b) Sending positive confirmations to customers
c) Reviewing the board minutes for unrecorded transactions
d) Reviewing the aged accounts receivable report
In auditing a client’s accounts payable, which of the following would be the best procedure to ensure that all liabilities are included in the financial statements?
a) Comparing accounts payable balances with vendor statements.
b) Reviewing subsequent payments to identify liabilities not recorded.
c) Sending confirmations to vendors regarding outstanding balances.
d) Analyzing the aged payables schedule for accuracy.
What is the primary purpose of performing substantive analytical procedures in auditing?
a) To detect errors in accounting records by recalculating figures.
b) To evaluate the reasonableness of financial statement amounts based on expectations.
c) To inspect physical assets and ensure they are correctly valued.
d) To assess the sufficiency of internal controls in safeguarding assets.
Which of the following is an example of an audit procedure that tests the accuracy of accounts payable transactions?
a) Sending a letter to the client’s suppliers asking for the amount of outstanding debts.
b) Reviewing invoices to determine that amounts recorded in accounts payable match actual amounts owed.
c) Comparing the total accounts payable balance with the client’s general ledger.
d) Observing inventory movements to ensure correct inclusion in the financial statements.
When auditing a company’s revenue recognition, which of the following audit procedures would provide the most reliable evidence for testing the existence assertion?
a) Reviewing the company’s sales orders and shipping documents.
b) Confirming sales transactions with customers.
c) Inspecting the company’s internal control procedures for order entry.
d) Performing an analytical procedure to compare sales trends to industry norms.
What type of audit evidence is most effective in testing the presentation and disclosure assertion for financial statements?
a) Bank confirmations to verify cash balances
b) Inspection of legal documents supporting ownership of assets
c) Inspection of tax returns to verify income tax liabilities
d) Reviewing the financial statements for completeness and proper classification
Which of the following is a valid method for evaluating the internal control over the collection of accounts receivable?
a) Reviewing customer confirmations for amounts owed to the company
b) Observing the physical inventory count process
c) Inspecting sales contracts for terms related to revenue recognition
d) Testing the authorization of write-offs and collection procedures
To assess the existence of property, plant, and equipment (PPE), an auditor is most likely to perform which of the following procedures?
a) Inspecting sales records for PPE disposals.
b) Reviewing the company’s insurance policies for coverage amounts.
c) Performing a physical inspection of assets and verifying serial numbers.
d) Confirming the amounts of PPE with external parties.
When testing the classification of liabilities, which assertion is the auditor primarily concerned with?
a) Completeness
b) Valuation and allocation
c) Presentation and disclosure
d) Existence
Which audit procedure would an auditor most likely use to gather evidence about the accuracy of payroll expenses?
a) Inspecting payroll records and comparing them with tax filings.
b) Sending confirmations to employees regarding salary payments.
c) Reviewing payroll-related journal entries for authorization.
d) Observing the company’s payroll processing procedures.
Which of the following procedures would an auditor most likely use to test the rights and obligations assertion for accounts receivable?
a) Confirming accounts receivable balances with customers.
b) Reviewing shipping records to confirm that sales transactions are legitimate.
c) Inspecting the client’s legal documents related to accounts receivable transactions.
d) Comparing current accounts receivable balances to prior periods for consistency.
Which of the following is an example of audit evidence obtained through inquiry?
a) Sending a letter to the client’s suppliers requesting information on outstanding invoices.
b) Asking the client’s management about the existence of contingent liabilities.
c) Inspecting documents supporting the client’s reported asset values.
d) Recalculating the depreciation expense based on the asset schedule.
When auditing a company’s inventory, the auditor is concerned with the existence assertion. Which audit procedure is most appropriate for verifying this assertion?
a) Reviewing purchase orders and receiving reports for proper cutoff.
b) Observing the physical inventory count and reconciling the results to the records.
c) Confirming inventory balances with third-party suppliers.
d) Reviewing the client’s internal control over the inventory management system.
To test the completeness of recorded revenue transactions, an auditor would most likely:
a) Review the shipping documents for all sales made near the period-end.
b) Inspect the company’s revenue recognition policies for compliance.
c) Confirm amounts with customers regarding the recorded sales.
d) Perform an analytical procedure comparing recorded sales to cash receipts.
An auditor is testing the valuation assertion of inventory. Which of the following audit procedures would be most effective in verifying this assertion?
a) Reviewing the inventory aging report for obsolete items.
b) Inspecting physical inventory for proper classification.
c) Reviewing the company’s sales contracts to determine the net realizable value.
d) Comparing inventory amounts to industry averages.
The auditor is examining the company’s accounts payable for completeness. Which audit procedure would most likely identify unrecorded liabilities?
a) Confirming accounts payable balances with suppliers.
b) Reviewing vendor statements for transactions not yet recorded.
c) Sending invoices to vendors for confirmation of amounts owed.
d) Reviewing cash disbursements after year-end to identify any unrecorded liabilities.
Which of the following is the most effective procedure for testing the cutoff assertion of revenue transactions?
a) Reviewing sales contracts to ensure proper recording of revenue.
b) Confirming sales transactions with customers to verify amounts owed.
c) Reviewing sales invoices issued after year-end to ensure proper recording.
d) Comparing the accounts receivable balance to prior periods for consistency.
Which of the following is an example of audit evidence obtained through inspection?
a) Confirming the amount of receivables with customers.
b) Observing the physical inventory count and inspecting the condition of goods.
c) Recalculating the depreciation of fixed assets based on the schedule.
d) Inquiring with management about legal contingencies.
What is the auditor’s primary concern when auditing a company’s goodwill for impairment?
a) Ensuring the goodwill is properly classified in the balance sheet.
b) Verifying that goodwill is properly amortized.
c) Verifying the company’s method for testing goodwill impairment.
d) Confirming the market value of goodwill.
When testing for the valuation assertion of accounts receivable, which of the following procedures would be most effective?
a) Confirming balances with customers and reviewing the aging report for overdue amounts.
b) Reviewing the company’s sales contracts for terms and conditions.
c) Sending invoices to customers for confirmation of amounts owed.
d) Comparing accounts receivable to prior periods for consistency.
When evaluating audit evidence for its sufficiency, an auditor considers:
a) The timeliness and independence of the evidence.
b) The quality, not the quantity, of evidence obtained.
c) Whether the evidence is obtained from an external source.
d) Whether the evidence has been signed or stamped by an external party.
Which of the following procedures would be most effective in obtaining audit evidence about the existence of inventory?
a) Recalculation of inventory balances for accuracy.
b) Confirmation of inventory quantities with suppliers.
c) Observing the client’s inventory count and reconciling it with the records.
d) Reviewing inventory cutoff procedures.
Which audit procedure is most effective in testing the completeness assertion of accounts payable?
a) Confirming accounts payable balances with suppliers.
b) Reviewing accounts payable aging for overdue amounts.
c) Reviewing cash disbursements after year-end to identify unrecorded liabilities.
d) Confirming subsequent payments with vendors.
When evaluating audit evidence related to the valuation assertion of fixed assets, the auditor would most likely:
a) Examine the sales contracts for any embedded warranties.
b) Recalculate depreciation and verify consistency with company policies.
c) Inspect invoices for evidence of asset impairment.
d) Confirm ownership of the fixed assets with external parties.
Which of the following audit procedures provides the most reliable evidence to test the occurrence assertion for sales transactions?
a) Reviewing sales orders and shipping documents.
b) Confirming sales transactions with customers.
c) Sending positive confirmations to customers regarding amounts owed.
d) Comparing recorded sales to industry averages.
What is the primary purpose of performing tests of controls during an audit?
a) To gather evidence about the effectiveness of the client’s internal controls.
b) To verify the existence of assets in the financial statements.
c) To determine the valuation of the client’s liabilities.
d) To estimate the accuracy of financial statements by recalculating amounts.
Which of the following audit procedures would be most appropriate for testing the presentation and disclosure assertion for financial statements?
a) Inspecting board minutes for compliance with company policies.
b) Sending confirmations to customers regarding the existence of receivables.
c) Reviewing the financial statement presentation for consistency with applicable accounting standards.
d) Reviewing the company’s sales contracts for correct revenue recognition.
When auditing revenue transactions, which of the following is the most effective procedure to test the accuracy assertion?
a) Reviewing the sales orders and shipping documents.
b) Confirming the balances with customers.
c) Recalculating the sales transaction amounts for accuracy.
d) Performing an analytical procedure to compare sales against industry averages.
When performing audit procedures for inventory, which assertion is an auditor primarily concerned with when inspecting the condition of inventory?
a) Completeness
b) Existence
c) Valuation
d) Rights and obligations
To ensure the completeness of recorded liabilities, an auditor most likely would perform which procedure?
a) Review subsequent disbursements for evidence of unrecorded liabilities.
b) Confirm balances with creditors regarding amounts owed.
c) Send confirmations to customers about outstanding accounts payable.
d) Analyze vendor invoices to ensure that all liabilities are recorded.
Which audit procedure would best provide evidence about the presentation of fixed assets on the balance sheet?
a) Inspecting the client’s depreciation schedules and recalculating depreciation.
b) Confirming asset ownership with external parties.
c) Reviewing the company’s policies for asset impairment.
d) Examining the company’s financial statements for proper classification and disclosure.
What is the primary objective of performing analytical procedures in the planning stage of an audit?
a) To identify areas where the risk of material misstatement is higher.
b) To confirm balances with customers and creditors.
c) To verify the physical existence of inventory.
d) To test the client’s internal control procedures for effectiveness.
Which audit procedure is most effective in testing the rights and obligations assertion for long-term debt?
a) Confirming outstanding debt balances with lenders.
b) Reviewing the company’s debt agreements for compliance with covenants.
c) Comparing long-term debt balances to industry averages.
d) Recalculating interest expense and principal payments on long-term debt.
Which of the following is the most effective procedure for verifying the existence of cash on hand?
a) Confirming the bank balances with the bank.
b) Inspecting the company’s bank reconciliation reports.
c) Reviewing the company’s cash receipts journal for deposits.
d) Observing the company’s physical cash count.
In an audit of accounts receivable, the auditor most likely performs which of the following to test the cutoff assertion?
a) Reviewing sales transactions recorded before and after year-end to ensure they are recorded in the proper period.
b) Inspecting the aged receivables listing to verify that all amounts are collectible.
c) Sending confirmations to customers regarding outstanding balances.
d) Recalculating the allowance for doubtful accounts for accuracy.
Which of the following audit procedures would most likely help an auditor obtain evidence about the accuracy assertion of the financial statements?
a) Recalculation of depreciation on fixed assets.
b) Reviewing the terms of sales contracts.
c) Confirming receivables with customers.
d) Comparing financial statement ratios to industry benchmarks.
What is the purpose of a positive confirmation in an audit?
a) To verify the existence of a transaction or balance by sending a request to the external party to respond whether they agree with the information.
b) To verify the accuracy of amounts recorded in the accounting records.
c) To obtain assurance that a customer received a product or service.
d) To verify the completeness of recorded liabilities.
Which of the following would provide the most reliable evidence about the valuation of accounts receivable?
a) Reviewing the accounts receivable aging schedule and assessing the collectability of outstanding balances.
b) Confirming balances with customers.
c) Reviewing subsequent cash receipts.
d) Comparing accounts receivable balances with prior year figures.
Which audit procedure would be most effective in testing the occurrence assertion for recorded sales transactions?
a) Reviewing shipping documents and sales orders.
b) Confirming receivables with customers.
c) Recalculating the sales revenue based on shipping dates.
d) Performing analytical procedures to compare sales revenue with industry averages.
Which of the following would be most effective for an auditor to use in verifying the completeness of recorded liabilities?
a) Reviewing the accounts payable ledger and confirming balances with vendors.
b) Reviewing the subsequent cash disbursements for evidence of unrecorded liabilities.
c) Sending negative confirmations to suppliers.
d) Comparing recorded liabilities to the prior year’s financial statements.
What is the primary purpose of performing substantive tests of transactions during an audit?
a) To evaluate the effectiveness of the client’s internal control system.
b) To gather evidence regarding the completeness, occurrence, and accuracy of transactions.
c) To verify the existence of assets and liabilities.
d) To confirm the valuation of inventory on hand.
In which of the following circumstances would an auditor most likely decide to increase the sample size for audit procedures?
a) When there is a low risk of material misstatement and the internal controls are highly effective.
b) When the auditor’s confidence in the effectiveness of the internal controls is low.
c) When the auditor has confirmed the majority of balances with external parties.
d) When the risk of fraud is assessed to be minimal.
Which audit procedure is most effective in testing the rights and obligations assertion for an entity’s inventory?
a) Reviewing shipping documents to determine inventory ownership.
b) Confirming inventory balances with external parties.
c) Inspecting inventory for signs of obsolescence or impairment.
d) Observing the inventory count to ensure proper physical existence.
An auditor is obtaining audit evidence about the fair value of investments in securities. Which of the following procedures would provide the most reliable evidence?
a) Reviewing the investment purchase agreements and recalculating the fair value of investments based on market quotes.
b) Confirming the investment balances with the investment manager.
c) Comparing the investment’s cost to industry benchmarks.
d) Performing analytical procedures to identify unusual fluctuations in investment balances.
Which of the following audit procedures would be most effective for obtaining audit evidence to test the valuation of accounts payable?
a) Reviewing the terms of supplier contracts to ensure proper accounting treatment.
b) Confirming accounts payable balances with suppliers.
c) Reviewing subsequent payments made to creditors after year-end.
d) Reviewing the accounts payable aging schedule for overdue balances.
What is the primary purpose of performing substantive procedures during an audit?
a) To identify internal control weaknesses.
b) To verify the effectiveness of the client’s internal controls.
c) To gather evidence regarding the completeness, occurrence, and accuracy of financial statement assertions.
d) To assess the risk of fraud in financial reporting.
In an audit of inventory, which procedure would be most effective in testing the completeness assertion?
a) Comparing recorded inventory to the actual inventory on hand during a physical count.
b) Reviewing purchase orders and receiving reports.
c) Confirming inventory balances with third-party suppliers.
d) Recalculating the cost of goods sold.
To test the valuation assertion for accounts receivable, the auditor would most likely:
a) Inspect the aging of receivables and perform tests for doubtful accounts.
b) Confirm the balances of receivables with customers.
c) Inspect the subsequent cash receipts to determine the accuracy of recorded amounts.
d) Review the terms of sales transactions to identify any sales returns or allowances.
An auditor is evaluating the sufficiency of audit evidence obtained for an audit. Which of the following factors would be least important in this evaluation?
a) The competence of the evidence.
b) The relevance of the evidence.
c) The timeliness of the evidence.
d) The cost of obtaining the evidence.
An auditor performs a procedure to gather audit evidence about a client’s financial statements. The auditor chooses to test the sample of transactions, even though the sample is not fully representative of the population. What type of evidence is this considered to be?
a) Direct evidence
b) Conclusive evidence
c) Circumstantial evidence
d) Sufficient evidence
Which of the following would be the most appropriate audit procedure for testing the existence of property, plant, and equipment (PPE)?
a) Recalculating depreciation on fixed assets.
b) Inspecting invoices and ownership documents.
c) Sending confirmations to suppliers.
d) Reviewing purchase orders for capital expenditures.
When an auditor performs substantive tests on a client’s revenue, which of the following is the most appropriate audit procedure?
a) Comparing revenue with industry trends.
b) Reviewing board of director meeting minutes for revenue-related decisions.
c) Inspecting contracts and sales orders to verify revenue recognition.
d) Confirming revenue amounts with external parties.
To evaluate the completeness of liabilities for a company, an auditor would most likely perform which of the following procedures?
a) Confirming liabilities with creditors.
b) Reviewing cash disbursements made after the balance sheet date.
c) Reviewing bank reconciliations.
d) Examining minutes of meetings for any unrecorded liabilities.
Which of the following audit procedures would most likely be used to test the valuation assertion for inventory?
a) Observing the physical inventory count.
b) Confirming the existence of inventory with third parties.
c) Reviewing the inventory aging report.
d) Reviewing the method used to value inventory (e.g., FIFO, LIFO, or weighted average).
What is the purpose of performing a cutoff test in the audit of revenue transactions?
a) To ensure that only valid sales are recorded.
b) To ensure that all sales are recorded in the correct period.
c) To verify the accuracy of recorded revenue amounts.
d) To verify that all customer payments are recorded as revenue.
Which of the following would be the most appropriate audit procedure for testing the completeness assertion of a client’s accounts payable?
a) Confirming accounts payable balances with suppliers.
b) Reviewing subsequent payments made to creditors.
c) Comparing accounts payable balances with the prior year’s figures.
d) Inspecting purchase orders and receiving reports.
An auditor is assessing the sufficiency of audit evidence obtained. Which of the following would most likely increase the sufficiency of audit evidence?
a) The evidence obtained is from an external source, independent of the client.
b) The auditor has performed a variety of audit procedures on the same financial statement assertion.
c) The evidence is obtained from a high-risk area of the financial statements.
d) The auditor has relied solely on the client’s internal control system.
Which of the following is an example of a substantive test of details?
a) Performing analytical procedures to evaluate sales fluctuations.
b) Sending confirmations to customers to verify account balances.
c) Reviewing internal control procedures to ensure segregation of duties.
d) Observing the physical inventory count.
What would most likely be an auditor’s concern if the auditor receives negative confirmations from a large sample of customers?
a) The failure to receive a response from customers could indicate a misstatement.
b) The lack of a response suggests that no errors exist in the customer balances.
c) The customers might be experiencing financial difficulties and are unable to pay.
d) Negative confirmations are not reliable audit evidence.
Which of the following audit procedures would most likely provide evidence to support the going concern assumption in an audit?
a) Reviewing minutes of board meetings for management plans to mitigate financial difficulties.
b) Sending confirmations to customers for outstanding receivables.
c) Inspecting contracts and agreements with third parties.
d) Recalculating depreciation on long-term assets.
Which of the following audit procedures would be most effective in testing the presentation and disclosure assertion of long-term debt?
a) Reviewing debt agreements for terms and covenants.
b) Sending confirmations to creditors for outstanding balances.
c) Inspecting subsequent interest payments on the debt.
d) Recalculating the interest expense related to the long-term debt.
Which of the following factors would most likely lead an auditor to increase the level of testing on the completeness of cash transactions?
a) The company’s internal controls over cash receipts and disbursements are highly effective.
b) There is a significant risk of fraud or misstatement related to cash transactions.
c) The company has a small volume of cash transactions.
d) The company has a history of accurate and timely financial reporting.
When an auditor uses confirmation as an audit procedure, which of the following is most important to the effectiveness of the procedure?
a) The source of the confirmation request must be from the auditor, not the client.
b) The auditor must rely solely on the confirmed balances to support financial statement assertions.
c) The confirmation request should be sent to the debtor or creditor at the client’s discretion.
d) The auditor should perform the confirmation procedure only for high-value transactions.
Which of the following audit procedures would be most effective in testing the accuracy of interest expense on a client’s debt?
a) Recalculating the interest expense based on the terms of the debt agreements.
b) Reviewing bank statements for debt-related payments.
c) Confirming debt balances with creditors.
d) Performing analytical procedures comparing interest expense to industry averages.
When evaluating audit evidence obtained from a third party, which of the following would be most relevant to the auditor’s decision about the reliability of the evidence?
a) Whether the third party is independent and objective.
b) Whether the evidence was obtained from a source with a known conflict of interest.
c) Whether the evidence is corroborated by evidence from internal sources.
d) Whether the third party is located within the same geographical region as the client.
Which of the following audit procedures is most likely to provide the most reliable evidence for the valuation of accounts receivable?
a) Reviewing customer aging reports.
b) Confirming balances with customers.
c) Inspecting sales invoices and shipping documents.
d) Recalculating allowance for doubtful accounts based on historical trends.
When performing tests of controls, an auditor’s primary focus is to determine:
a) The overall effectiveness of internal control.
b) Whether management has violated any policies.
c) The reliability of financial statements.
d) The design and operational effectiveness of controls.
Which of the following procedures would be least effective in detecting unrecorded liabilities at year-end?
a) Reviewing cash disbursements made shortly after the balance sheet date.
b) Sending out confirmations to major creditors.
c) Reviewing the cut-off of expense accounts.
d) Examining the minutes of board meetings for related-party transactions.
An auditor is reviewing inventory and wants to assess the risk of obsolescence. Which of the following audit procedures is most appropriate?
a) Reviewing the client’s inventory turnover ratios.
b) Confirming inventory balances with suppliers.
c) Recalculating inventory valuation using FIFO, LIFO, or average cost.
d) Reviewing invoices from suppliers for recent inventory purchases.
Which of the following procedures would most likely be used by an auditor to test the occurrence of transactions?
a) Inspecting supporting documentation, such as invoices and purchase orders.
b) Comparing recorded amounts with industry benchmarks.
c) Recalculating the mathematical accuracy of transaction entries.
d) Examining the general ledger for unusual journal entries.
Which of the following is the primary purpose of an auditor performing analytical procedures during the planning stage of an audit?
a) To obtain evidence regarding the accuracy of financial statements.
b) To identify areas that may represent specific risks of material misstatement.
c) To confirm the existence of assets and liabilities.
d) To test internal control effectiveness.
If an auditor finds discrepancies between the financial statements and the underlying accounting records, the auditor should:
a) Immediately issue an unqualified opinion.
b) Perform additional testing to verify the accuracy of the information.
c) Report the discrepancies to the company’s CEO.
d) Ignore the discrepancies if they are immaterial.
Which of the following is the best audit procedure for testing the valuation of accounts payable?
a) Reviewing subsequent payments made to creditors.
b) Confirming outstanding payables with suppliers.
c) Comparing current liabilities with prior year balances.
d) Inspecting purchase orders and invoices for outstanding payables.
What is the most appropriate audit procedure for verifying the classification of long-term debt?
a) Reviewing debt covenants and loan agreements.
b) Confirming balances with creditors.
c) Sending confirmations to related parties for all outstanding balances.
d) Recalculating interest expense for the period.
Which of the following audit procedures is most effective in detecting fraudulent financial reporting?
a) Inspecting documents for proper signatures and authorizations.
b) Performing analytical procedures to compare financial ratios with industry norms.
c) Reviewing board minutes for management discussions about fraud prevention.
d) Sending confirmations to customers and suppliers for balances.
To evaluate the proper classification of an item as an expense or an asset, an auditor would most likely perform:
a) Analytical procedures.
b) A physical inspection of the asset.
c) A cut-off test on related transactions.
d) A confirmation of the asset’s value with a third party.
In testing the accuracy of the valuation of investments, an auditor would most likely:
a) Obtain a confirmation from the investment broker regarding the holdings.
b) Compare the recorded amounts of investments with market prices or fair value.
c) Send a request for confirmation to each individual stockholder.
d) Perform tests of controls over investment acquisition.
Which of the following procedures would be most effective in verifying the completeness of recorded revenue?
a) Reviewing contracts for signed agreements.
b) Comparing recorded sales to shipping documents.
c) Sending out confirmations to customers.
d) Inspecting the client’s accounting policies for revenue recognition.
Which of the following audit procedures would be most effective for testing the presentation and disclosure of related-party transactions?
a) Reviewing the minutes of board meetings for approval of related-party transactions.
b) Reviewing invoices for transactions with related parties.
c) Inspecting the client’s bank statements for transfers to related parties.
d) Sending confirmations to related parties regarding their transactions with the company.
Which of the following is an example of substantive testing in auditing?
a) Testing the design and implementation of internal controls.
b) Reviewing the client’s financial statements for consistency with accounting standards.
c) Inspecting supporting documents for recorded transactions.
d) Observing the company’s physical inventory count.
Which of the following is the best procedure for testing the occurrence of sales transactions?
a) Reviewing subsequent cash receipts from customers.
b) Inspecting the sales journal and comparing it to shipping documents.
c) Confirming outstanding receivables with customers.
d) Reviewing the general ledger for adjustments.
An auditor’s primary concern when performing a risk assessment is to:
a) Identify the financial statement assertions most at risk of misstatement.
b) Determine whether management is engaged in fraudulent activities.
c) Assess the competence of the client’s internal audit department.
d) Identify which audit procedures to perform to gather audit evidence.
Which of the following audit procedures is best suited to evaluate the reasonableness of management’s estimates for the allowance for doubtful accounts?
a) Confirming the balances with customers.
b) Reviewing subsequent cash receipts from accounts receivable.
c) Comparing historical write-off percentages with current trends.
d) Recalculating the accounts receivable aging schedule.
An auditor is testing the completeness assertion for accounts payable. Which of the following procedures is most likely to help detect unrecorded liabilities?
a) Sending accounts payable confirmations to major creditors.
b) Reviewing subsequent disbursements for invoices recorded in the following period.
c) Reviewing the general ledger for unusual adjustments.
d) Comparing current-year expenses to prior-year expenses.
Which of the following audit procedures would provide the most persuasive evidence regarding the existence of inventory?
a) Reviewing the inventory aging schedule.
b) Sending inventory confirmations to customers.
c) Performing a physical inventory count and observing the client’s procedures.
d) Recalculating the inventory turnover ratio.
What is the primary purpose of performing analytical procedures during the final review stage of an audit?
a) To identify any areas of significant misstatement in the financial statements.
b) To gather evidence about the accuracy of specific account balances.
c) To evaluate the adequacy of the audit evidence obtained during the fieldwork.
d) To assess the reasonableness of financial statement disclosures.
In auditing accounts payable, which of the following would be the most effective procedure to identify liabilities that have been excluded from the financial statements?
a) Reviewing the cash disbursements after year-end.
b) Sending confirmations to creditors.
c) Inspecting purchase orders for transactions recorded after year-end.
d) Comparing the accounts payable aging report to the general ledger.
Which of the following audit procedures would an auditor most likely use to test the existence of prepaid expenses?
a) Reviewing subsequent payments for goods and services.
b) Comparing the current balance of prepaid expenses to the prior year.
c) Inspecting supporting documentation for prepaid expense transactions.
d) Confirming the balances of prepaid expenses with third parties.
Which of the following audit procedures is least effective in testing the occurrence of revenue transactions?
a) Inspecting supporting documentation such as sales orders and shipping documents.
b) Confirming sales transactions with customers.
c) Reviewing the sales journal for unusual or unapproved entries.
d) Reviewing subsequent cash receipts from customers.
An auditor is concerned about the completeness of accounts receivable and wishes to test for unrecorded receivables. Which of the following audit procedures would be most effective?
a) Sending confirmations to a sample of customers.
b) Reviewing the aging of accounts receivable.
c) Comparing total receivables with prior periods to identify any unusual fluctuations.
d) Reviewing the bank statement for large deposits received after year-end.
Which of the following best describes an auditor’s responsibility when using external confirmations to gather evidence regarding account balances?
a) The auditor is responsible for the accuracy of the information provided by the confirming party.
b) The auditor must assess the reliability of the confirmation procedures before relying on them.
c) The auditor should send confirmations only for large balances and not for small ones.
d) The auditor should disregard confirmation responses that are inconsistent with other audit evidence.
In evaluating the validity of recorded sales transactions, an auditor would most likely perform which of the following procedures?
a) Examining supporting documentation such as customer orders and shipping documents.
b) Recalculating the sales journal totals and comparing them with ledger balances.
c) Sending confirmations to a sample of customers for verification of amounts owed.
d) Reviewing the sales returns and allowances journal for significant adjustments.
Which of the following is the most persuasive type of audit evidence?
a) Client-prepared documentation that has been reviewed by the auditor.
b) Oral representations made by management during the audit.
c) External confirmation of account balances received directly from third parties.
d) Auditor’s own observations during the physical inspection of assets.
When an auditor tests for the occurrence of transactions, which of the following would provide the most reliable evidence?
a) Reviewing the general ledger for entries made during the period.
b) Inspecting the supporting documents for a sample of transactions.
c) Reviewing the bank statement for evidence of cash receipts.
d) Examining the minutes of meetings for evidence of board approval of transactions.
Which of the following procedures is most likely to be used by an auditor to test the accuracy of payroll expenses?
a) Reviewing payroll reports and comparing them with prior periods for unusual trends.
b) Sending confirmations to employees regarding payroll balances.
c) Recalculating payroll taxes and comparing them to statutory requirements.
d) Inspecting employment contracts and timesheets for supporting documentation.