AUDITING & ASSURANCE PRINCPLES SCORE

QUIZ # 4
TOPIC(s) COVERED: AT 04 – AUDIT EVIDENCE & AUDIT DOCUMENTATION

NAME:__________________________ YEAR & SECTION:__________ DATE:____________

INSTRUCTIONS: FROM THE FOLLOWING MULTIPLE CHOICE QUESTIONS BELOW, CHOOSE THE LETTER OF
THE BEST ANSWER BY SHADING IT TO A SEPARATE ANSWER SHEET PROVIDED.

1. The best definition of audit evidence is

A. Information that provides a factual basis for audit opinions.
B. Information that provides an absolute basis for audit conclusions.
C. Useful data that are convincing in nature.
D. Useful data that are competent.

2. The major reason an independent auditor gathers evidence is to

A. detect fraud
B. evaluate management
C. evaluate internal control
D. form an opinion on the financial statements

3. Which of the following best describes external confirmation?

A. Involves examining records and documents, whether external or internal, in
paper form, electronic form or other media, or physical examination of an
asset.
B. A direct written response to the auditor from a third party.
C. Consists of checking the mathematical accuracy of documents and records.
D. Consists of seeking information of knowledgeable persons, both financial and
non-financial, within the entity or outside the entity.
E. The process of looking at a process or procedure being performed by others.

4. The strongest criticism of the reliability if audit evidence that the auditor
physically observes is that
A. The client may conceal items from the auditor.
B. The auditor may not be qualified to evaluate items he is observing.
C. Such evidence is too costly in relation to its reliability.
D. The observation must occur at a specific time, which is often difficult to
arrange.

5. Which of the following is a general principle relating to the reliability of audit

evidence?
A. Audit evidence obtained from indirect sources rather than directly is more
reliable than evidence obtained directly by the auditor.
B. Audit evidence provided by copies is more reliable than that provided by
facsimiles.
C. Audit evidence obtained from knowledgeable independent sources outside the
client company is more reliable than audit evidence obtained from non-
independent sources.
D. Audit evidence provided by original documents is more reliable than audit
evidence generated through a system of effective controls.

6. Audit evidence can come in different forms with different degrees of persuasiveness.
Which of the following is the least persuasive type of evidence?
A. Bank statement obtained from the client.
B. Computations made by the auditor.
C. Prenumbered client sales invoice.
D. Vendor's invoice.

7. Which of the following is an underlying accounting record?

I. Evidence of electronic fund transfers
II. Minutes of the board of director’s meetings
III. General ledgers
A. I and II C. I, II and III
B. II and III D. Answer not given
C. I and III

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8. Which of the following is not a primary purpose of audit working papers?
A. Coordinate the examination
B. Assist in the preparation of the audit report
C. Support the financial statements
D. Provide evidence of the audit work performed

9. A good working paper must:

I. not be confusing and must not contain information which is sufficient and
understandable for an auditor who is not connected in the audit under
consideration.
II. be prepared as timely as possible to facilitate timely review and documentation
of procedures done.
A. I only C. Both I and II
B. II only D. Neither I nor II

10. The current file of the auditor’s working papers generally should include
I. a flowchart of the internal controls.
II. a copy of the financial statements.
III. organization charts.
A. I and II D. I, II and III
B. II and III E. Answer not given
C. I and III

11. The current file of the auditor’s working papers generally should include
A. a flowchart of the internal controls.
B. a copy of the financial statements.
C. organization charts.
D. copies of bond and note indentures.

12. Evidence is generally considered appropriate when:

A. It has been obtained by random selection.
B. there is enough of it to afford a reasonable basis for an opinion on financial
statements.
C. it has the qualities of being relevant, objective, and free from known bias.
D. it consists of written statements made by managers of the enterprise under
audit.

13. Auditors apply analytical procedures to the client's operations in order to identify
A. Improper separation of accounting and other financial duties.
B. Weaknesses of a material nature in the client's internal control.
C. Unusual transactions.
D. Noncompliance with prescribed control procedures.

14. Underlying accounting records include:

I. Minutes of the meeting
II. Official receipts
III. Sales invoices
A. I and II D. I, II and III
B. II and III E. Answer not given
C. I and III

15. Which of the following statements is (are) not correct?

A. The quantity of evidence obtained determines sufficiency.
B. The auditor need not consider the independence of information source when
obtaining evidence.
C. Evidence obtained directly by the auditor is ordinarily more reliable than
evidence obtained from other sources.
D. all of the above

16. What type of evidence would provide the highest level of assurance in an attestation
engagement?
A. Evidence secured solely from within the entity.
B. Evidence obtained from independent sources.
C. Evidence obtained indirectly.
D. Evidence obtained from multiple internal inquiries.

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17. Which of the following best describes inquiry?
A. Involves examining records and documents, whether external or internal, in
paper form, electronic form or other media, or physical examination of an
asset.
B. A direct written response to the auditor from a third party.
C. Consists of checking the mathematical accuracy of documents and records.
D. Consists of seeking information of knowledgeable persons, both financial and
non-financial, within the entity or outside the entity.
E. The process of looking at a process or procedure being performed by others.

18. I. Audit documentation prepared timely enhances the quality of the audit.
II. Audit documentation should be assembled not later than 30 days after the
auditor’s report date.
A. True, false C. True, true
B. False, true D. False, false

19. Evidential matter supporting the financial statements consists of:

A. Books of original entry, general subsidiary ledgers and related accounting
manuals.
B. The underlying accounting data and all corroborating information available to
the auditor.
C. Corroborating evidential matter such as checks, invoices, contracts, and
confirmations.
D. Documentation of the accounting and internal accounting controls.

20. The various evidences obtained directly by the auditor through observation such as
test counts of inventory and those obtained directly from independent sources are
considered relatively more persuasive compared to evidence secured from within the
entity.

Evidence secured from within the entity like prenumbered purchase order forms is
considered least persuasive type of audit evidence compared to externally created
documents such as bank statements received from the client.
A. False; True. C. True; False.
B. False; False. D. True; True.

21. Which of the following statements is true concerning audit evidence?

A. The most reliable evidence is evidence that can be obtained in a cost-effective
manner.
B. The most reliable evidence is always the least cost- effective to obtain.
C. If evidence does not relate to one of the management assertions, it is not
relevant for the auditor.
D. Documents created, circulated, and stored within the client's own information
systems are highly reliable.

22. Which of the following is most likely to be a factor influencing the appropriateness
of audit evidence for testing a financial statement assertion?
A. The number of documents examined
B. The quality of internal controls surrounding client- generated documents
C. The experience of the audit staff member performing the test
D. The cost of obtaining the evidence

23. Identify the nature of the evidential matter, (AR for accounting records, OI for
other information)
o Minutes of board and stockholders meetings
o Worksheets in support of cost allocations
o Bench marking
o Invoices, paid checks, vouchers
o General and subsidiary ledgers
The following are the respective nature of evidential matter:
A. OI, AR, OI, AR, AR C. OI, OI, AR, OI, AR
B. AR, OI, AR, OI, AR D. AR, AR, OI, AR, AR

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

A. Assist in the planning and performance of the audit
B. Assist in the supervision and review of the audit work.
C. Record the audit evidence resulting from the audit work performed to support
the auditor’s opinion.
D. Be a substitute for the entity’s financial records.

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25. In an audit of the organization's real estate development subsidiary, the audit
objective was to determine that capitalized land improvements had been assigned
equally to all developed lots. The auditor's evidence consisted of
1. Independent appraisals of all lot values
2. Sales records for similar subdivision lots
3. An analysis of market values of each lot.
Which of the following evidential criteria, if any, are violated?
A. Sufficiency and relevance. C. Relevance and competency.
B. Competency and sufficiency. D. No criteria are violated

26. Which of the following statements is true?

A. The evidence which the auditor accumulates remains the same from audit to
audit, but the general audit objectives vary depending on the circumstances.
B. The general audit objectives remain the same from audit to audit, but the
evidence varies depending on the circumstances.
C. The general audit objectives may vary from audit to audit, but the circumstances
remain the same.
D. The circumstances may vary from audit to audit, but the evidence accumulated
remains the same.

27. Reyes, CPA, is planning the audit of Kiko’s company. Kiko verbally asserts to Reyes
that all expenses for the year have been recorded in the accounts. Kiko’s
representation in this regard
A. should be disregarded because it is not in writing.
B. is not considered a sufficient basis for Reyes to conclude that all expenses
have been recorded.
C. is sufficient evidence for Reyes to conclude that the completeness assertion
is supported for the expenses.
D. can enable Reyes to minimize his work on the assessment of control risk for
the completeness of expenses.

28. Evidential matter supporting the financial statements consists of underlying

accounting data and all corroborating information available to the auditor. An
example of corroborating information is
A. General and subsidiary ledgers.
B. Worksheets supporting cost allocation.
C. Minutes of meetings.
D. Accounting manuals.

29. In testing the existence assertion for an asset, an auditor ordinarily works from
the
A. Accounting records to the supporting evidence.
B. Supporting evidence to the accounting records.
C. Potentially unrecorded items to the financial statements.
D. Financial statements to the potentially unrecorded items.

30. Under SRC 68, the retention period for audit engagements ordinarily is not shorter
than ______________ from the auditor’s report date.
A. 5 years C. 7 years
B. 6 years D. 3 years

- END OF EXAMINATION -

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