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    idit Documentation’ According to PSA 230 Redrafted ‘Documentation’, working papers do not ‘a. Assistin the planning and performance of the audit. , Assist in the supervision and review of the audit work, &. Record the audit evidence resulting from the audit work performed to support an ausitor’s opinion. ‘4. Suppor the client's financial statements. 1 statement ~ Working papers are the property of the auditor. 2° statement — Although portions of or extracts from the working papers maybe made available to the tentity atthe discretion of the auditor, they may be substitute for the entity's accounting records. a. fst stalement is True; 2nd statement is False b. 1st stalement is False; 2nd statement is True ©. Both statements are True 4. Both statements are False 4 statement — The auditor should prepare working papers which are sufficiently complete and delailed to provide an overall understanding of the audit. 2% statement — The auditor should record in the working papers information on planning the audit Work, the nature, timing and extent of the audit procedures performed, the results thereof, and the ‘conclusions dravin from the audit evidence obtained. a. 1 stalement is True ; 2% statementis False b. 1 statement is False ' 2% statement is True ©. Both statements are True 4d, Both statements are False Why does an auditor document audit evidence? ‘a, To comply with the requirements of gathering ll available evidence. '. To provide client reference for all account balances and correcting entries. To support audit opinion and to provide evidence that the audit was carried out in accordance with PSA. 4. To document all records of misstatements noted in the financial statements Working papers that record the procedures used by the auditor to gather evidence should be ‘Considered the primary support for the financial statements being audited. Viewed as the connecting link between the books of accounts and the financial statements, c.Designed to meet the circumstances of the particular engagement. 4. Dastrayed when the auclted entity ceases to be a client. ‘Which of the following conditions constitutes inappropriate working paper preparation? ‘a. Flowcharts are included in the working papers. b. Findings are cross-referenced to supporting documentation. ‘c. Tick marks are explained in working papers. 4. Allforms and directives used by the aucitee department are included in the working papers. ‘An auditor's working papers will ordinarily be least likely to include documentation showing how the a. Client's schedules were prepared. b. Engagement was planned. ‘¢. Understanding of the client's internal control was obtained and control risk was assessed. d. Unusual matters were resolved. {8 Which ofthe following is usually included or shown in the auditor's working papers? ‘a. The procedures used by the auditor to verity the personal financial status of members of the client's management team Analyses that are designed to be a part of, or a substitute for, the clen’s accounting records c. Excerpts from authoritative pronouncements that support the underlying generally accepted ‘accounting principles used in preparing the financial statements, d, The manner in which exceptions and unusual matters disclosed by the auditors procedures were resolved or treated 8. Which ofthe following is not generally included in the working papers fle? a. An indication as to who performed the audit procedures and when they were performed. 'b. Documentation ofthe auditor's understanding of the accounting and internal control systems. ©. Copy of the internal audits aualt program. 4. Analyses of significant ratios and trends. 40. Although the quantity and content of aualt working papers vary with each particular engagement, an auditors permanent files most likely include ‘Schedules that support the current year’s adjusting entries, Prior years’ accounts receivable confirmations that were classified as exceptions. Documentation indicating that the audit work was adequately planned and supervised, ‘Analyses of share capital and other owners’ equity accounts. pore 11. Audit working papers are indexed by means of reference numbers. The primary purpose of indexing to a. Permit cross-referencing and simplify supervisory review. 'b. Support the auait report. Eliminate the need for follow-up reviews, 4. Determine that working papers adequately support findings, conclusions, and reports. 412. The audit working paper that reflects the major components of an amount reported in the financial statements is the ‘a. Interbank transfer schedule ‘c. Supporting schedule b. Carryforward schedule, d. Lead schedule 13. An auditor ordinarily uses a working trial balance resembling the financial statements without footnotes, but containing columns for 8. Cash flow increases and decreases .c. Reclassifications and adjustments '. Audit objectives and assertions ‘d._Reconcilations and tickmarks 14. 15. 16. 1. In the course of the audit of financial statements for the purpose of expressing an opinion thereon, the auditor will normally prepare @ schedule of unadjusted differences for which he did not propose adustment when they were uncovered. The primary purpose served by tis schedule ito Point out to the responsible client officials the errors made by various company personnel. B. Summarize the adustments that must be made before the Company can prepare and submit its income tax retums. ‘c. Kdentify the potential financial statement effects of errors or disputed items that were considered lmmaterial when discovered. 4. Summarize the errors made by the company so that corrections ean be made after the audited financial statements are released \Which of the following analyses appearing in a predecessor's working papers is the successor auditor least likely tobe interested in reviewing? ‘a. Analysis of noncurrent balance sheet accounts. ¢. Analysis of income statement accounts. b. Analysis of current balance sheet accounts. d. Analysis of contingencies. Inan intemal auait, the audit supervisor determines that working papers are complete ‘a. When salisfied that the audit objectives have been met and the working papers support the conclusions. b. When working papers refer to the steps outlined in the aucit program. c. Only after the auditor who prepared the working papers has signed and dated them. 1d. When proper cross-references to other working papers are noted, ‘Standardized working papers are often used, chiefly because they allow working papers to be prepared more, a. Efficiently —_b._Professional Neatly 4. Accurately 18 Ordinarily, the auat may use schedules, analyses and other documentation prepared by entity personnel in order to: Lessen auditor's responsibil, Eliminate the need to apply any auc procedures on verifying thelr correctness. Emphasize thatthe responsibilty on financal statements resis withthe cient management. Improve audi efficiency. \Working papers which contain information relating primarily to the audit of a single period. a. Current auait es ‘c. Financial reporting fles b. Permanent audit fles 4. Comrespondence fies ‘high fhe oon i the ast req othe aut working papers? ‘Substitute for the entity's accounting recor. Confidentiality of information included in the working papers. Safe custody ofthe working papers. Retention fora period sufficient to meet the needs of the practice, The form and content of working papers are affected by matters such asthe following except: Nature of the engagement “Type of opinion to be rendered by the auditor Nature ane complexity of the business [Needs inthe particular circumetances forthe direction, supervision and review of work performed by assistants poem ‘Audit working papers should not ‘a. Include any client-prepared papers or documents other than those prepared by the CPA or his ‘assistant. Be kept by the CPA after review and completion of the audit except for tems required for the inoome tax retum or the permanent fe. Be submited to the client to support the financial statements and to provide evidence ofthe aucit ‘work performed. d._ Be themselves be expected lo provide sufficient support forthe auditor's opinion. Using laptop computers in auditing may affect the methods used to review the work of staf assistants because Supervisory personnel may not have an understanding of the capabilties and limitations of ‘computers. '. Working paper documentation may not contain readily observable detals of calculations. The aud fslawork standards for supervision may differ. Documenting the supervisory review may require assistance of management services personnel. 24. The current file of the auditor's working papers generally should include a. Aflowchart of the internal controls. ©. Accopy of the financial statements, . Copies of bond and note indentures. 4d. Organization charts 25. Which of the following eliminates voluminous details from the auditor's working trial balance by classifying and summarizing similar or related items? a. Account analyses: . Supporting schedules © Control accounts d._ Lead schedules 26. Documentation is a form of evidence ‘a. Used in every financial statement ausit b. Used in most financial statement audit. 2. Used on the rare occasions when it ie both readily available and lees costly than other procedures. d._Used when nothing is available that is more competent, 27. An audit working paper that shaws the detailed evidence and procedures regarding the balance in the accumulated depreciation account in the year under audit will be found in the ‘Current fle of working papers. Permanent fle of working papers. Other information working papers in the current file, Planning memorandum in the current fie. asee 28. In the case of recurring audits, some working papers files may be classified as audit files which are, Updated with new information of continuing importance. This type of aucit file is known a. Current auait file. ©. Electronic audit file. b. Permanent audit fe, 4. Planning memorandum file 29. A schedule listing account balances for the current and previous years, and columns for adjusting and reclassifying entries proposed by the auditors to arrive at the final amount that will appear in the financial statements, is referred to as a a. Working trial balance. c. Summarizing schedule b. Lead schedule. 4. Supporting schedule 30. A schedule set up to combine similar general ledger accounts, the total of which appears on the Working trial balance as a single amount, is referred to as a ‘a. Supporting schedule. °c. Corroborating schedule b. Lead schedule. 4d. Reconciling schedule 31. What do you call the type of working paper where matters of importance are nated down for further verification? a. Summary sheet. ©. Agenda sheet . Audit program. 4d. Supporting schedules 32. The permanent file portion of the auditor's working papers generally should include a. Acopy of the engagement letter. b. Acopy of key customer confirmation. c. Names and addresses of audit staff personnel on the engagements. d._ Time and expense reports, 33. The permanent file section of the working papers that is kept for each audit client most likely contains ‘a. Review notes pertaining to questions and comments regarding the audit work performed. b. Asschedule of time spent on the engagement by each individual auditor. ©. Correspondence with the client's legal counsel concerning pending litigation. d._ Narrative descriptions of the client's accounting procedures and internal controls, 34. In_general, which of the following statements is correct with respect to ownership, possession, or ‘access to working papers prepared by a CPA firm in connection with an audit? a. The warking papers may be obtained by third parties where they appear to be relevant to issues, raised initigation b. The working papers are subject to the privileged communication rule which, in a majority of jurisdictions, prevents third-party access to the working papers. ‘e The working papers are the property of the client after the client pays the fees 4d, The working papers must be relained by the CPA firm for @ period of ten years. ‘35. For what minimum period should audit working papers be retained by the independent GPA? ‘a. For the period during which the entity remains a client of the independent CPA. . For the period during which an auditor-client relationship exists but not more than six (6) years. ‘c. For the statutory period within which legal action may be brought against the independent CPA, d. For as long as the CPA is in public practice. 36. Which of the following documentation is required for an audit in accordance with PSA? ‘a. An internal control questionnaire. b. Acliant engagement letter. ‘c. Aplanning memorandum or checklist 4d. Aclient representation letter. ‘37 Audit documentation is the record of audit procedures performed, relevant audit evidence, and the auditor's conclusions. Which of the following statements concerning audit documentation is incorrect? a. Audit documentation should include superseded drafts of working papers and financial ‘statements, . Audit documentation prepared after the performance of the audit work is likely to be less accurate than documentation prepared at the time such work is performed, c. Audit documentation may include abstracts or copies of the entily’s records such as significant ‘and specific contracts and agreements d. Audit documentation is not a substitute for the entity's accounting records, 38 The auditor is required to complete the administrative process of assembling the final audit fle on a timely basis after the date of the auditor's report. The time limit within which to complete the assembly of the auait fie is ordinarily ‘a. Not more than 30 days after the date of the aucltor's report. . Not more than 60 days after the date ofthe auditor's report. ‘c.Not more than 90 days after the end ofthe en's reporting perio. 4d. Not more than 60 days after the date the entiy’s financial statements are authorized for issue. ‘39. Audit documentation (working papers) should ‘a. Be considered the primary support forthe financial statements being audited. b. Show that the accounting records agree or reconcile with the financial statements . Evaluate management's performance against company goals for the year under aut ._ Be provided tothe client upon request. 40. Audit documentation (working papers) ‘a. Provides evidence of the auditor's compliance with generally accepted auditing standards. b. Is record to be used as a basis forthe following year's engagement. ©. Inclides an analysis ofthe client's marketing strategies, ._Isaclientowned record of conclusions reached by the auditors 41, In.using the work of a specialist, an understanding should exist among the auditor, the client, and the specialist as to the nature of the work to be performed by the specialist. Preferably, the understanding should be documented and would inclu al fhe olowing except ‘The objectives and scope of the specialist's work The specialist's representations ast his relationship, any, tothe cent c. The specialist's understanding of the auditor's corroborative use of the specialist's findings in relation to the representations inthe financial statements d._ A statement that the methods or assumptions to be used are not inconsistent with those used by the client 42, Which ofthe folowing is an Invald desertion of why working papers are developed? Facilitates thir-pary reviews ‘Aids in the planning, performance and review af audits Provides the principal evidential support for the auaitor’s report ‘Aids in the professional development of the operating staff pose 43, a7. 49. ‘The main advantage of property indexed working papers is to a. Reduce the size of the fle Beller organize the working papers Allow division of labor within the audit team d. Facilitate the efficient use of audit staff ‘Which of the following statements about working papers is correct? 2. Working papers are not permitted to be used as a reference source by the client 'b. The auditor should document his understanding of the clients internal control which is to be sed to plan the audit ©. Working papers may be regarded as a substitute for the clients accounting records 4. When reporting on comparative financial statements, the independent aucitor may discard working papers after two years Which of the following is a basic tool used by the auditor to control the audit work and review the progress of the audit? a. Time and expense summary 'b. Engagement leter Progress flowcharts, Audit program During the working paper review, an audit supervisor finds that the auditor's reported findings are ‘nol adequately cross-referenced to supporting documentation. The supervisor will most likely Instruct the auditor to ‘a. Prepare a working paper to indicate that the fll scope of the audit was carried out '. Familiarize himself with the sequence of working papers so that he will be able to answer questions about the conclusions stated in the report cc. Eliminate any cross-references to other working papers since the system is unclear 4d. Provide @ working paper indexing system that shows the relationship between findings, conclusions, and the related facts ‘Which of the following working papers would one normally expect to find in the permanent fle? a. Acopy of a long-term bond indenture b. The working trial balance c. An analysis of additions and disposals relating to marketable securities ‘d._Aworkpaper analyzing customer replies to confirmation requests ‘The permanent file section of the working papers that is kept for each audit client most likely contains ‘a. Review notes pertaining to questions and comments regarding the auclt work performed b. A schedule of time spent on the engagement by each individual auditor ‘¢. Correspondence with the client's legal counsel concerning pending tigation 4d. Narrative descriptions of the client's intemal control policies and procedures Which of the following statements is correct with respect to ownership of audit documentation? a. The audi firm owns the audit documentation b. The audit client owns the audit documentation cc. The audi client and audit firm have joint ownership of the audit documentation 4d. The law is not explicit with respect to the ownership of audit documentation ‘After the fieldwork audit procedures are completed, a partner of the CPA fim who has not been Involved in the aucit performs @ second or wrap-up working paper review. This second review actually focuses on a. The fair presentation of the financial statements in conformity with applicable reporting framework. Fraud involving the clients management and its employees “The materiality of the adjusting entries proposed by the audit staff ‘The communication of inlernal control weaknesses to the cent soe iw § 5 o > 4 ow 2 2 < Al OO /O/AlIQj/O/A}Q/O/Oj}O/ 41 C/O}

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