Southland College – School of Business and Accountancy

Auditing and Assurance Engagements Principles

Quiz: Audit Evidence

Write the letter of the best answer. Attach your work to the classroom.

1. PSA 500 defines audit evidence as

A. The information obtained by the auditor in arriving at the conclusions on which the audit opinion
is based.
B. Assertions by management, explicit or otherwise, that are embodies in the financial statements.
C. Tests performed to obtain audit evidence to detect material misstatements in the financial
statements.
D. Tests performed to obtain audit evidence about the suitability of design and effective operation of
the accounting and internal control systems.

2. The objective of the ordinary examination by the independent auditor is the expression of an opinion
on
A. the accuracy of the financial statements.
B. the balance sheet and the income statement.
C. the fairness of the financial statements.
D. the annual report of the client enterprise.

3. Management assertions are

A. stated in the footnotes to the FS.
B. explicitly expressed representations about the FS.
C. provided to the auditor in the assertions letter, but are not disclosed in the FS of the entity.
D. implied or express representations about the accounts in the FS.

4. Which of the following statements is incorrect regarding audit objectives?

A. Audit objective should be developed in light of management assertions about the FS components.
B. Selection of tests to meet audit objectives should consider the auditor’s understanding of the
client’s internal control structure.
C. The auditor’s objective in obtaining audit evidence is to make conclusions on which to base the
opinion on the FS.
D. There should be a one-to-one relationship between audit objectives and procedures.

5. (S1) A given set of audit procedures may provide audit evidence that is relevant to certain assertions,
but not to others. (S2) The auditor often obtains audit evidence from different sources or of a different
nature that is relevant to the same assertion. (S3) Obtaining audit evidence relating to a particular
assertion is a substitute for obtaining audit evidence regarding another assertion.
A. F, T, T
B. T, F, T
C. T, T, F
D. F, F, F

6. Which of the following statements on reliability is not correct?

A. Audit evidence is generally more reliable when it exists in documentary form as compared to
evidence consisting of oral representations from the client.
B. Audit evidence is generally more reliable when obtained directly by the auditor as compared to
those obtained indirectly (second-hand knowledge) or by inference.
C. Audit evidence is generally more reliable when it is obtained from independent sources outside
the entity as compares to audit evidence obtained from within the entity.
D. Audit evidence that is generated internally under conditions of good internal control does not
meet the required appropriateness of evidence mentioned in PSA 500.

Prepared by: Nixsun Diaz Casuncad First Semester SY 2021-2022

Southland College – School of Business and Accountancy
Auditing and Assurance Engagements Principles
Quiz: Audit Evidence

7. Management assertions are

A. directly related to generally accepted auditing standards.
B. directly related to generally accepted accounting standards.
C. indirectly related to generally accepted auditing standards.
D. indirectly related to generally accepted accounting standards.

8. Tests of controls are necessary when: (I) the auditor’s risk assessment includes an expectation of the
operating effectiveness of internal controls (II) substantive procedures alone do not provide sufficient
appropriate audit evidence.
A. I only
B. II only
C. I and II
D. Neither I nor II

9. Physical examination is the inspection or count by the auditor of assets such as

A. cash or inventory only.
B. cash, inventory, cancelled checks, and sales documents.
C. cash, inventory, securities, notes receivable, and tangible fixed assets.
D. cash, inventory, cancelled checks, and tangible fixed assets.

10. Physical examination of tangible assets is not sufficient form of evidence when the auditor wants to
determine the
A. existence of the asset.
B. quantity and description of the asset.
C. condition or quality of the asset.
D. ownership of the asset.

11. Evidence obtained directly by the auditor is more reliable than information obtained indirectly. Which
of the following is not an example of the auditor’s direct knowledge?
A. Inspection
B. Observation
C. Computation
D. Inquiry

12. Which of the following audit procedures is used extensively throughout the audit but does not, by
itself, provide sufficient appropriate evidence?
A. Inspection
B. Observation
C. Computation
D. Inquiry

13. Complete the statement: “The evidence gathering technique of observation

A. is useful in most parts of the audit.”
B. is rarely sufficient by itself.”
C. is limited to what the auditor sees.”
D. requires the gathering of corroborative evidence.”

14. Which one of the following types of procedures will aid the auditor in obtaining evidence regarding
the mathematical accuracy of accounting records and other information?
A. confirmation
B. recalculation

Prepared by: Nixsun Diaz Casuncad First Semester SY 2021-2022

Southland College – School of Business and Accountancy
Auditing and Assurance Engagements Principles
Quiz: Audit Evidence

C. inspection
D. inquiry

15. Traditionally, confirmations are used to verify

A. individual transactions between organizations, such as sales transactions.
B. fixed asset additions.
C. bank balances and accounts receivable.
D. all of the choices.

16. The appropriateness of evidence available to an auditor is least likely to be affected by:
A. the relationship of the source or preparer of the evidence to the entity being audited.
B. the relevance of the evidence to the financial statement assertion being investigated.
C. the timeliness of the audit evidence.
D. the sampling method employed by the auditor to obtain a sample of the evidence.

17. The most reliable form of documentary evidence are those documents that are:
A. internally generated.
B. pre-numbered.
C. authorized by responsible official.
D. easily duplicated.

18. Which of the following procedures would provide the least reliable evidence?
A. inquiries of the client’s internal audit staff held in private.
B. inspection of pre-numbered client purchase orders filed in the vouchers payable department.
C. analytical procedures performed by the auditor on the entity’s trial balance.
D. inspection of bank statements obtained directly from the client’s financial institution.

19. Each of the following might, by itself, form a valid basis for an auditor to decide to omit a test except
for the:
A. difficulty and expense involved in testing a particular item.
B. assessment of control risk at a low level.
C. inherent risk involved.
D. relationship between the cost of obtaining evidence and its usefulness.

20. Which of the following methods is considered the best combination in obtaining audit evidence
assuming documentary evidence is available to the auditor?
A. inspection and re-performance
B. observation and inquiry
C. inquiry and inspection
D. inquiry and analytical procedures

21. In the context of an audit of FS, 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 transactions, direct tests of financial balances, or analytical tests
D. will increase proportionately with the auditor’s reliance on internal control.

22. Which if incorrect regarding the nature of further audit procedures?

A. the nature of further audit procedures refers to their purpose and type.
B. certain audit procedures may be more appropriate for some assertions than others.

Prepared by: Nixsun Diaz Casuncad First Semester SY 2021-2022

Southland College – School of Business and Accountancy
Auditing and Assurance Engagements Principles
Quiz: Audit Evidence

C. the auditor is required to obtain audit evidence about the accuracy and completeness of
information produced by the entity’s information system when that information is used in
performing audit procedures.
D. the higher the auditor’s assessments of inherent and control risks, the less reliable and relevant is
the audit evidence sought by the auditor from substantive procedures.

23. Analytical procedures enable the auditor to predict the balance or quantity of an item under audit.
Information to develop this estimate can be obtained from the following:
A. comparison of financial data with data for comparable prior periods or anticipated results and
similar data for the industry in which the entity operates.
B. study of the relationships of elements of financial data that would be expected to conform to a
predictable pattern based upon the entity’s experience.
C. study of the relationships of financial data with relevant nonfinancial data.
D. all of the choices.

24. Where there are unusual fluctuations and relationships ordinarily begins with inquiries of
management, followed by
A. corroboration of management’s responses.
B. consideration of the need to apply other audit procedures based on the results of management
inquiries.
C. corroboration of management’s responses and consideration of the need to apply other audit
procedures based on the results of management inquiries.
D. neither corroboration of management’s responses nor consideration of the need to apply other
audit procedures based on the results of management inquiries.

25. Confirmation is most likely to be relevant form of evidence with regard to assertions about accounts
receivable when the auditor has concerns about the receivables’
A. valuation.
B. classification.
C. existence.
D. completeness.

26. Obtaining and evaluating evidence through direct communication from a third party in response to a
request for information about a particular item affecting FS assertions.
A. external confirmation
B. recalculation
C. inspection
D. inquiry

27. A confirmation request letter should always be sent under the control of
A. the client.
B. the auditor.
C. the recipient.
D. the regulatory body.

28. When recipient has accomplished the confirmation request, replies should be
A. sent directly to the auditor.
B. sent directly to the client, then from client to the auditor.
C. sent directly to the auditor, with another copy of the reply to the client.
D. not sent back since confirmation request does not necessitate replies.

Prepared by: Nixsun Diaz Casuncad First Semester SY 2021-2022

Southland College – School of Business and Accountancy
Auditing and Assurance Engagements Principles
Quiz: Audit Evidence

29. Which of the following statements is correct regarding external confirmation?

A. The auditor need not tailor external confirmation requests to the specific audit objective.
B. Confirmation requests ordinarily do not include management’s authorization to the respondent to
disclose the information to the auditor.
C. A positive external confirmation request asks the respondent to reply to the auditor in all cases.
D. A negative external confirmation request asks the respondent to reply to the auditor in all cases.

30. Negative confirmation requests may be used when

A. the assessed level of inherent and control risks is high.
B. a large number of small balances are involved.
C. a substantial number of errors are expected.
D. the auditor has reason to believe that respondents will disregard these requests.

31. The more the planned reliance of the auditor on the operating effectiveness of internal controls,
A. the more the extent of the auditor’s test of controls.
B. the less the extent of the auditor’s test of controls.
C. the more the reliance of the auditor on substantive procedures.
D. the less the reliance of the auditor on information generated by the entity.

32. Before applying substantive tests to the details of asset accounts at interim date, an auditor
A. should assess control risk at below the maximum level.
B. should assess inherent risk at the maximum level.
C. should assess the difficulty in controlling the incremental audit risk.
D. should assess materiality for the accounts tested as insignificant.

*** nothing follows ***

Prepared by: Nixsun Diaz Casuncad First Semester SY 2021-2022