NOTRE DAME OF MIDSAYAP COLLEGE

Midsayap, Cotabato
COLLEGE OF BUSINESS AND ACCOUNTANCY

SUBJECT: AUDITING AND ASSURANCE PRINCIPLES

INSTRUCTOR: HAMOD M. GULIDTEM, CPA

GAAS, AUDIT EVIDENCE AND DOCUMENTATION

1. Statement I: Audit evidence includes only written information used by the auditor in arriving
at an opinion about the fairness of financial statements.
Statement II: Evidence is generally of higher quality if it involves a member of the audit team
actually going out to physically observe it than if it was obtained from another source.

A. Only statement I is incorrect.

B. Only statement II is incorrect.
C. Both statements are correct.
D. Both statements are incorrect.

2. Statement I: Inquiries of client personnel are not an effective means of evidence gathering by
an auditor.
Statement II: Confirmations are among the most expensive type of evidence to obtain.

A. Only statement I is incorrect.

B. Only statement II is incorrect.
C. Both statements are correct.
D. Both statements are incorrect.

3. Statement I: Audit documentation serves as support for the financial statements.

Statement II: Audit documentation is the joint property of the auditor and the auditor client.

A. Only statement I is incorrect.

B. Only statement II is incorrect.
C. Both statements are correct.
D. Both statements are incorrect.

4. Statement I: Cost should be never be a consideration when making decisions about evidence
for a given audit.
Statement II: Relevance of evidence can only be considered in terms of specific audit
objectives.

A. Only statement I is incorrect.

B. Only statement II is incorrect.
C. Both statements are correct.
D. Both statements are incorrect.

5. Statement I: Lead schedules are often created by auditors to combine similar accounts, such
as all inventory accounts for further testing and documentation.
Statement II: Ordinarily, audit documentation can be provided to someone else only with the
express permission of the client.

A. Only statement I is incorrect.

B. Only statement II is incorrect.
C. Both statements are correct.
D. Both statements are incorrect.

6. The general standards stress the importance of

A. The personal qualities which the auditor should have
B. Evidence accumulation
C. Communicating the auditor’s finding to the reader
D. All of the above
7. The Audit Standard which requires “adequate technical training and proficiency” is normally
interpreted as requiring the auditor to have
A. Formal education in auditing and accounting
B. Adequate practical experience for the work being performed
C. Continuing professional education
D. All of the above

8. A CPA, while performing an audit, strives to achieve independence in appearance in order to

A. Reduce risk and liability.
B. Comply with the generally accepted standards of field work
C. Become independent in fact.
D. Maintain public confidence in the profession.

9. The standard of due audit care requires the auditor to

A. Apply judgment in a conscientious manner, carefully weighing the relevant factors before
reaching a decision.
B. Ensure that the financial statements are free from error.
C. Make perfect judgment decisions in all cases.
D. Possess skills clearly above the average for the profession.

10. The third general standard states due care is to be exercised in the performance of an audit.
This standard is generally interpreted to require
A. Objective review of the adequacy of the technical training and proficiency of firm
personnel
B. Critical review of work done at every level of supervision
C. Thorough review of the existing internal control structure
D. Periodic review of a CPA firm’s quality control procedures.

11. Other information that the auditor may use as audit evidence least likely includes
A. Minutes of the meeting
B. Confirmation from third parties.
C. Information obtained by the auditor from such audit procedures as inquiry, observation,
and inspection.
D. Adjustments to the F/S that are not reflected in formal journal entries.

12. The date on which no information may be deleted from audit documentation is
A. Client’s year end
B. Documentation completion date
C. Last date of significant fieldwork
D. All of the above.

13. Audit documents that record the procedures used by the auditor to gather evidence should be
A. Considered the primary support for the financial statements being examined.
B. Viewed as the connecting link between the accounting records and the financial statements.
C. Designed an orderly fashion to facilitate the review of audit work by the senior, manager,
and partner on the engagement.
D. Retained until the audited entity ceases to be a client.

14. The permanent (continuing file) of an auditor’s working papers most likely indicate copies of
the
A. Bank statements
B. Lead schedules
C. Debt agreements
D. Attorney’s letters

15. Which of the following show the detailed general ledger accounts that make up a financial
statement category on the auditor’s working trial balance?
A. Account analyses
B. Supporting schedules
C. Control accounts
D. Lead schedules
16. Conclusions are typically documented by auditors in which type of work paper?
A. audit planning memo
B. audit program
C. audit memorandum
D. representation letter

17. Audit documentation

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

18. Which one of the following would be the most persuasive type of evidence?
A. Check register
B. Bank statement
C. Observation of assets
D. Inquiry with the in-house attorney

19. Ultimately, what is sufficient appropriate audit evidence depends on

A. Auditor’s professional judgment
B. User’s view
C. Management’s judgment
D. All of the above.

20. Which of the following types of audit evidence is the least reliable?
A. Evidence from the client’s organization.
B. Evidence derived from a well-controlled system.
C. Evidence from independent outside sources.
D. Original documents.

21. Which one of the procedures provides the most reliable evidence?
A. Confirmations
B. Recalculation
C. Reperformance
D. Observations

22. Evidence is reliable if it

A. Signals the true state of a management assertion.
B. Applies to the period being audited.
C. Relates to the audit assertion being tested.
D. Is consistent with management’s assertion.

23. Relevance can be considered only in terms of

A. general objectives
B. specific objectives
C. transaction audit objectives
D. balance audit objectives

24. A confirmation is a form of inquiry that is used to:

A. Verify the inventory count is correct.
B. Verify that a control is being observed.
C. Verify a representation from a third party.
D. Verify that a specific trend is correct.

25. 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 reperformance
B. Inquiry and inspection
C. Inquiry and analytical procedure
D. Observation and inquiry

26-30. Give one hugot/pick-up line related to audit.