Auditing – Assignment and Discussion questions Page 1 of 2

Chapter 6

Assignment questions (Ch6)

P6-1 [LO1]
Refer to Exhibit 6.1. Auditing standards require the auditor to gather sufficient appropriate evidence to provide a
reasonable basis for an opinion regarding the financial statements. What are the characteristics of:
(a) sufficient audit evidence and
(b) appropriate audit evidence? How are sufficiency and appropriateness related to each other and with respect to risk?
Contrast how sufficiency and appropriateness of evidence would differ for a high-risk and a low-risk assertion.

P6-13 [LO4] (P6-13 for 12 edition, P6-18 for 11 edition)

Review Exhibit 6.9 and describe how the two audit approaches differ. What factors would lead to such a difference?
Auditing – Assignment and Discussion questions Page 2 of 2
Chapter 6

Discussion questions
P6-8 (c)
An auditor has to determine both the reliability and the relevance of potential audit evidence in order to determine that
appropriate audit evidence is gathered.

c. For each of the following items, listed as (1) through (6), identify whether the auditor has made a judgment error and, if
there is a judgment error, whether the error relates to evidence reliability or relevance. Organize your answer as follows:

Judgment Error Nature of Error Explanation

Yes or No Relevance, Reliability, or Both Description of Error

1. The auditor receives only 20% of the confirmations that were sent to customers to verify their account balance. The
auditor responds by taking another sample of receivables to send out in place of the first sample. The auditor is convinced
the first sample is not representative of the population as a whole.

2. The auditor sent a confirmation to an independent warehouse to confirm the existence of inventory owned by the audit
client. There was no response. The auditor decided to visit the warehouse to independently inspect the inventory on hand.

3. The auditor decides to test the completeness of accounts payable by taking a sample of recorded accounts payable and
tracing to the source document evidencing receipt of the goods or services. No exceptions were noted so the auditor does
not expand the audit work.
4. An auditor wishes to test the valuation of a marketable security and inquires about management’s intent for using the
securities. Management indicates that they are intending to hold the securities as a long-term investment. The auditor
decides that no further evidence is needed and that the securities are properly valued at cost.

5. The auditor notes that there are some problems with segregation of duties over accounts receivable that could affect
the existence assertion. The client is aware that the auditor normally sends out accounts receivable confirmations. The
auditor decides to expand the audit work by sending additional confirmations.

6. During the observation of inventory, the auditor notes a number of items that look old and apparently not used. The
auditor discusses each item with the marketing manager to determine whether or not the item is considered saleable at
normal prices.