Chapter 04 Test Bank: Student

Chapter 04 Test Bank
Student: ___________________________________________________________________________
1. Who is responsible for the preparation of the financial report?

A.
Audit
or.
B.
Managem
ent.
C.
Both auditor and
management.
D.
None of the answers given
are correct.

2. Original accounting data comprises:

A.
the basic data related to entity
transactions.
B.
information contained in the
financial report.
C.
depreciation and amortisation of the
entity’s assets.
D.
all entries made in an entity’s
general ledger.

3. Which of the following items is an example of professional scepticism?

A.
Determining a low level of
materiality.
B.
Determining a high
level of risk.
C.
Being alert to conditions that may
indicate risks of fraud.
D.
All of the answers given
are correct.

4-1
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
4. Which of the following tests would involve the exercising of professional judgment?

A.
Assessing the appropriateness of the estimate of the
provision for doubtful debts.
B.
Obtaining a bank confirmation to support the
cash at bank figure.
C.
Checking the calculations on a
sales invoice.
D.
All of the answers given
are correct.

5. Which audit assertion relates to ensuring that all recorded sales are valid?

A.
Existen
ce.
B.
Complete
ness.
C.
Occurre
nce.
D.
Accura
cy.

6. Which of the following audit objectives relates primarily to the financial report assertion of
accuracy, valuation and allocation?

A.
Inventory listings are accurately compiled and the totals are properly
included in the inventory accounts.
B.
Inventory quantities include all products, materials and supplies owned by
the company that are in transit.
C.
Slow-moving and obsolete items included in inventories
are properly identified.
D.
Inventories exclude items billed to customers
or owned by others.

4-2
Education.
7. Which of the following is not a financial report assertion?

A.
Inspect
ion.
B.
Rights and
obligations.
C.
Accuracy, valuation and
allocation.
D.
Existen
ce.

8. Your audit client is a retailer that sells some of its own merchandise and a large proportion of
merchandise held on consignment from suppliers. Which account balance assertion for
inventory would this cause to be most at risk?

A.
Existen
ce.
B.
Complete
ness.
C.
Rights and
obligations.
D.
allocation.

9. Your audit client is under intense pressure to meet an earnings target. Which transaction
assertion for purchases is most at risk?

A.
Occurre
nce.
B.
Complete
ness.
C.
Classifica
tion.
D.
Accura
cy.

4-3
Education.
10. As part of accounts payable testing, an auditor reviews cash payments made post balance
date. This is done mainly to gain evidence about which assertion?

A.
allocation.
B.
Rights and
obligations.
C.
Complete
ness.
D.
Existen
ce.

11. This is your first audit of Storm Ltd. During the initial planning you have discovered that the
client lacks receiving reports and a policy as to the timing within which to record purchases.
You have also observed that there are many adjusting entries to accounts payable, which is a
material balance. The audit assertion most at risk when auditing accounts payable is:

A.
existe
nce.
B.
accuracy, valuation and
allocation.
C.
complete
ness.
D.
rights and
obligations.

12. Which of the following procedures would an auditor most likely rely on to verify management's
assertion of completeness?

A.
Comparing a sample of shipping documents to
related sales invoices.
B.
Reviewing a standard bank
confirmation.
C.
Confirming a sample of recorded receivables by direct
communication with the debtors.
D.
Observing the client's distribution of
payroll cheques.

4-4
Education.
13. Which of the following audit objectives relates primarily to the financial report assertion,
rights and obligations?

A.
Inventories are properly classified in the statement of financial
position as current assets.
B.
or owned by others.
C.
Slow-moving and obsolete items included in inventories
D.
Inventory quantities include all products, materials and supplies
owned by the company.

classification?

A.
Inventories are included in the statement of financial
B.
or owned by others.
C.
Inventories are included in the statement of financial position at the lower of
cost and net realisable value.
D.

15. Which of the following audit objectives does not relate primarily to the financial report

A.
Inventories are reduced when appropriate to
net realisable value.
B.
Inventory quantities include all products, materials
and supplies on hand.
C.
The totals of inventory listings are properly included in
the inventory accounts.
D.

4-5
Education.
16. When reviewing a loan agreement to ascertain whether the bank’s security over any of the
client’s assets has been included in the financial report, the audit assertion being achieved
is:

A.
allocation.
B.
existe
nce.
C.
rights and
obligations.
D.
complete
ness.

17. In testing the existence assertion for an asset, an auditor ordinarily works from the:

A.
potentially unrecorded items to the
financial report.
B.
financial report to the potentially
unrecorded items.
C.
supporting evidence to the
accounting records.
D.
accounting records to the
supporting evidence.

18. Selecting a sample of quantities of inventory in the warehouse and tracing each item to the
final stock sheets helps address which of the following assertions in respect of inventory?

A.
Complete
ness.
B.
allocation.
C.
Existen
ce.
D.
Rights and
obligations.

4-6
Education.
19. Tracing is used primarily to test which of the following assertions about classes of
transactions?

A.
Occurre
nce.
B.
Complete
ness.
C.
Cut-
off.
D.
Classifica
tion.

20. Vouching is used primarily to test which of the following assertions about classes of
transaction?

A.
Occurre
nce.
B.
Complete
ness.
C.
Authorisat
ion.
D.
Classifica
tion.

21. You are concerned about whether all sales have occurred. The procedure that will be most
effective in verifying this assertion is:

A.
selecting a sample of invoices and vouching them
to delivery dockets.
B.
selecting a sample of customers' orders and tracing
them to delivery dockets.
C.
checking the sequence of
delivery dockets.
D.
selecting a sample of delivery dockets and
tracing them to invoices.

4-7
Education.
22. While undertaking the audit of the inventory balance, you use your audit software to extract,
from the inventory master file, a report that shows those inventory items with a negative
gross margin. The financial report assertion at which such a report is aimed is:

A.
allocation.
B.
existe
nce.
C.
cut-
off.
D.
rights and
obligation.

23. Which of the following audit procedures does not assist in the achievement of the assertion of
existence in relation to an investment in listed shares?

A.
A review of share prices quoted at the
financial year-end.
B.
A confirmation of shares held on the
client’s behalf.
C.
An analytical review of rate of return
on investments.
D.
A test of details of transactions of share purchases and
sales during the year.

24. Auditors are most likely to use focused audit procedures to examine:

A.
routine
transactions.
B.
low-risk
assertions.
C.
only the rights and
obligations assertion.
D.
high-risk
assertions.

4-8
Education.
25. Your audit client is under intense pressure to meet an earnings target. Which audit procedure
are you most likely to use when auditing purchases?

A.
Vouchi
ng.
B.
Traci
ng.
C.
Recalcula
tion.
D.
Confirmat
ion.

26. In the context of an audit of a financial report, substantive tests are audit procedures that:

A.
may be eliminated under
certain conditions.
B.
are designed to discover significant
subsequent events.
C.
may be either tests of details of transactions, tests of details of account balances, tests of
disclosure, or analytical procedures.
D.
will increase proportionately with the auditor's
reliance on internal control.

27. Most of the independent auditor’s work in formulating an opinion on a financial report consists
of:

A.
obtaining an understanding of the
internal control.
B.
obtaining and examining
audit evidence.
C.
examining cash
transactions.
D.
comparing recorded accounts
with assets.

4-9
Education.
28. In a financial report audit, which of the following procedures is a substantive test of
transactions?

A.
Testing for evidence of approval
of invoices.
B.
Testing recorded sales with supporting
delivery dockets.
C.
Confirming debtors’
accounts.
D.
Comparing this year’s balance with
the previous year.

29. Which of the following is not an auditing procedure?

A.
Vouchi
ng.
B.
Analytical
procedures.
C.
Disclos
ure.
D.
Physical
inspection.

30. Which of the following is an essential factor in evaluating the sufficiency of evidence? The
evidence must:

A.
be well documented and cross-referenced in
the audit documents.
B.
be based on sources that are
considered reliable.
C.
bear a direct relationship to the
audit objective.
D.
be of a large enough quantity to enable the auditor
to form an opinion.

4-10
Education.
31. Which of the following presumptions is correct about the reliability of audit evidence?

A.
Information obtained indirectly from outside sources is the
most reliable audit evidence.
B.
To be reliable, audit evidence should be convincing
rather than persuasive.
C.
Reliability of audit evidence refers to the amount of
corroborative evidence obtained.
D.
An effective internal control system provides more reliable audit
evidence than does an ineffective
internal control system.

32. The following statements were made in a discussion of audit evidence between two auditors.
Which statement is not valid concerning audit evidence?

A.
‘I am seldom convinced beyond all doubt with respect to all aspects of
the reports being examined.'
B.
‘I would not undertake that procedure because at best the results would only be persuasive
and I'm looking for convincing evidence.'
C.
‘I evaluate the degree of risk involved in deciding the kind of
evidence I will gather.'
D.
‘I evaluate the usefulness of the evidence I can obtain against
the cost of obtaining it.'

33. Which of the following statements concerning evidence is correct?

A.
Appropriate evidence supporting management's assertions must be convincing
rather than merely persuasive.
B.
A client's accounting data cannot be considered sufficient audit evidence
to support the financial report.
C.
The cost of obtaining evidence is not an important consideration to an auditor in deciding
what evidence should be obtained.
D.
Effective internal control contributes little to the reliability of the
evidence created within the entity.

4-11
Education.
34. 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.
Documentation in the audit working papers of inferences drawn by the auditor
from analytical ratios and trends.
C.
Notation of experts' conclusions documented in the
auditor's working papers.
D.
Lists of negative confirmation requests for which the
auditor received no response.

35. Which of the following factors is most important in determining the appropriateness of audit
evidence?

A.
The reliability of the evidence in meeting
the audit objective.
B.
The sampling method used by
the auditor.
C.
The quantity of the
evidence obtained.
D.
The objectivity of the auditor
gathering the evidence.

36. To be appropriate, evidence must be both:

A.
reliable and well
documented.
B.
reliable and
relevant.
C.
useful and
independent.
D.
extensive and
timely.

4-12
Education.
37. The weakest form of audit evidence among the following is:

A.
a letter of representation from
management.
B.
confirmation of an inter-company receivable from
a related company.
C.
a letter of representation from the
client's solicitors.
D.
a bank
statement.

38. Evidence is reliable if it:

A.
signals the true state of
an assertion.
B.
applies to the period
being audited.
C.
relates to the audit objective
being tested.
D.
corroborates
management's assertions.

39. An auditor's decision either to apply analytical procedures as substantive tests or to perform
tests of details usually is determined by the:

A.
availability of data aggregated at
a high level.
B.
relative effectiveness and
efficiency of the tests.
C.
timing of tests performed after the
balance date.
D.
auditor's familiarity with
industry trends.

4-13
Education.
40. Which of the following statements relating to the appropriateness of audit evidence is always
true?

A.
Evidence gathered by an auditor from outside
an entity is reliable.
B.
Accounting data developed under a satisfactory internal control system are more relevant
than data developed under unsatisfactory internal control conditions.
C.
Oral representations made by management are
not valid evidence.
D.
Evidence gathered by auditors must be both reliable and relevant to
be considered appropriate.

41. Audit evidence can come in different forms with different degrees of persuasiveness. Which of
the following is the least persuasive type of evidence?

A.
Documents mailed by outsiders
to the auditor.
B.
Correspondence between the auditor
and suppliers.
C.
Sales invoices inspected by
the auditor.
D.
Calculations made by
the auditor.

42. The risk that an auditor's procedures will lead to the conclusion that a material misstatement
does not exist in an account balance when, in fact, such a misstatement does exist is:

A.
audit
risk.
B.
detection
risk.
C.
control
risk.
D.
inherent
risk

4-14
Education.
43. Auditors can eliminate engagement risk:

A.
under no
circumstances.
B.
by establishing policies for client
acceptance and continuance.
C.
by lowering
audit risk.
D.
by lowering
materiality.

44. The risk that, due to the application of an inappropriate audit procedure, an auditor will
conclude that a material error does not exist in an account balance when, in fact, such error
does exist is referred to as:

A.
sampling
risk.
B.
control
risk.
C.
non-sampling
risk.
D.
inherent
risk.

45. As the acceptable level of detection risk decreases, an auditor may change the:

A.
timing of substantive tests by performing them at an interim date
rather than at balance date.
B.
assessed level of inherent risk to a
higher amount.
C.
timing of tests of controls by performing them at several dates
rather than at one time.
D.
nature of substantive tests from a less effective to a
more effective procedure.

4-15
Education.

A.
substantive tests of details to substantive
analytical procedures.
B.
nature of substantive tests from less effective to more
effective procedures.
C.
number of tests of
controls.
D.
assessed level of inherent risk to a
higher amount.

47. As the acceptable level of detection risk decreases, the assurance directly provided from:

A.
substantive tests
should increase.
B.
substantive tests
should decrease.
C.
tests of controls should
increase.
D.
tests of controls should
decrease.

48. As the acceptable level of detection risk increases, an auditor may change the:

A.
assessed level of control risk from less
than high to high.
B.
assurance provided by tests of controls by using a larger
sample size than planned.
C.
timing of substantive tests from year-end
to an interim date.
D.
nature of substantive tests from less effective to more

4-16
Education.
49. The auditor faces a risk that the audit will not detect material misstatements that occur in
the accounting process. In regard to minimising this risk, the auditor primarily relies on:

A.
substantive
tests.
B.
tests of
controls.
C.
internal
control.
D.
statistical
analysis.

50. The situation and circumstances can dictate the level of certain risks no matter what the
auditor does. However, the auditor is always able to decide to reduce one of the following
risks:

A.
Control
risk.
B.
Risk of
management fraud.
C.
Detection
risk.
D.
Inherent
risk.

51. The extent of substantive tests for an assertion in relation to the assessed level of inherent
risk varies in a relationship that is ordinarily:

A.
opposi
te.
B.
inver
se.
C.
dire
ct.
D.
unequ
al.

4-17
Education.
52. Which of the following best describes the concept of audit risk?

A.
The risk of the auditor being sued because of
association with an audit client.
B.
The risk that the auditor will provide an unmodified opinion on a materially
misstated financial report.
C.
The overall risk that a material misstatement exists
in the financial report.
D.
The risk that auditors use audit procedures
that are inappropriate.

53. Engagement risk is:

A.
the risk of issuing an incorrect
auditor's opinion.
B.
the auditor's risk of loss from events arising in connection with the financial
report audited and reported upon.
C.
the overall risk of material
misstatements.
D.
the risk of entity
financial failure.

54. Inherent risk and control risk differ from detection risk in that they:

A.
arise from the misapplication of
auditing procedures.
B.
may be assessed in either quantitative or non-
quantitative terms.
C.
exist independently of the
financial report audit.
D.
can be changed at the
auditor's discretion.

4-18
Education.
55. Which of the following is not a qualitative factor that may affect an auditor's establishment of
materiality?

A.
Potential for
fraud.
B.
The entity is close to violating
loan covenants.
C.
Firm policy sets materiality at 5% of
pre-tax income.
D.
A small misstatement that would interrupt
an earnings trend.

56. Which of the following would an auditor be most likely to use in determining the preliminary
judgment about materiality?

A.
The entity's annualised interim
financial statements.
B.
The contents of the management
representation letter.
C.
The results of the internal control
questionnaire.
D.
The anticipated sample size of the planned
substantive tests.

57. Which one of the following statements is correct concerning the concept of materiality?

A.
Materiality is determined by reference to guidelines established by the Australian Securities
and Investments Commission (ASIC).
B.
Materiality depends only on the dollar amount of an item relative to other
items in the financial report.
C.
Materiality depends on the nature of an item rather than
on the dollar amount.
D.
Materiality is a matter of
professional judgment.

4-19
Education.
58. Which of the following relatively small misstatements would most likely have a material effect
on an entity's financial report?

A.
An illegal payment to a foreign official that
was not recorded.
B.
A piece of obsolete office equipment that
was not retired.
C.
A petty cash fund disbursement that was not
properly authorised.
D.
An uncollectible account receivable that
was not written off.

59. Your preliminary audit plan for Astro Ltd states that planning materiality is set at 1% of total
assets. This planning materiality amount:

A.
will need to be used for evaluation at the end of the engagement to judge the overall
presentation of the financial report, because that was the level used to set the scope of
testing.
B.
should not be revised in
mid-audit.
C.
may be revised based on the results of audit tests and new
information as the audit progresses.
D.
is appropriate for planning, but the evaluation materiality amount must be
based on a percentage of revenue.

60. When considering materiality for planning purposes, an auditor believes that misstatements
aggregating $10 000 would have a material effect on an entity's income statement, but that
misstatements would have to aggregate $20 000 to materially affect the statement of
financial position. Ordinarily, it would be appropriate to design auditing procedures that would
be expected to detect misstatements that aggregate:

A.
$10
000.
B.
$15
000.
C.
$20
000.
D.
$30
000.

4-20
Education.
61. Which of the following tests is intended to detect deviations from prescribed accounting
department procedures?

A.
Substantive tests specified by a
standardised audit program.
B.
Tests of controls designed
specifically for the client.
C.
Analytical tests as designed in the
industry audit guide.
D.
Computerised analytical tests tailored for the configuration
of IT equipment in use.

62. Which of the following procedures would be least likely to be included in an auditor's test of
controls?

A.
Observat
ion.
B.
Enqui
ry.
C.
Confirmat
ion.
D.
Inspect
ion.

63. All of the following auditing procedures are substantive tests except:

A.
analytical
procedures.
B.
tests of approvals on
invoices.
C.
vouching of sales transactions to
delivery dockets.
D.
confirmation of bank balances
at year-end.

4-21
Education.
64. ‘Dual-purpose tests' is a term used for:

A.
tests of controls that address both the design of the control procedures
and their operating effectiveness.
B.
tests of transactions that include substantive procedures as
well as tests of controls.
C.
tests that address both balances and
transaction classes.
D.
tests performed because of client expectations as well as for
gathering audit evidence.

65. Which of the following statements concerning the auditor's use of the work of an expert is
correct?

A.
If the auditor believes that the determinations made by the expert are unreasonable, only
an adverse auditor's opinion may be issued.
B.
If the expert is related to the client, the auditor is not permitted to use the expert's
findings as corroborative evidence.
C.
The expert should be identified in the auditor's report if the auditor has relied on the expert
in issuing an unmodified auditor's opinion.
D.
The expert should have an understanding of the auditor's corroborative
use of the expert's findings.

66. Audit documentation prepared on audits of publicly held clients is the property of the:

A.
sharehol
ders.
B.
audit
or.
C.
management of the entity
being audited.
D.
the Australian and Securities
Investments Commission.

4-22
Education.
67. All of the following documents are typically in the current file except:

A.
adjusting journal
entries.
B.
copies of the
auditor's report.
C.
chart of
accounts.
D.
copies of minutes of important
committee meetings.

68. Audit documents record the results of the auditor's evidence-gathering procedures. When
preparing audit documents, the auditor should remember that:

A.
audit documents should be kept on the client's premises so that the client can have
access to them for reference purposes.
B.
audit documents should be the primary support for the financial
report being examined.
C.
audit documents should be considered as a substitute for the
client's accounting records.
D.
audit documents should be designed to meet the circumstances and the
auditor's needs on each engagement.

69. Audit documents that record the procedures used by the auditor to gather evidence should
be:

A.
considered the primary support for the financial
B.
viewed as the connecting link between the accounting records
and the financial report.
C.
designed to meet the circumstances of the
particular engagement.
D.
destroyed when the audited entity
ceases to be a client.

4-23
Education.
70. Audit documentation:

A.
must be in
electronic form.
B.
must be only in
paper form.
C.
is not required, but is strongly
recommended.
D.
may be in paper, electronic or
some other form.

71. Which of the following is not a factor affecting the independent auditor's judgment as to the
quantity, type and content of audit working papers?

A.
The need, in the particular circumstances, for supervision and review of the
work performed by any assistants.
B.
The nature and conditions of the client's records
and internal control.
C.
The expertise of client personnel and their
expected audit participation.
D.
The type of financial report, schedules or other information upon
which the auditor is reporting.

72. In planning an audit engagement, which of the following is a factor that affects the
independent auditor’s judgment as to the quantity, type and content of working papers?

A.
The estimated occurrence rate
of attributes.
B.
The preliminary evaluations based upon initial
substantive testing.
C.
The content of the client’s
D.
The anticipated nature of the
auditor’s report.

4-24
Education.
73. An auditor’s working papers will generally be least likely to include documentation showing
how the:

A.
client’s schedules
were prepared.
B.
engagement had been
planned.
C.
client’s internal control had been understood and the level
of control risk assessed.
D.
unusual matters were
resolved.

74. The current file of an auditor's working papers is most likely to include a copy of the:

A.
superannuation fund
contract.
B.
constitut
ion.
C.
flowcharts of the internal
control activities.
D.
bank
reconciliation.

75. Which of the following is not a primary purpose of audit working papers?

A.
To assist in preparation of the
auditor's report.
B.
To support the
financial report.
C.
To provide evidence of the audit
work performed.
D.
To coordinate
the audit.

4-25
Education.
76. Which of the following factors will least affect the independent auditor’s judgment as to the
quantity, type and content of working papers desirable for a particular engagement?

A.
Need for supervision
and review.
B.
Number of personnel assigned
to the audit.
C.
Nature of the
auditor’s report.
D.
Nature of the financial report or other information upon which
the auditor is reporting.

4-26
Education.
Chapter 04 Test Bank Key

1. Who is responsible for the preparation of the financial report?

A. Audit
or.
B. Managem
ent.
C. Both auditor and
management.
D. None of the answers given
are correct.

AACSB: Analytic
Difficulty: Easy
Learning Objective: 04.01 Explain the difference between accounting and auditing and the importance of professional
scepticism and professional judgment to auditing
Topic: Accounting and auditing contrasted

2. Original accounting data comprises:

A. the basic data related to entity

transactions.
B. information contained in the
financial report.
C. depreciation and amortisation of the
entity’s assets.
D. all entries made in an entity’s
general ledger.

AACSB: Analytic
Difficulty: Easy

4-27
Education.
3. Which of the following items is an example of professional scepticism?

A. Determining a low level of

materiality.
B. Determining a high
level of risk.
C. Being alert to conditions that may
indicate risks of fraud.
D. All of the answers given
are correct.

AACSB: Analytic
Difficulty: Easy

4-28
Education.
4. Which of the following tests would involve the exercising of professional judgment?

A. Assessing the appropriateness of the estimate of the

provision for doubtful debts.
B. Obtaining a bank confirmation to support the
cash at bank figure.
C. Checking the calculations on a
sales invoice.
D. All of the answers given
are correct.

AACSB: Analytic
Difficulty: Easy

5. Which audit assertion relates to ensuring that all recorded sales are valid?

A. Existen
ce.
B. Complete
ness.
C. Occurre
nce.
D. Accura
cy.

AACSB: Analytic
Difficulty: Easy
Learning Objective: 04.02 Outline the logical process of identifying financial report assertions, developing specific audit
objectives and selecting auditing procedures
Topic: Financial report assertions and audit objectives and procedures

4-29
Education.
accuracy, valuation and allocation?

A. Inventory listings are accurately compiled and the totals are properly
included in the inventory accounts.
B. Inventory quantities include all products, materials and supplies owned by
C. Slow-moving and obsolete items included in inventories
D. Inventories exclude items billed to customers
or owned by others.

AACSB: Analytic
Difficulty: Medium

7. Which of the following is not a financial report assertion?

A. Inspect
ion.
B. Rights and
obligations.
C. Accuracy, valuation and
allocation.
D. Existen
ce.

AACSB: Analytic
Difficulty: Easy

4-30
Education.
8. Your audit client is a retailer that sells some of its own merchandise and a large proportion
of merchandise held on consignment from suppliers. Which account balance assertion for
inventory would this cause to be most at risk?

A. Existen
ce.
B. Complete
ness.
C. Rights and
obligations.
D. Accuracy, valuation and
allocation.

AACSB: Analytic
Difficulty: Medium

9. Your audit client is under intense pressure to meet an earnings target. Which transaction
assertion for purchases is most at risk?

A. Occurre
nce.
B. Complete
ness.
C. Classifica
tion.
D. Accura
cy.

AACSB: Analytic
Difficulty: Medium

4-31
Education.
10. As part of accounts payable testing, an auditor reviews cash payments made post balance
date. This is done mainly to gain evidence about which assertion?

A. Accuracy, valuation and

allocation.
B. Rights and
obligations.
C. Complete
ness.
D. Existen
ce.

AACSB: Analytic
Difficulty: Medium
Learning Objective: 04.03 Explain the relationships between audit procedures and evidence, and describe common audit
procedures used in an audit of a financial report
Learning Objective: 04.04 Define sufficient appropriate audit evidence and its relationship to auditing procedures

11. This is your first audit of Storm Ltd. During the initial planning you have discovered that the
client lacks receiving reports and a policy as to the timing within which to record
purchases. You have also observed that there are many adjusting entries to accounts
payable, which is a material balance. The audit assertion most at risk when auditing
accounts payable is:

A. existe
nce.
B. accuracy, valuation and
allocation.
C. complete
ness.
D. rights and
obligations.

AACSB: Analytic
Difficulty: Medium

4-32
Education.
12. Which of the following procedures would an auditor most likely rely on to verify
management's assertion of completeness?

A. Comparing a sample of shipping documents to

related sales invoices.
B. Reviewing a standard bank
confirmation.
C. Confirming a sample of recorded receivables by direct
communication with the debtors.
D. Observing the client's distribution of
payroll cheques.

AACSB: Analytic
Difficulty: Hard

13. Which of the following audit objectives relates primarily to the financial report assertion,
rights and obligations?

A. Inventories are properly classified in the statement of financial

B. Inventories exclude items billed to customers
or owned by others.
C. Slow-moving and obsolete items included in inventories
D. Inventory quantities include all products, materials and supplies
owned by the company.

AACSB: Analytic
Difficulty: Medium

4-33
Education.
classification?

A. Inventories are included in the statement of financial

B. Inventories exclude items billed to customers
or owned by others.
C. Inventories are included in the statement of financial position at the lower of
cost and net realisable value.
D. Inventory quantities include all products, materials and supplies owned by

AACSB: Analytic
Difficulty: Medium

15. Which of the following audit objectives does not relate primarily to the financial report

A. Inventories are reduced when appropriate to

net realisable value.
B. Inventory quantities include all products, materials
and supplies on hand.
C. The totals of inventory listings are properly included in
the inventory accounts.
D. Inventory quantities include all products, materials and supplies owned by

AACSB: Analytic
Difficulty: Medium

4-34
Education.
16. When reviewing a loan agreement to ascertain whether the bank’s security over any of the
client’s assets has been included in the financial report, the audit assertion being achieved
is:

A. accuracy, valuation and

allocation.
B. existe
nce.
C. rights and
obligations.
D. complete
ness.

AACSB: Analytic
Difficulty: Hard

4-35
Education.
17. In testing the existence assertion for an asset, an auditor ordinarily works from the:

A. potentially unrecorded items to the

financial report.
B. financial report to the potentially
unrecorded items.
C. supporting evidence to the
accounting records.
D. accounting records to the
supporting evidence.

AACSB: Analytic
Difficulty: Medium

18. Selecting a sample of quantities of inventory in the warehouse and tracing each item to the
final stock sheets helps address which of the following assertions in respect of inventory?

A. Complete
ness.
B. Accuracy, valuation and
allocation.
C. Existen
ce.
D. Rights and
obligations.

AACSB: Analytic
Difficulty: Medium

4-36
Education.
19. Tracing is used primarily to test which of the following assertions about classes of
transactions?

A. Occurre
nce.
B. Complete
ness.
C. Cut-
off.
D. Classifica
tion.

AACSB: Analytic
Difficulty: Easy

20. Vouching is used primarily to test which of the following assertions about classes of
transaction?

A. Occurre
nce.
B. Complete
ness.
C. Authorisat
ion.
D. Classifica
tion.

AACSB: Analytic
Difficulty: Easy

4-37
Education.
21. You are concerned about whether all sales have occurred. The procedure that will be most
effective in verifying this assertion is:

A. selecting a sample of invoices and vouching them

to delivery dockets.
B. selecting a sample of customers' orders and tracing
them to delivery dockets.
C. checking the sequence of
delivery dockets.
D. selecting a sample of delivery dockets and
tracing them to invoices.

AACSB: Analytic
Difficulty: Medium

22. While undertaking the audit of the inventory balance, you use your audit software to
extract, from the inventory master file, a report that shows those inventory items with a
negative gross margin. The financial report assertion at which such a report is aimed is:

A. accuracy, valuation and

allocation.
B. existe
nce.
C. cut-
off.
D. rights and
obligation.

AACSB: Analytic
Difficulty: Medium

4-38
Education.
23. Which of the following audit procedures does not assist in the achievement of the assertion
of existence in relation to an investment in listed shares?

A. A review of share prices quoted at the

financial year-end.
B. A confirmation of shares held on the
client’s behalf.
C. An analytical review of rate of return
on investments.
D. A test of details of transactions of share purchases and
sales during the year.

AACSB: Analytic
Difficulty: Medium

24. Auditors are most likely to use focused audit procedures to examine:

A. routine
transactions.
B. low-risk
assertions.
C. only the rights and
obligations assertion.
D. high-risk
assertions.

AACSB: Analytic
Difficulty: Easy
Topic: Audit procedures and evidence

4-39
Education.
25. Your audit client is under intense pressure to meet an earnings target. Which audit
procedure are you most likely to use when auditing purchases?

A. Vouchi
ng.
B. Traci
ng.
C. Recalcula
tion.
D. Confirmat
ion.

AACSB: Analytic
Difficulty: Hard

26. In the context of an audit of a financial report, substantive tests are audit procedures
that:

A. may be eliminated under

certain conditions.
B. are designed to discover significant
subsequent events.
C. may be either tests of details of transactions, tests of details of account balances, tests
of disclosure, or analytical procedures.
D. will increase proportionately with the auditor's
reliance on internal control.

AACSB: Analytic
Difficulty: Easy

4-40
Education.
27. Most of the independent auditor’s work in formulating an opinion on a financial report
consists of:

A. obtaining an understanding of the

internal control.
B. obtaining and examining
audit evidence.
C. examining cash
transactions.
D. comparing recorded accounts
with assets.

AACSB: Analytic
Difficulty: Easy

28. In a financial report audit, which of the following procedures is a substantive test of
transactions?

A. Testing for evidence of approval

of invoices.
B. Testing recorded sales with supporting
delivery dockets.
C. Confirming debtors’
accounts.
D. Comparing this year’s balance with
the previous year.

AACSB: Analytic
Difficulty: Medium

4-41
Education.
29. Which of the following is not an auditing procedure?

A. Vouchi
ng.
B. Analytical
procedures.
C. Disclos
ure.
D. Physical
inspection.

AACSB: Analytic
Difficulty: Easy

30. Which of the following is an essential factor in evaluating the sufficiency of evidence? The
evidence must:

A. be well documented and cross-referenced in

the audit documents.
B. be based on sources that are
considered reliable.
C. bear a direct relationship to the
audit objective.
D. be of a large enough quantity to enable the auditor
to form an opinion.

AACSB: Analytic
Difficulty: Easy
Topic: Sufficient appropriate audit evidence

4-42
Education.
31. Which of the following presumptions is correct about the reliability of audit evidence?

A. Information obtained indirectly from outside sources is the

most reliable audit evidence.
B. To be reliable, audit evidence should be convincing
rather than persuasive.
C. Reliability of audit evidence refers to the amount of
corroborative evidence obtained.
D. An effective internal control system provides more reliable audit
evidence than does an ineffective
internal control system.

AACSB: Analytic
Difficulty: Medium

4-43
Education.
32. The following statements were made in a discussion of audit evidence between two
auditors. Which statement is not valid concerning audit evidence?

A. ‘I am seldom convinced beyond all doubt with respect to all aspects of
the reports being examined.'
B. ‘I would not undertake that procedure because at best the results would only be
persuasive and I'm looking for convincing evidence.'
C. ‘I evaluate the degree of risk involved in deciding the kind of
evidence I will gather.'
D. ‘I evaluate the usefulness of the evidence I can obtain against
the cost of obtaining it.'

AACSB: Analytic
Difficulty: Easy

33. Which of the following statements concerning evidence is correct?

A. Appropriate evidence supporting management's assertions must be convincing

rather than merely persuasive.
B. A client's accounting data cannot be considered sufficient audit evidence
to support the financial report.
C. The cost of obtaining evidence is not an important consideration to an auditor in
deciding what evidence should be obtained.
D. Effective internal control contributes little to the reliability of the
evidence created within the entity.

AACSB: Analytic
Difficulty: Medium

4-44
Education.
34. 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. Documentation in the audit working papers of inferences drawn by the auditor
from analytical ratios and trends.
C. Notation of experts' conclusions documented in the
auditor's working papers.
D. Lists of negative confirmation requests for which the
auditor received no response.

AACSB: Analytic
Difficulty: Medium

35. Which of the following factors is most important in determining the appropriateness of
audit evidence?

A. The reliability of the evidence in meeting

the audit objective.
B. The sampling method used by
the auditor.
C. The quantity of the
evidence obtained.
D. The objectivity of the auditor
gathering the evidence.

AACSB: Analytic
Difficulty: Easy

4-45
Education.
36. To be appropriate, evidence must be both:

A. reliable and well

documented.
B. reliable and
relevant.
C. useful and
independent.
D. extensive and
timely.

AACSB: Analytic
Difficulty: Easy

37. The weakest form of audit evidence among the following is:

A. a letter of representation from

management.
B. confirmation of an inter-company receivable from
a related company.
C. a letter of representation from the
client's solicitors.
D. a bank
statement.

AACSB: Analytic
Difficulty: Easy

38. Evidence is reliable if it:

A. signals the true state of

an assertion.
B. applies to the period
being audited.
C. relates to the audit objective
being tested.
D. corroborates
management's assertions.

AACSB: Analytic
Difficulty: Medium
4-46
Education.

39. An auditor's decision either to apply analytical procedures as substantive tests or to
perform tests of details usually is determined by the:

A. availability of data aggregated at

a high level.
B. relative effectiveness and
efficiency of the tests.
C. timing of tests performed after the
balance date.
D. auditor's familiarity with
industry trends.

AACSB: Analytic
Difficulty: Medium

40. Which of the following statements relating to the appropriateness of audit evidence is
always true?

A. Evidence gathered by an auditor from outside

an entity is reliable.
B. Accounting data developed under a satisfactory internal control system are more
relevant than data developed under unsatisfactory internal control conditions.
C. Oral representations made by management are
not valid evidence.
D. Evidence gathered by auditors must be both reliable and relevant to
be considered appropriate.

AACSB: Analytic
Difficulty: Hard

4-47
Education.
41. Audit evidence can come in different forms with different degrees of persuasiveness.
Which of the following is the least persuasive type of evidence?

A. Documents mailed by outsiders

to the auditor.
B. Correspondence between the auditor
and suppliers.
C. Sales invoices inspected by
the auditor.
D. Calculations made by
the auditor.

AACSB: Analytic
Difficulty: Easy

42. The risk that an auditor's procedures will lead to the conclusion that a material
misstatement does not exist in an account balance when, in fact, such a misstatement
does exist is:

A. audit
risk.
B. detection
risk.
C. control
risk.
D. inherent
risk

AACSB: Analytic
Difficulty: Easy
Learning Objective: 04.05 Outline the audit risk model
Topic: Overview of the audit risk model

4-48
Education.
43. Auditors can eliminate engagement risk:

A. under no
circumstances.
B. by establishing policies for client
acceptance and continuance.
C. by lowering
audit risk.
D. by lowering
materiality.

AACSB: Analytic
Difficulty: Easy

44. The risk that, due to the application of an inappropriate audit procedure, an auditor will
conclude that a material error does not exist in an account balance when, in fact, such
error does exist is referred to as:

A. sampling
risk.
B. control
risk.
C. non-sampling
risk.
D. inherent
risk.

AACSB: Analytic
Difficulty: Easy

4-49
Education.

A. timing of substantive tests by performing them at an interim date

rather than at balance date.
B. assessed level of inherent risk to a
higher amount.
C. timing of tests of controls by performing them at several dates
rather than at one time.
D. nature of substantive tests from a less effective to a
more effective procedure.

AACSB: Analytic
Difficulty: Hard


A. substantive tests of details to substantive

analytical procedures.
B. nature of substantive tests from less effective to more
C. number of tests of
controls.
D. assessed level of inherent risk to a
higher amount.

AACSB: Analytic
Difficulty: Hard

47. As the acceptable level of detection risk decreases, the assurance directly provided from:

A. substantive tests
should increase.
B. substantive tests
should decrease.
C. tests of controls should
increase.
D. tests of controls should
decrease.

AACSB: Analytic
Difficulty: Medium
4-50
Education.

48. As the acceptable level of detection risk increases, an auditor may change the:

A. assessed level of control risk from less

than high to high.
B. assurance provided by tests of controls by using a larger
sample size than planned.
C. timing of substantive tests from year-end
to an interim date.
D. nature of substantive tests from less effective to more

AACSB: Analytic
Difficulty: Hard

49. The auditor faces a risk that the audit will not detect material misstatements that occur in
the accounting process. In regard to minimising this risk, the auditor primarily relies on:

A. substantive
tests.
B. tests of
controls.
C. internal
control.
D. statistical
analysis.

AACSB: Analytic
Difficulty: Easy

4-51
Education.
50. The situation and circumstances can dictate the level of certain risks no matter what the
auditor does. However, the auditor is always able to decide to reduce one of the following
risks:

A. Control
risk.
B. Risk of
management fraud.
C. Detection
risk.
D. Inherent
risk.

AACSB: Analytic
Difficulty: Easy

51. The extent of substantive tests for an assertion in relation to the assessed level of inherent
risk varies in a relationship that is ordinarily:

A. opposi
te.
B. inver
se.
C. dire
ct.
D. unequ
al.

AACSB: Analytic
Difficulty: Easy

4-52
Education.
52. Which of the following best describes the concept of audit risk?

A. The risk of the auditor being sued because of

association with an audit client.
B. The risk that the auditor will provide an unmodified opinion on a materially
misstated financial report.
C. The overall risk that a material misstatement exists
in the financial report.
D. The risk that auditors use audit procedures
that are inappropriate.

AACSB: Analytic
Difficulty: Medium

53. Engagement risk is:

A. the risk of issuing an incorrect

auditor's opinion.
B. the auditor's risk of loss from events arising in connection with the financial
report audited and reported upon.
C. the overall risk of material
misstatements.
D. the risk of entity
financial failure.

AACSB: Analytic
Difficulty: Medium

54. Inherent risk and control risk differ from detection risk in that they:

A. arise from the misapplication of

auditing procedures.
B. may be assessed in either quantitative or non-
quantitative terms.
C. exist independently of the
financial report audit.
D. can be changed at the
auditor's discretion.

AACSB: Analytic
Difficulty: Medium
4-53
Education.

55. Which of the following is not a qualitative factor that may affect an auditor's establishment
of materiality?

A. Potential for
fraud.
B. The entity is close to violating
loan covenants.
C. Firm policy sets materiality at 5% of
pre-tax income.
D. A small misstatement that would interrupt
an earnings trend.

AACSB: Analytic
Difficulty: Easy
Learning Objective: 04.06 Explain the concept of materiality
Topic: Materiality

56. Which of the following would an auditor be most likely to use in determining the preliminary
judgment about materiality?

A. The entity's annualised interim

financial statements.
B. The contents of the management
C. The results of the internal control
questionnaire.
D. The anticipated sample size of the planned
substantive tests.

AACSB: Analytic
Difficulty: Easy
Topic: Materiality

4-54
Education.
57. Which one of the following statements is correct concerning the concept of materiality?

A. Materiality is determined by reference to guidelines established by the Australian

Securities and Investments Commission (ASIC).
B. Materiality depends only on the dollar amount of an item relative to other
items in the financial report.
C. Materiality depends on the nature of an item rather than
on the dollar amount.
D. Materiality is a matter of
professional judgment.

AACSB: Analytic
Difficulty: Easy
Topic: Materiality

58. Which of the following relatively small misstatements would most likely have a material
effect on an entity's financial report?

A. An illegal payment to a foreign official that

was not recorded.
B. A piece of obsolete office equipment that
was not retired.
C. A petty cash fund disbursement that was not
properly authorised.
D. An uncollectible account receivable that
was not written off.

AACSB: Analytic
Difficulty: Medium
Topic: Materiality

4-55
Education.
59. Your preliminary audit plan for Astro Ltd states that planning materiality is set at 1% of
total assets. This planning materiality amount:

A. will need to be used for evaluation at the end of the engagement to judge the overall
presentation of the financial report, because that was the level used to set the scope of
testing.
B. should not be revised in
mid-audit.
C. may be revised based on the results of audit tests and new
information as the audit progresses.
D. is appropriate for planning, but the evaluation materiality amount must be
based on a percentage of revenue.

AACSB: Analytic
Difficulty: Medium
Topic: Materiality

60. When considering materiality for planning purposes, an auditor believes that
misstatements aggregating $10 000 would have a material effect on an entity's income
statement, but that misstatements would have to aggregate $20 000 to materially affect
the statement of financial position. Ordinarily, it would be appropriate to design auditing
procedures that would be expected to detect misstatements that aggregate:

A. $10
000.
B. $15
000.
C. $20
000.
D. $30
000.

AACSB: Analytic
Difficulty: Medium
Topic: Materiality

4-56
Education.
61. Which of the following tests is intended to detect deviations from prescribed accounting
department procedures?

A. Substantive tests specified by a

standardised audit program.
B. Tests of controls designed
specifically for the client.
C. Analytical tests as designed in the
industry audit guide.
D. Computerised analytical tests tailored for the configuration
of IT equipment in use.

AACSB: Analytic
Difficulty: Easy
Learning Objective: 04.07 Define types of audit tests
Topic: Types of audit tests

4-57
Education.
62. Which of the following procedures would be least likely to be included in an auditor's test
of controls?

A. Observat
ion.
B. Enqui
ry.
C. Confirmat
ion.
D. Inspect
ion.

AACSB: Analytic
Difficulty: Easy

63. All of the following auditing procedures are substantive tests except:

A. analytical
procedures.
B. tests of approvals on
invoices.
C. vouching of sales transactions to
delivery dockets.
D. confirmation of bank balances
at year-end.

AACSB: Analytic
Difficulty: Medium

64. ‘Dual-purpose tests' is a term used for:

A. tests of controls that address both the design of the control procedures
and their operating effectiveness.
B. tests of transactions that include substantive procedures as
well as tests of controls.
C. tests that address both balances and
transaction classes.
D. tests performed because of client expectations as well as for
gathering audit evidence.

AACSB: Analytic
4-58
Education.
Difficulty: Easy

65. Which of the following statements concerning the auditor's use of the work of an expert is
correct?

A. If the auditor believes that the determinations made by the expert are unreasonable,
only an adverse auditor's opinion may be issued.
B. If the expert is related to the client, the auditor is not permitted to use the expert's
findings as corroborative evidence.
C. The expert should be identified in the auditor's report if the auditor has relied on the
expert in issuing an unmodified auditor's opinion.
D. The expert should have an understanding of the auditor's corroborative
use of the expert's findings.

AACSB: Analytic
Difficulty: Medium
Learning Objective: 04.08 Explain how an auditor may use the work of an expert or component auditor
Topic: Using the work of an expert or a component auditor

66. Audit documentation prepared on audits of publicly held clients is the property of the:

A. sharehol
ders.
B. audit
or.
C. management of the entity
being audited.
D. the Australian and Securities
Investments Commission.

AACSB: Analytic
Difficulty: Easy
Learning Objective: 04.09 Describe the general requirement to document audit work and the contents of audit working
papers
Topic: Documentation of audit work: audit working papers

4-59
Education.
67. All of the following documents are typically in the current file except:

A. adjusting journal
entries.
B. copies of the
auditor's report.
C. chart of
accounts.
D. copies of minutes of important
committee meetings.

AACSB: Analytic
Difficulty: Easy
papers

68. Audit documents record the results of the auditor's evidence-gathering procedures. When
preparing audit documents, the auditor should remember that:

A. audit documents should be kept on the client's premises so that the client can have
access to them for reference purposes.
B. audit documents should be the primary support for the financial
C. audit documents should be considered as a substitute for the
client's accounting records.
D. audit documents should be designed to meet the circumstances and the
auditor's needs on each engagement.

AACSB: Analytic
Difficulty: Easy
papers

4-60
Education.
69. Audit documents that record the procedures used by the auditor to gather evidence should
be:

A. considered the primary support for the financial

B. viewed as the connecting link between the accounting records
and the financial report.
C. designed to meet the circumstances of the
particular engagement.
D. destroyed when the audited entity
ceases to be a client.

AACSB: Analytic
Difficulty: Easy
papers

70. Audit documentation:

A. must be in
electronic form.
B. must be only in
paper form.
C. is not required, but is strongly
recommended.
D. may be in paper, electronic or
some other form.

AACSB: Analytic
Difficulty: Easy
papers

4-61
Education.
71. Which of the following is not a factor affecting the independent auditor's judgment as to
the quantity, type and content of audit working papers?

A. The need, in the particular circumstances, for supervision and review of the
work performed by any assistants.
B. The nature and conditions of the client's records
and internal control.
C. The expertise of client personnel and their
expected audit participation.
D. The type of financial report, schedules or other information upon
which the auditor is reporting.

AACSB: Analytic
Difficulty: Medium
papers

72. In planning an audit engagement, which of the following is a factor that affects the
independent auditor’s judgment as to the quantity, type and content of working papers?

A. The estimated occurrence rate

of attributes.
B. The preliminary evaluations based upon initial
substantive testing.
C. The content of the client’s
D. The anticipated nature of the
auditor’s report.

AACSB: Analytic
Difficulty: Easy
papers

4-62
Education.
73. An auditor’s working papers will generally be least likely to include documentation showing
how the:

A. client’s schedules
were prepared.
B. engagement had been
planned.
C. client’s internal control had been understood and the level
of control risk assessed.
D. unusual matters were
resolved.

AACSB: Analytic
Difficulty: Easy
papers

74. The current file of an auditor's working papers is most likely to include a copy of the:

A. superannuation fund
contract.
B. constitut
ion.
C. flowcharts of the internal
control activities.
D. bank
reconciliation.

AACSB: Analytic
Difficulty: Easy
papers

4-63
Education.
75. Which of the following is not a primary purpose of audit working papers?

A. To assist in preparation of the

auditor's report.
B. To support the
financial report.
C. To provide evidence of the audit
work performed.
D. To coordinate
the audit.

AACSB: Analytic
Difficulty: Easy
papers

76. Which of the following factors will least affect the independent auditor’s judgment as to the
quantity, type and content of working papers desirable for a particular engagement?

A. Need for supervision

and review.
B. Number of personnel assigned
to the audit.
C. Nature of the
auditor’s report.
D. Nature of the financial report or other information upon which
the auditor is reporting.

AACSB: Analytic
Difficulty: Easy
papers

Chapter 04 Test Bank Summary

Category # of Q
uestion
s
AACSB: Analytic 76
Difficulty: Easy 40
Difficulty: Hard 7
Difficulty: Medium 29
4-64
Education.
Learning Objective: 04.01 Explain the difference between accounting and auditing and the i 4
mportance of professional scepticism and professional judgment to auditing
Learning Objective: 04.02 Outline the logical process of identifying financial report assertion 19
s, developing specific audit objectives and selecting auditing procedures
Learning Objective: 04.03 Explain the relationships between audit procedures and evidence, 16
and describe common audit procedures used in an audit of a financial report
Learning Objective: 04.04 Define sufficient appropriate audit evidence and its relationship to 22
auditing procedures
Learning Objective: 04.05 Outline the audit risk model 13
Learning Objective: 04.06 Explain the concept of materiality 6
Learning Objective: 04.07 Define types of audit tests 4
Learning Objective: 04.08 Explain how an auditor may use the work of an expert or compo 1
nent auditor
Learning Objective: 04.09 Describe the general requirement to document audit work and the 11
contents of audit working papers
Topic: Accounting and auditing contrasted 4
Topic: Audit procedures and evidence 6
Topic: Documentation of audit work: audit working papers 11
Topic: Financial report assertions and audit objectives and procedures 19
Topic: Materiality 6
Topic: Overview of the audit risk model 13
Topic: Sufficient appropriate audit evidence 12
Topic: Types of audit tests 4
Topic: Using the work of an expert or a component auditor 1
4-65
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Chapter 04 Test Bank: Student

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Chapter 04 Test Bank

1. Who is responsible for the preparation of the financial report?

A. the basic data related to entity

A. Determining a low level of

A. Assessing the appropriateness of the estimate of the

A. Accuracy, valuation and

A. Comparing a sample of shipping documents to

A. Inventories are properly classified in the statement of financial

A. Inventories are included in the statement of financial

A. Inventories are reduced when appropriate to

A. accuracy, valuation and

A. potentially unrecorded items to the

A. selecting a sample of invoices and vouching them

A. accuracy, valuation and

A. A review of share prices quoted at the

A. may be eliminated under

A. obtaining an understanding of the

A. Testing for evidence of approval

A. be well documented and cross-referenced in

A. Information obtained indirectly from outside sources is the

A. Appropriate evidence supporting management's assertions must be convincing

A. Schedules of details of physical inventory counts

A. The reliability of the evidence in meeting

A. reliable and well

A. a letter of representation from

A. signals the true state of

A. availability of data aggregated at

A. Evidence gathered by an auditor from outside

A. Documents mailed by outsiders

A. timing of substantive tests by performing them at an interim date

A. substantive tests of details to substantive

A. assessed level of control risk from less

A. The risk of the auditor being sued because of

A. the risk of issuing an incorrect

A. arise from the misapplication of

A. The entity's annualised interim

A. Materiality is determined by reference to guidelines established by the Australian

A. An illegal payment to a foreign official that

A. Substantive tests specified by a

A. considered the primary support for the financial

A. The estimated occurrence rate

A. To assist in preparation of the

A. Need for supervision

Chapter 04 Test Bank Summary

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