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Chapter 7 Audit Evidence
Learning Objective 7-1
1) There are no questions for this Learning Objective.

Answer:
1) Auditors must make decisions regarding what evidence to gather and how much to accumulate.
Which of the following is a decision that must be made by auditors related to evidence?
A)
Sample size Timing of audit procedures
Yes Yes
B)
No No
C)
Yes No
D)
No Yes
Answer: C
Terms: Decision to be made by auditors related to evidence
Diff: Easy
Objective: LO 7-2
AACSB: Reflective thinking skills
2) Audit procedures are concerned with the nature, extent, and timing in gathering audit evidence.
Which, of the following, is true as to the timing of audit procedures?
A)
Prior to the fiscal year-end of Subsequent to the fiscal year-end
the client of the client
Yes Yes
B)
No No
C)
Yes No
D)
No Yes
Answer: A
Terms: Timing of audit procedures
Diff: Easy
Objective: LO 7-2
1) Audit evidence has two primary qualities for the auditor; relevance and reliability. Given the choices
below which provides the auditor with the most reliable audit evidence?
A) general ledger account balances
B) confirmation of accounts receivable balance received from a customer
C) internal memo explaining the issuance of a credit memo
D) copy of month-end adjusting entries
Answer: B
Terms: Audit evidence qualities of relevance and reliability
Diff: Easy
Objective: LO 7-3
AACSB: Analytic skills
2) Which of the following is not a characteristic of the reliability of evidence?
A) effectiveness of client internal controls
B) education of auditor
C) independence of information provider
D) timeliness
Answer: B
Terms: Characteristic of reliability of evidenc
Diff: Easy
Objective: LO 7-3
3) The auditor must gather sufficient and appropriate evidence during the course of the audit. Sufficient
evidence must:
A) be well documented and cross-referenced in the audit documents.
B) be based on sources that are external to company.
C) provide evidence that prove or disprove an audit objective/assertion.
D) be persuasive enough to enable the auditor to issue an audit report.
Answer: D
Terms: Sufficient evidence
Diff: Easy
Objective: LO 7-3
4) Audit evidence obtained directly by the auditor will not be reliable if:
A) the auditor lacks the competence to evaluate the evidence.
B) it is provided by the client's attorney.
C) the client denies its veracity.
D) it is impossible for the auditor to obtain additional corroboratory evidence.
Answer: A
Terms: Audit evidence obtained directly by auditor
Diff: Easy
Objective: LO 7-3
5) Appropriateness of evidence is a measure of the:

A) quantity of evidence.
B) quality of evidence.
C) sufficiency of evidence.
D) meaning of evidence.
Answer: B
Terms: Appropriateness of evidence
Diff: Easy
Objective: LO 7-3
6) Which of the following statements regarding the relevance of evidence is correct?
A) To be relevant, evidence must pertain to the audit objective of the evidence.
B) To be relevant, evidence must be persuasive.
C) To be relevant, evidence must relate to multiple audit objectives.
D) To be relevant, evidence must be derived from a system including effective internal controls.
Answer: A
Terms: Relevance of evidence
Diff: Easy
Objective: LO 7-3
7) Two determinants of the persuasiveness of evidence are:

A) competence and sufficiency.
B) relevance and reliability.
C) appropriateness and sufficiency.
D) independence and effectiveness.
Answer: C
Terms: Determinants of persuasiveness of evidence
Diff: Easy
Objective: LO 7-3
8) The two characteristics of the appropriateness of evidence are:

A) relevance and timeliness.
B) relevance and accuracy.
C) relevance and reliability.
D) reliability and accuracy.
Answer: C
Terms: Appropriateness of evidence
Diff: Easy
Objective: LO 7-3
9) Which of the following forms of evidence would be least persuasive in forming the auditor's opinion
about marketable securities and other investments held by the company?
A) Responses to auditor's questions by the president and controller regarding the investments account.
B) Correspondence with a stockbroker regarding the quantity of client's investments held in street name
by the broker.
C) Minutes of the board of directors authorizing the purchase of stock as an investment.
D) The auditor's count of marketable securities.
Answer: A
Terms: Least persuasive form of evidence
Diff: Moderate
Objective: LO 7-3
10) Which of the following statements is not correct?
A) It is possible to vary the sample size from one unit to 100% of the items in the population.
B) The decision of how many items to test should not be influenced by the increased costs of performing
the additional tests.
C) The decision of how many items to test must be made by the auditor for each audit procedure.
D) The sample size for any given procedure is likely to vary from audit to audit.
Answer: B
Terms: Testing of items; Sample size
Diff: Moderate
Objective: LO 7-3
11) For audit evidence to be compelling to the auditor it must be sufficient and appropriate. Which
statement below is not correct regarding the appropriateness of audit evidence?
A) The more effective the internal control system, the more assurance it provides the auditor about the
reliability of financial reporting by the client.
B) An auditor's opinion, to be economically useful and profitable to the auditing firm needs to be formed
within a reasonable time and based on evidence obtained that assures profits for the auditing firm.
C) Evidence obtained from independent sources outside the entity is generally more reliable than
evidence secured solely within the entity.
D) The independent auditor's direct personal knowledge, obtained through inquiry, observation and
inspection, is generally more persuasive than information obtained indirectly.
Answer: B
Terms: Appropriateness of audit evidence
Diff: Moderate
Objective: LO 7-3
12) Which one of the following is not one of the primary purposes of audit documentation prepared by
the audit team?
A) A basis for planning the audit.
B) A record of the evidence accumulated and the results of the tests.
C) A basis for review by supervisors and partners.
D) A basis for determining work deficiencies by peer review teams.
Answer: D
Terms: Purposes of audit documentation
Diff: Moderate
Objective: LO 7-3
13) Which of the following is the most objective type of evidence?
A) A letter written by the client's attorney discussing the likely outcome of outstanding lawsuits.
B) The physical count of securities and cash.
C) Inquiries of the credit manager about the collectability of noncurrent accounts receivable.
D) Observation of cobwebs on some inventory bins.
Answer: B
Terms: Most objective type of evidence
Diff: Moderate
Objective: LO 7-3
14) Due professional care, the third general standard, is concerned with what is done by the independent
auditor and how well it is done. For example, due care in the matter of audit documentation requires that
audit documentation of the evidence gathered by the auditor meets which of the following criteria?
A) Workpapers be indexed to the general ledger accounts and include both a permanent file and a
general file.
B) The content be sufficient to provide support for the auditor's opinion, including the auditor's
representation as to compliance with auditing standards.
C) Audit evidence is principally gathered to determine if the client's financial statements, as prepared by
management, can be relied upon to make managerial decisions about the firm.
D) Audit evidence as displayed in the workpapers is primarily performed to protect the auditing firm in
the case of a lawsuit by investors.
Answer: B
Terms: Audit evidence gathered by auditors meets which criteria
Diff: Moderate
Objective: LO 7-3
15) Which items affect the sufficiency of evidence when choosing a sample?
A)
Selecting items with a high The randomness of the items
likelihood of misstatement selected
Yes Yes
B)
No No
C)
Yes No
D)
No Yes
Answer: C
Terms: Sufficiency of evidence when choosing a sample
Diff: Moderate
Objective: LO 7-3
16) Determine which of the following is most correct regarding the reliability of audit evidence.
A) Information that is indirectly obtained from external sources is the most reliable audit evidence.
B) Reliability of audit evidence is dependent upon the evidence being convincing.
C) Reliability of evidence refers to the amount of evidence obtained.
D) An effective internal control system provides more reliable audit evidence.
Answer: D
Terms: Reliability of audit evidence
Diff: Moderate
Objective: LO 7-3
17) 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.
Answer: C
Terms: Evidence considered appropriate
Diff: Moderate
Objective: LO 7-3
18) Given the economic and time constraints in which auditors can collect evidence about management
assertions about the financial statements, the auditor normally gathers evidence that is:
A) irrefutable.
B) conclusive.
C) persuasive.
D) completely convincing.
Answer: C
Terms: Auditor normally gathers evidence that is
Diff: Moderate
Objective: LO 7-3
19) Which of the following statements is not a correct use of the terminology in relation to audit
evidence?
A) Evidence obtained from an independent source outside the client organization is more reliable than
that obtained from within.
B) Documentary evidence is more reliable when it is received by the auditor indirectly rather than
directly.
C) Documents that originate outside the company are considered more reliable than those that originate
within the client's organization.
D) External evidence, such as communications from banks, is generally regarded as more reliable than
answers obtained from inquiries of the client.
Answer: B
Terms: Terminology related to audit evidence
Diff: Challenging
Objective: LO 7-3
20) Evidence is usually more persuasive for balance sheet accounts when it is obtained:
A) as close to the balance sheet date as possible.
B) only from transactions occurring on the balance sheet date.
C) from various times throughout the client's year.
D) from the time period when transactions in that account were most numerous during the fiscal period.
Answer: A
Terms: Evidence is more persuasive for balance sheet accounts
Diff: Challenging
Objective: LO 7-3
21) Which of the following statements is true?

A) A large sample of highly competent evidence is persuasive if it is relevant to the objective being tested.
B) A large sample of evidence that is neither competent nor timely is not persuasive.
C) A small sample of only one or two pieces of relevant, competent, and timely evidence lacks
persuasiveness.
D) The persuasiveness of evidence can be evaluated after considering its sufficiency.
Answer: A
Terms: Samples and evidence
Diff: Challenging
Objective: LO 7-3
22) Which of the following statements relating to the competence of evidential matter is always true?
A) Evidence from outside an enterprise is always reliable.
B) Accounting data developed under satisfactory conditions of internal control are more relevant than
data developed under unsatisfactory internal control conditions.
C) Oral representations made by management are not reliable evidence.
D) Evidence must be both reliable and relevant to be considered appropriate.
Answer: D
Terms: Competence of evidential matter
Diff: Challenging
Objective: LO 7-3
23) Distinguish between internal documentation and external documentation as types of audit evidence.
Give two examples of each. Which type is considered more reliable?
Answer: Internal documentation involves the auditor's examination of documents that have been
prepared and used within the client's organization and are retained without ever going to an outside
party. Examples would include duplicate sales invoices, employees' time reports, and inventory receiving
reports.
External documentation involves the auditor's examination of documents that have been in the hands of
someone outside the client's organization. Examples include vendors' invoices, cancelled checks,
cancelled notes payable, and insurance policies.
External documents are regarded as more reliable evidence than internal documents.
Terms: Internal and external documentation; Reliability of evidence
Diff: Moderate
Objective: LO 7-3
24) Discuss three of the following influences on the persuasiveness of evidence.
1. Relevance
2. Independence of provider
3. Effectiveness of client's internal controls
4. Auditor's direct knowledge
5. Degree of objectivity
6. Timeliness
Answer:
1. Relevance — Evidence must pertain to the audit objective if it is to be persuasive. Relevance must be
considered in terms of specific audit objectives as evidence may be relevant to one objective and not
another.
2. Independence of provider — Evidence obtained from a source outside the entity is more reliable and
persuasive than that obtained from within.
3. Effectiveness of client's internal controls — When a client's internal controls are effective, evidence
obtained is more reliable than when they are weak.
4. Auditor's direct knowledge — Evidence obtained directly by the auditor through physical
examination, observation, computation and inspection is more competent than information obtained
indirectly.
5. Degree of objectivity — Objective evidence is more reliable than evidence that requires considerable
judgment to determine whether it is correct.
6. Timeliness — The timeliness of audit evidence can refer either to when it is accumulated or to the
period covered by the audit. Evidence is usually more reliable for balance sheet accounts when it is
obtained as close to the balance sheet date as possible.
Terms: Influences persuasiveness of evidence
Diff: Moderate
Objective: LO 7-3
25) Why is the appropriateness of audit evidence obtained by the auditor important in forming an audit
opinion? Describe the qualities information should have to be considered appropriate by the auditor.
Answer: Appropriateness is a measure of the quality of evidence. Audit evidence that is considered
appropriate contains the characteristics of relevance and reliability. Relevant evidence related to the
assertion being tested. Reliability refers to the relative "truthfulness" of the assertion/objective.
Terms: Appropriateness of audit evidence
Diff: Moderate
Objective: LO 7-3
26) The reliability of evidence refers to the degree to which evidence is considered believable or
trustworthy. There are six factors that affect the reliability of audit evidence. One factor is the
independence of the provider; i.e., evidence obtained from a source outside the client company is more
reliable than that obtained within. Identify and discuss any two of the remaining five factors:
Answer: The remaining four factors that affect the reliability of evidence are:
• Effectiveness of client's internal control. When a client's internal controls are effective, evidence obtained
from the client is more reliable than when controls are weak.
• Auditor's direct knowledge. Evidence obtained directly by the auditor is more reliable than information
obtained indirectly.
• Qualifications of individuals providing the information. Information obtained from persons not familiar
with the business world would generally not be considered as reliable as information from an expert in a
business-related field.
• Degree of objectivity. Objective evidence is more reliable than evidence that requires considerable
judgment to determine whether it is correct.
• Timeliness — The timeliness of audit evidence can refer either to when it is accumulated or to the
period covered by the audit. Evidence is usually more reliable for balance sheet accounts when it is
obtained as close to the balance sheet date as possible.
Terms: Reliability of evidence
Diff: Challenging
Objective: LO 7-3
27) Below are 10 documents typically examined during an audit. Classify each document as either
internal or external.
Type of Document Documents
1. Canceled checks for payments of accounts payable.
2. Payroll time cards.
3. Duplicate sales invoices.
4. Vendors' invoices.
5. Bank statements.
6. Minutes of the board of directors' meetings.
7. Signed lease agreements.
8. Notes receivable.
9. Subsidiary accounts receivable records.
10. Remittance advices.
Answer:
1. External 6. Internal
2. Internal 7. External
3. Internal 8. External
4. External 9. Internal
5. External 10. External
Terms: Internal and external evidence
Diff: Moderate
Objective: LO 7-3
28) Audit evidence to support an opinion about the fairness of a client's financial statements consists
entirely of written information.
A) True
B) False
Answer: B
Terms: Audit evidence to support an opinion
Diff: Easy
Objective: LO 7-3
29) The relevance of audit evidence depends on the audit objective being tested.
A) True
B) False
Answer: A
Terms: Relevance of audit evidence
Diff: Easy
Objective: LO 7-3
30) Inquiries of the client are usually sufficient to provide appropriate evidence to satisfy an audit
objective.
A) True
B) False
Answer: B
Terms: Inquiries of client; Appropriate evidence
Diff: Easy
Objective: LO 7-3
31) A canceled check written by the client, made payable to a local supplier and drawn on the client's
bank account is one type of internal document.
A) True
B) False
Answer: B
Terms: Internal document
Diff: Easy
Objective: LO 7-3
32) Objective evidence is more reliable, and hence more persuasive, than subjective evidence.
A) True
B) False
Answer: A
Terms: Objective evidence more reliable
Diff: Moderate
Objective: LO 7-3
33) Relevance of evidence can only be considered in terms of specific audit objectives.
A) True
B) False
Answer: A
Terms: Relevance of evidence
Diff: Moderate
Objective: LO 7-3
1) Calculating the gross margin for the current year under audit as a percent of sales and comparing it
with previous years is what type of evidence?
A) physical examination
B) analytical procedures
C) observation
D) inquiry
Answer: B
Terms: Calculate and compare gross margin
Diff: Easy
Objective: LO 7-4
2) When the auditor develops supporting evidence for amounts posted to account balances with
documentary evidence, that process is called:
A) inquiry.
B) confirmation.
C) vouching.
D) physical examination.
Answer: C
Terms: Auditor develops supporting evidence for amounts posted with documentary evidence
Diff: Easy
Objective: LO 7-4
3) An example of an external document that provides reliable information for the auditor is:
A) employees' time reports.
B) bank statements.
C) purchase order for company purchases.
D) carbon copies of checks.
Answer: B
Terms: External document
Diff: Easy
Objective: LO 7-4
4) An example of a document the auditor receives from the client, but which was prepared by someone
outside the client's organization, is a:
A) confirmation.
B) sales invoice.
C) vendor invoice.
D) bank reconciliation.
Answer: C
Terms: Example of document auditor receives from client but prepared by outside source
Diff: Easy
Objective: LO 7-4
5) "The use of comparisons and relationships to assess whether account balances or other data appear
reasonable compared to the auditor's expectations" is a definition of:
A) analytical procedures.
B) tests of transactions.
C) tests of balances.
D) auditing.
Answer: A
Terms: Use of comparisons and relationships to assess whether account balances
Diff: Easy
Objective: LO 7-4
6) Often, auditor procedures result in significant differences being discovered by the auditor. The auditor
should investigate further if:
A)
Significant differences are not Significant differences are
expected but do exist expected but do not exist
Yes Yes
B)
No No
C)
Yes No
D)
No Yes
Answer: A
Terms: Audit procedures result in significant differences
Diff: Easy
Objective: LO 7-4
7) When the auditor uses tracing as an audit procedure for tests of transactions she is primarily concerned
with which audit objective?
A) Occurrence
B) Completeness
C) Cutoff
D) Classification
Answer: A
Terms: Tracing as an audit procedure concerned with audit objective
Diff: Moderate
Objective: LO 7-4
8) When the auditor used the audit procedure vouching she is primarily concerned with which of the
following audit objectives when testing classes of transactions?
A) Occurrence
B) Completeness
C) Authorization
D) Classification
Answer: B
Terms: Vouching as an audit procedure concerned with audit objective
Diff: Moderate
Objective: LO 7-4
9) When auditors use documentation to support recorded transactions and amounts, the process is
usually called:
A) tracing.
B) confirmations.
C) vouching.
D) reperformance.
Answer: C
Terms: Directional testing
Diff: Moderate
Objective: LO 7-4
10) Analytical procedures must be used during which phase(s) of the audit?
A)
Test of Controls Planning Completion
Yes Yes Yes
B)
No Yes Yes
C)
Yes No No
D)
No No No
Answer: B
Terms: Analytical procedures use during phases of the audit
Diff: Moderate
Objective: LO 7-4
11) Auditors may decide to replace tests of details with analytical procedures when possible because the:
A) analytical procedures are more reliable.
B) analytical procedures are considerably less expensive.
C) analytical procedures are more persuasive.
D) tests of details are more difficult to interpret.
Answer: B
Terms: Tests of details of balances; Substantive analytical procedures
Diff: Moderate
Objective: LO 7-4
12) When making decisions about evidence for a given audit, the auditor's goal is to obtain a sufficient
amount of timely, reliable evidence that is relevant to the information being verified. In addition, the goal
of audit efficiency is to gather and evaluate the information:
A) no matter the cost involved in obtaining such evidence.
B) even if cost is irrelevant to the auditor, because they bill the client for costs incurred.
C) at the lowest possible total cost.
D) at the cost suggested in the engagement letter.
Answer: C
Terms: Goal of audit efficiency
Diff: Moderate
Objective: LO 7-4
13) "Physical examination" is the inspection or count by the auditor of items such as:
A) cash, inventory, and payroll timecards.
B) cash, inventory, canceled checks, and sales documents.
C) cash, inventory, canceled checks, and tangible fixed assets.
D) cash, inventory, securities, notes receivable, and tangible fixed assets.
Answer: D
Terms: Physical examination
Diff: Moderate
Objective: LO 7-4
14) Which of the following statements is most correct regarding the primary purpose of audit
procedures?
A) to detect all errors or fraudulent activities as well as illegal activities
B) to comply with auditing standards promulgated by the PCAOB for publicly held clients
C) to gather corroborative audit evidence about management's assertions regarding the client's financial
statements
D) to determine the amount of errors in the balance sheet accounts in order to adjust the accounts to
actual
Answer: C
Terms: Primary purpose of audit procedures
Diff: Moderate
Objective: LO 7-4
15) Given the audit procedures below, which one provides the most reliable evidence?
A) Confirmations
B) Recalculation
C) Reperformance
D) Observations
Answer: A
Terms: Audit procedure that provides most reliable evidence
Diff: Moderate
Objective: LO 7-4
16) Confirmations would almost always be used, assuming all the accounts below are material, for:
A) individual transactions between organizations, such as sales transactions.
B) bank balances and accounts receivable.
C) fixed asset additions.
D) payroll expenses.
Answer: B
Terms: Confirmations
Diff: Moderate
Objective: LO 7-4
17) To be considered reliable evidence, confirmations must be controlled by:

A) a client employee responsible for accounts receivable.
B) a financial statement auditor.
C) a client's internal audit department.
D) a client's controller or CFO.
Answer: B
Terms: Confirmations controlled to be considered reliable evidence
Diff: Moderate
Objective: LO 7-4
18) Indicate whether confirmation of accounts receivable and accounts payable, provided they each are
significant accounts, is required or optional:
A)
Accounts Receivable Accounts Payable
Required Required
B)
Required Optional
C)
Optional Required
D)
Optional Optional
Answer: B
Terms: Confirmation of accounts receivable and accounts payable
Diff: Moderate
Objective: LO 7-4
19) The Auditing Standards Board has concluded that analytical procedures are so important that they
are required during:
A) planning and test of control phases.
B) planning and completion phases.
C) test of control and completion phases.
D) planning, test of control, and completion phases.
Answer: B
Terms: Analytical procedures required
Diff: Moderate
Objective: LO 7-4
20) A benefit obtained from comparing the client's data with industry averages is that it provides a(n):
A) benchmark to compare the company against industry averages.
B) indication where errors exist in the statements.
C) benchmark to be used in evaluating a client's budgets.
D) comparison of "what is" with "what should be."
Answer: A
Terms: Comparing client data with industry averages
Diff: Moderate
Objective: LO 7-4
21) The primary purpose of performing analytical procedures in the planning phase of an audit is to:
A) help the auditor obtain an understanding of the client's industry and business.
B) assess the going concern assumption.
C) indicate possible misstatements.
D) reduce detailed tests.
Answer: A
Terms: Primary purpose of analytical procedures in planning phase of audit
Diff: Moderate
Objective: LO 7-4
22) Which of the following is not a correct combination of terms and related type of audit evidence?
A) Inquire inquiries of client
B) Count physical examination
C) Recompute documentation
D) Read documentation
Answer: C
Terms: Combination of terms and related audit evidence
Diff: Moderate
Objective: LO 7-4
23) Which of the following is not one of the major types of analytical procedures?
A) compare client with industry averages
B) compare client with prior year
C) compare client with budget
D) compare client with SEC averages
Answer: D
Terms: Major type of analytical procedures
Diff: Moderate
Objective: LO 7-4
24) An important benefit of industry comparisons is as:

A) an aid to understanding the client's business.
B) an indicator of errors.
C) an indicator of fraud.
D) a least-cost indicator for audit procedures.
Answer: A
Terms: Benefit of industry comparisons
Diff: Moderate
Objective: LO 7-4
25) The auditor is concerned that a client is failing to bill customers for shipments. An audit procedure
that would gather relevant evidence would be to:
A) select a sample of duplicate sales invoices and trace each to related shipping documents.
B) trace a sample of shipping documents to related duplicate sales invoices.
C) trace a sample of Sales Journal entries to the Accounts Receivable subsidiary ledger.
D) compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable
account in the general ledger.
Answer: B
Terms: Audit procedure to gather relevant evidence that client fails to bill
Diff: Challenging
Objective: LO 7-4
26) In performing your audit for a privately-held firm your inquiries have yielded that one of the
company's owner's primary motivations is to pay the least amount of income tax that is possible. Based
on this observation which audit objective for ending inventory would the auditor be most concerned
about ascertaining?
A) Completeness
B) Accuracy
C) Rights and obligations
D) Existence
Answer: A
Terms: Audit objective for ending inventory
Diff: Challenging
Objective: LO 7-4
27) Which of the following statements is not correct?

A) Analytical procedures are used to isolate accounts or transactions that should be investigated more
extensively.
B) For certain immaterial accounts, analytical procedures may be the only evidence needed.
C) In some instances, other types of evidence may be reduced when analytical procedures indicate that an
account balance appears reasonable.
D) Analytical procedures use supporting documentation to determine which account balances need
additional detailed procedures.
Answer: D
Terms: Analytical procedures
Diff: Challenging
Objective: LO 7-4
28) You are auditing the company's purchasing process for goods and services. You are primarily
concerned with the company not recording all purchase transactions. Which audit procedure below
would be the most effective audit procedure in this case?
A) Vouching from the accounts payable account to the vendor invoices.
B) Tracing vendor invoices to recorded amounts in the accounts payable account.
C) Confirmation accounts payable recorded amounts.
D) Reconciling the accounts payable subsidiary ledger to the accounts payable account.
Answer: B
Terms: Audit procedure for recording all purchase transactions
Diff: Challenging
Objective: LO 7-4
29) Which of the following discoveries through the use of analytical procedures would most likely
indicate a relatively high risk of financial failure?
A) A decline in gross margin percentages.
B) An increase in the balance in fixed assets.
C) An increase in the ratio of allowance for uncollectible accounts to gross accounts receivable, while at
the same time accounts receivable turnover also decreased.
D) A higher than normal ratio of long-term debt to net worth as well as a lower than average ratio of
profits to total assets.
Answer: D
Diff: Challenging
Objective: LO 7-4
30) Which of the following statements is correct regarding the costs involved in obtaining evidence?
A)
Physical examination is usually the Cost of obtaining evidence may be a
least expensive type of audit factor in deciding whether to
evidence obtain that evidence
Yes Yes
B)
No No
C)
Yes No
D)
No Yes
Answer: D
Terms: Costs in obtaining evidence
Diff: Challenging
Objective: LO 7-4
31) An analytical procedure used to test the reasonableness of an account balance occurs when the
auditor calculates the expected balance and compares it with the actual balance. The auditor's expected
account balance may be determined by:
A) using industry standards.
B) using Dun and Bradstreet reports.
C) relating it to another account that involves financial statement articulation.
D) inquiry of the client.
Answer: C
Terms: Analytical procedure used to test reasonableness of an account balance
Diff: Challenging
Objective: LO 7-4
32) One purpose of performing analytical procedures in the planning phase of an audit is to assess the
client's financial condition. Explain how the assessment of a client's financial condition can affect the
auditor's decisions concerning evidence accumulation in later phases of the audit.
Answer: The use of analytical procedures is often a useful indicator for determining whether the client
company has financial problems and if substantial doubt exists about the entity's ability to continue as a
going concern. The analytical procedures could also indicate the presence of possible misstatements in
the financial statements if significant unexpected fluctuations occur. These items may warrant increased
audit procedures, whereas when the analytical procedures reveal no unusual fluctuations, the possibility
of material misstatement is minimized and it is possible, thus, to perform fewer detailed tests on related
accounts or to eliminate certain audit procedures, reduce sample sizes, or to move the procedures farther
away from the balance sheet date.
Diff: Moderate
Objective: LO 7-4
33) There are four important purposes of analytical procedures. Identify three of these four purposes and,
for each purpose, give a specific example of an analytical procedure that an auditor might perform.
Answer: Four important purposes of analytical procedures are:
• To help the auditor understand the client's industry and business, the auditor might analyze recent
trends in the client's gross margin percentages to assess the effects of competition in the industry.
• To aid in the assessment of the client's ability to continue as a going concern, the auditor might
analyze several of the client's key ratios including the ratio of long-term debt to net worth, the ratio of
profits to total assets, and the current ratio.
• To indicate the presence of possible misstatements in the financial statements, the auditor might
compare the current year's unaudited account balances with the previous year's audited balances.
• To reduce the extent of detailed tests, the auditor might perform a simple analytical procedure such
as multiplying the client's monthly rent times 12 as a test of the client's rent expense account. If the
product agrees with the balance in rent expense, no additional testing of the account may be necessary.
Terms: Purposes of analytical procedures
Diff: Challenging
Objective: LO 7-4
34) Define the following terms commonly used in audit procedures:
1. Examine
2. Scan
3. Compute
4. Foot
5. Compare
6. Count
7. Vouch
Answer:
1. Examine — A reasonably detailed study of a specific document or record to determine specific facts
about it. It is the inspection or count by the auditor of a tangible asset.
2. Scan — A less detailed examination of a document or record to determine whether there is something
unusual warranting further investigation.
3. Compute — A calculation done by the auditor independent of the client.
4. Foot — Addition of a column of numbers to determine whether the total is the same as the client's.
5. Compare — A comparison of information in two different locations.
6. Count — A determination of assets on hand at a given time. This is associated with evidence defined
as physical examination.
7. Vouch — The use of documents to verify recorded transactions or amounts.
Terms: Audit evidence and audit procedures
Diff: Moderate
Objective: LO 7-4
35) Below are 12 audit procedures. Classify each procedure according to the following types of audit
evidence: (1) physical examination, (2) confirmation, (3) documentation, (4) observation, (5) inquiry of the
client, (6) reperformance, and (7) analytical procedure.
Type of Evidence Audit Procedures

1. Watch client employees count inventory to determine whether
company procedures are being followed.
2. Count inventory items and record the amount in the audit
files.
3. Trace postings from the sales journal to the general ledger
accounts.
4. Calculate the ratio of cost of goods sold to sales as a test of
overall reasonableness of gross margin relative to the preceding
year.
5. Obtain information about the client's internal controls by
asking questions of client personnel.
6. Trace column totals from the cash disbursements journal to
the general ledger.
7. Examine a piece of equipment to make sure a recent purchase
of equipment was actually received and is in operation.
8. Review the total of repairs and maintenance for each month to
determine whether any month's total was unusually large.
9. Compare vendor names and amounts on purchase invoices
with entries in the purchases journal.
10. Foot entries in the sales journal to determine whether they
were correctly totaled by the client.
11. Make a surprise count of petty cash to verify that the amount
of the petty cash fund is intact.
12. Obtain a written statement from the client's bank stating the
client's year-end balance on deposit.
Answer:
1. Observation
2. Physical examination
3. Reperformance
4. Analytical procedure
5. Inquiry of the client
6. Reperformance
8. Analytical procedure
9. Documentation
10. Reperformance
12. Confirmation
Terms: Audit evidence and related evidence
Diff: Moderate
Objective: LO 7-4
36) Match nine of the terms (a-k) with the definitions provided below (1-9):
a. Foot
b. Compute
c. Scan
d. Inquire
e. Count
f. Trace
g. Reperform
h. Read
i. Examine
j. Observe
k. Compare
________ 1. A calculation done by the auditor independent of the client.
________ 2. Addition of a column of numbers to determine if the total is the same as the client's.
________ 3. A comparison of information in two different locations.
________ 4. A use of the senses to assess certain activities.
________ 5. Following details of transactions from original documents to journals.
________ 6. A less detailed examination of a document or record to determine if there is something

unusual warranting further investigation.
________ 7. Obtaining information from the client in response to specific questions.
________ 8. A determination of assets on hand at a given time.
________ 9. An examination of written information to determine facts pertinent to the audit.
Answer:
1. b
2. a
3. k
4. j
5. f
6. c
7. d
8. e
9. h
Terms: Audit procedures; Foot; Compute; Scan; Inquire; Count; Trace; Read; Observe; Compare
Diff: Moderate
Objective: LO 7-4
37) Match five of the terms (a-h) with the definitions provided below (1-5):
a. Audit documentation
b. Audit procedures
c. Audit objectives
d. Analytical procedures
e. Budgets
f. Reliability of evidence
g. Sufficiency of evidence
h. Persuasiveness of evidence
________ 1. Use of comparisons and relationships to assess the reasonableness of account balances.
________ 2. Detailed instructions for the collection of a type of audit evidence.
________ 3. The degree to which evidence can be considered believable or trustworthy.
________ 4. Contains all the information that the auditor considers necessary to conduct an adequate
audit and to provide support for the audit report.
________ 5. This is determined by the amount of evidence obtained.

Answer:
1. d
2. b
3. f
4. a
5. g
Terms: Analytical procedures; Audit procedures; Reliability of evidence; Sufficiency of evidence
Diff: Moderate
Objective: LO 7-2, LO 7-3, and LO 7-4
38) Confirmations are among the most expensive type of evidence to obtain.
A) True
B) False
Answer: A
Terms: Confirmations; Cost of evidence
Diff: Easy
Objective: LO 7-4
39) Whenever practical and reasonable, the confirmation of accounts receivable is required of CPAs.
A) True
B) False
Answer: A
Terms: Confirmations of accounts receivable required of CPAs
Diff: Easy
Objective: LO 7-4
40) Inquiries of clients and reperformance normally have a low cost associated with them.
A) True
B) False
Answer: A
Terms: Inquiries of clients and reperformance have low cost
Diff: Easy
Objective: LO 7-4
41) When analytical procedures reveal unusual fluctuations in an account balance, the auditor will
probably perform fewer tests of details for that account and increase the tests of controls related to the
account.
A) True
B) False
Answer: B
Terms: Analytical procedures reveal unusual fluctuations
Diff: Easy
Objective: LO 7-4
42) The type of audit evidence known as inquiry requires the auditor to obtain oral information from the
client in response to questions.
A) True
B) False
Answer: A
Terms: Audit evidence; Inquiry
Diff: Easy
Objective: LO 7-4
43) Auditor judgment is the primary determinant in determining the amount of evidence gathered.
A) True
B) False
Answer: A
Terms: Auditor judgment; Evidence
Diff: Moderate
Objective: LO 7-4
44) Analytical procedures must be used in the planning and completion phases of the audit.
A) True
B) False
Answer: A
Terms: Analytical procedures used in planning and completion phases of audit
Diff: Moderate
Objective: LO 7-4
45) Confirmations are ordinarily used to verify account balances, but may be used to verify transactions.
A) True
B) False
Answer: A
Terms: Confirmations to verify balances and transactions
Diff: Moderate
Objective: LO 7-4
46) Accounts receivable confirmations must be controlled by the client from the time they are prepared
until the time they are returned to the auditor.
A) True
B) False
Answer: B
Terms: Confirmations control
Diff: Moderate
Objective: LO 7-4
47) Cost is never an adequate justification for omitting a necessary procedure or not gathering an
adequate sample size.
A) True
B) False
Answer: A
Terms: Cost of audit procedures; Sample size
Diff: Moderate
Objective: LO 7-4
48) Analytical procedures can be used to provide reliable substantive evidence for all balance-related
audit objectives.
A) True
B) False
Answer: B
Diff: Moderate
Objective: LO 7-4
49) One advantage of using statistical techniques when performing analytical procedures is that they
eliminate the need for auditor judgment.
A) True
B) False
Answer: B
Diff: Moderate
Objective: LO 7-4
1) Which of the following best describes one of the primary objectives of audit documentation?
A) Defend against claims of a deficient audit.
B) Provide a basis for reviewing the work of subordinates.
C) Provide reasonable assurance that the audit was conducted in accordance with auditing standards.
D) Provide additional support of recorded amounts to the client.
Answer: C
Terms: Primary objective of audit documentation
Diff: Moderate
Objective: LO 7-5
2) The permanent files included as part of audit documentation do not normally include:
A) a copy of the current and prior years' audit programs.
B) copies of articles of incorporation, bylaws and contracts.
C) information related to the understanding of internal control.
D) results of analytical procedures from prior years.
Answer: A
Terms: Permanent files as audit documentation
Diff: Moderate
Objective: LO 7-5
3) The auditor's results of evidence gathering procedures are contained in audit documentation for the
audit. When preparing the requisite audit, documentation should be cognizant of:
A) Documents are kept by the client for easy reference for their accounting staff.
B) Audit documents should be considered as a substitute for the clients accounting records.
C) Audit documents are designed to facilitate the review and supervision of the work performed by the
audit team by a reviewing partner.
D) Audit documents are the sole source of evidence that an auditor uses in forming an opinion about the
client's financial statements.
Answer: C
Terms: Audit documentation for audit
Diff: Moderate
Objective: LO 7-5
4) Audit documentation should provide support for:
A)
The audit report The financial statements
Yes Yes
B)
No No
C)
Yes No
D)
No Yes
Answer: C
Terms: Audit documentation should provide support
Diff: Challenging
Objective: LO 7-5
5) Audit documentation is the joint property of the auditor and the audit client.
A) True
B) False
Answer: B
Terms: Audit documentation
Diff: Moderate
Objective: LO 7-5
6) Ordinarily, audit documentation can be provided to someone else only with the express permission of
the client.
A) True
B) False
Answer: A
Terms: Audit documentation provided with permission of client
Diff: Moderate
Objective: LO 7-5
1) What client information is needed by auditors in creating lead schedules?

A) Interim statements prepared by the client for the company's 3 rd quarter financial results.
B) General ledger information, including unadjusted ending balances and beginning balances for
accounts.
C) A schedule of adjusting entries made by the client for all balance sheet accounts.
D) Detailed transaction information that may explain the changes in balance sheet accounts for the
current year under audit.
Answer: B
Terms: Client information needed for auditor to create lead schedules
Diff: Challenging
Objective: LO 7-6
2) Audit documentation should possess certain characteristics. Which of the following is true regarding
those characteristics?
A)
Audit documentation should be Audit documentation should be
indexed and cross-referenced organized to benefit the client's staff
Yes Yes
B)
No No
C)
Yes No
D)
No Yes
Answer: C
Terms: Audit documentation characteristics
Diff: Challenging
Objective: LO 7-6
3) The permanent audit file would usually include the following:
A) client's working trial balance
B) summary of the risk assessment procedures performed
C) organizational chart of the company's employees
D) summary of the auditors test of controls for the current years audit
Answer: C
Terms: Permanent file
Diff: Challenging
Objective: LO 7-6
4) When determining sufficient and appropriate audit evidence in order to form an opinion on the client's
financial statements the auditor compiles audit documentation to support the opinion. The largest
portion of audit documentation will include detailed supporting schedules prepared by the client or the
auditor in support of specific accounts on the financial statements. The major types of supporting
schedules include analysis schedules and tests of reasonableness. Discuss those two schedules and give
an example for each schedule.
Answer: Analysis: designed to show the activity in a general ledger account during the entire period
under audit, tying together the beginning and ending balances. For example, marketable securities,
property, plant and equipment, long-term debt, equity accounts. Auditors are focusing on the
significance of the activity in the account during the year.
Tests of Reasonableness: Contains information that enables the auditor to evaluate whether the client's
balance appears to contain a misstatement. Example, depreciation expense, allowance for uncollectibles,
income tax provision. Tests are primarily analytical procedure tests in which the auditor forms an
expectation of the balance that appears in the working trial balance.
Terms: Major types of supporting schedules; Analysis and tests of reasonableness
Diff: Moderate
Objective: LO 7-6
5) The basis for preparing financial statements for companies is the general ledger. As soon as possible
the auditor obtains the general ledger accounts of the client and prepares a working trial balance. Discuss
the audit documentation in the current file that relates to the working trial balance. Include a description
of lead and support schedules in your answer.
Answer: Lead Schedules–each line item on the working trial balance is supported by a lead schedule,
containing the detailed accounts from the general ledger making up the line item in the working trial
balance.
Support Schedules–each detailed account of the lead schedule is supported by proper schedules
supporting the audit work performed and the conclusions reached by the auditors.
Terms: Audit documentation in current file; Working trial balance; Lead schedules and support schedules
Diff: Moderate
Objective: LO 7-6
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China to the Amazonian warriors of South America and the Fountain
of Youth which explorers of real enterprise were ready to discover.
Had there been any knowledge of the science of politics in
Spain, Columbus would have been a person of considerable
importance in his old age. The Radicals would have rallied around
him, and would have denounced the atrocious manner in which a
treacherous and reactionary monarchy had treated him. Columbian
clubs would have been established everywhere, and he would have
been made to serve as the stalking-horse of an unprincipled and
reckless faction.
[Æt. 67–70; 1503–1506]
When we compare the way in which the Italian republicans have

used the name and fame of Garibaldi as the most effective weapon
in striking at the monarchy which has made United Italy possible, we
cannot but despise the ignorance of politics shown by the Spaniards
in the beginning of the sixteenth century.
Columbus, though utterly worn out, was still able to write letters.
He wrote to the King, to the Queen, to everybody who had any
influence, asking that his honors and privileges should be restored,
and hinting that he was ready to be sent back to San Domingo as
Governor. No one paid any attention to him. Other men were fitting
out exploring expeditions, and Columbus, with his splendid dreams
and his peculiar mixture of religion and geography, was regarded as
a foolish old man who had outlived his original usefulness. He was
too sick to visit the court and personally explain why he had not
discovered the Panama Canal, and the King, having failed to keep
his own promises, was naturally not at all anxious to see him.
Perhaps Isabella would have still remained faithful to her old
protégé, but she was on her deathbed, and died without seeing him.
In May, 1505, Columbus managed to go to Segovia, where
Ferdinand held his court. He saw the King, but got very little pleasure
thereby. Ferdinand was now a widower and his own master; and his
manner plainly showed Columbus that, whatever the King might
promise, he never intended to keep his word and do justice to the
man who had given him a new world.
[Æt. 70; 1506]
The end was now drawing near, and Columbus made a codicil to
his will, expressing his last wishes. Beatrix Enriquez was still alive,
though whether she too had forsaken Columbus we are not told. It is
pleasant to find that the Admiral remembered her, and in the codicil
to his will ordered his son Diego to see that she was properly cared
for, adding, “and let this be done for the discharge of my conscience,
for it weighs heavy on my soul.” He had neglected to marry Beatrix,
and, unlike most men in like circumstances, the neglect burdened his
conscience. This codicil was almost the last act of his busy life; and
on the 20th of May, 1506, repeating the Latin words, In manus tuas,
Domine, commendo spiritum meum, he died with the calmness of a
brave man and the peace of a Christian. He had lived seventy years,
and had literally worn himself out in the service of the royal hound
whose miserable little soul rejoiced when he heard that the great
Italian was dead.
Columbus was buried almost as much as he was born. His first
burial was in the convent of St. Francisco. Seven years later he was
buried some more in the Carthusian convent in Seville. In 1536 he
was carried to San Domingo and buried in the Cathedral, and
afterward he was, to some extent, buried in Havana. Whether
Havana or San Domingo has at present the best claim to his grave,
is a disputed point.
CHAPTER XIX.
HIS CHARACTER AND ACHIEVEMENTS.
HITHERTO we have proceeded upon the assumption that

Columbus was a real historical person. It is one of the limitations of
biography that the writer must always assume the existence of the
subject of his sketch. There are, however, grave reasons for
doubting whether Christopher Columbus ever lived. There is the
matter of his birthplace. Is it credible that he was born in seven
distinct places? Nobody claims that George Washington was born in
all our prominent cities, or that Robinson Crusoe, who was perhaps
the most absolutely real person to be found in the whole range of
biography, was born anywhere except at York. Can we believe that
the whole of Columbus was simultaneously buried in two different
West Indian cities? If we can accept any such alleged fact as this,
we can no longer pretend that one of the two Italian cities which
boast the possession of the head of John the Baptist is the victim of
misplaced confidence.
And then the character of Columbus as portrayed by his
admiring biographers is quite incredible, and his alleged treatment by
the King and Queen whom he served is to the last degree
improbable. The story of Columbus is without doubt an interesting
and even fascinating one; but can we, as fearless and honest
philosophers, believe in the reality of that sweet Genoese vision—
the heroic and noble discoverer of the New World?
There are strong reasons for believing that the legend of
Christopher Columbus is simply a form of the Sun myth. We find the
story in the Italian, Spanish, and English languages, which shows,
not that Colombo, Colon, and Columbus ever lived, breathed, ate
dinner, and went to bed, but that the myth is widely spread among
the Indo-Germanic races. Columbus is said to have sailed from the
east to the west, and to have disappeared for a time beyond the
western horizon, only to be found again in Spain, whence he had
originally sailed. Even in Spain, he was said to have had his
birthplace in some vague locality farther east, and to have reached
Spain only when near his maturity.
This is a beautiful allegorical description of the course of the sun
as it would appear to an unlearned and imaginative Spaniard. He
would see the sun rising in the distant east, warming Spain with his
mature and noonday rays, setting beyond the western horizon in the
waters of the Atlantic, and again returning to Spain to begin another
voyage, or course, through the heavens. The clouds which at times
obscure the sun are vividly represented by the misfortunes which
darkened the career of Columbus, and his imprisonment in chains by
Bobadilla is but an allegorical method of describing a solar eclipse.
The colonists who died of fever under his rule, like the Greeks who
fell under the darts of the Sun God, remind us of the unwholesome
effects produced by the rays of a tropical sun upon decaying
vegetation; and the story that Columbus was buried in different
places illustrates the fact that the apparent place of sunset changes
at different points of the year.
There is very much to be said in favor of the theory that
Columbus is a personification of the Sun, but that theory cannot be
accepted either by a biographer or by any patriotic American. The
one would have to put his biography of the Great Admiral in the fire,
and the other would lose all certainty as to whether America had
ever been discovered. We must resolve to believe in the reality of
Columbus, no matter what learned sceptics may tell us; and we shall
find no difficulty in so doing if we found our belief on a good strong
prejudice instead of reasonable arguments.
Let us then permit no man to destroy our faith in Christopher
Columbus. We can find fault with him if we choose; we can refuse to
accept Smith’s or Brown’s or Jones’s respective estimates of his
character and deeds: but let us never doubt that Columbus was a
real Italian explorer; that he served an amiable Spanish Queen and a
miserable Spanish King; and that he sailed across a virgin ocean to
discover a virgin continent.
There prevails to a very large extent the impression that the
voyages of Columbus prove that he was a wonderfully skilful
navigator, and it is also commonly believed that the compass and the
astrolabe were providentially invented expressly in order to assist
him in discovering America. There was, of course, a certain amount
of practical seamanship displayed in keeping the Santa Maria and
her successors from being swamped by the waves of the Atlantic;
but it may be safely asserted that only a very slight knowledge of
navigation was either exhibited or needed by Columbus. The ships
of the period could do nothing except with a fair wind. When the wind
was contrary they drifted slowly to leeward, and when the wind was
fair a small-boy with a knowledge of the elements of steering could
have kept any one of them on her course. The compass was a
handy thing to have on board a ship, since it gave to the sailors the
comfortable feeling which an ignorant man always has in the
presence of any piece of mechanism which he fancies is of
assistance to him; but for all practical purposes the sun and the stars
were as useful to Columbus as was his compass with its
unintelligible freaks of variation. So, too, the astrolabe must have
impressed the sailors as a sort of powerful and beneficent fetish, but
the log-book of Columbus would have testified that the astrolabe was
more ornamental than useful.
The system of navigation followed by Columbus was to steer as
nearly west as practicable on the way to America, and to steer as
nearly east as possible on his way back to Spain. In the one case he
would be sure to hit some part of the New World if he sailed long
enough, and in the other case persistent sailing would be sure to
bring him within sight of either Europe or Africa. In neither case could
he so far overrun his reckoning as to arrive unexpectedly at some
point in the interior of a continent. The facts prove that this was
precisely the way in which Columbus navigated his ship. When
steering for America he never knew where he would find land, and
was satisfied if he reached any one of the countless large and small
West India islands; and on returning to Spain there was as much
probability that he would find himself at the Azores or at the mouth of
the Tagus as at any Spanish port.
The truth is, that neither the seamanship of Columbus nor the
invention of the compass or the astrolabe made his first voyage
successful. Probably any one of the thousands of contemporary
Italian sailors could have found the West Indies as easily as
Columbus found them, provided the hypothetical sailor had
possessed sufficient resolution to sail westward until the land should
stop his way. What we should properly be called upon to admire in
Columbus as a navigator of unknown seas is the obstinacy with
which he adhered to his purpose of sailing due west until land should
be found, no matter if it should take all summer. It was an obstinacy
akin to that with which our great Union General fought his last
campaign. Such obstinacy will sometimes accomplish greater results
than the most skilful navigator or the profoundest strategist could
accomplish. Had the man who discovered our country or the man
who saved it been less obstinate, American history would have been
widely different from what it has been.
As the astrolabe has been mentioned several times in the course
of this narrative, it may be well to describe it, especially as it is now
obsolete. It was an instrument of considerable size, made of some
convenient material—usually either metal or wood, or both—and
fitted with various contrivances for the purpose of observing the
heavenly bodies. When a navigator took an observation with the
astrolabe he immediately went below and “worked it up” with the
help of a slate and pencil, and in accordance with the rules of
arithmetic and algebra. The result was a series of figures which
greatly surprised him, and which he interpreted according to the
humor in which he happened to find himself. A skilful navigator who
could guess his latitude with comparative accuracy generally found
that an observation taken with the astrolabe would give him a result
not differing more than eighty or ninety degrees from the latitude in
which he had previously imagined his ship to be, and if he was an
ingenious man he could often find some way of reconciling his
observation with his guesses. Thus the astrolabe gave him
employment and exercised his imagination, and was a great blessing
to the lonesome and careworn mariner.
It is our solemn duty, as Americans, to take a warm interest in
Christopher Columbus, for the reason that he had the good taste and
judgment to discover our beloved country. Efforts have frequently
been made to deprive him of that honor. It has been urged that he
was not the first man who crossed the Atlantic, that he never saw the
continent of North America, and that he was not the original
discoverer of South America. Most of this is undoubtedly true. It is
now generally conceded the Norwegians landed on the coast of New
England about six hundred years before Columbus was born; that
Americus Vespuccius was the first European to discover the South
American continent; that Sebastian Cabot rediscovered North
America after the Norwegians had forgotten all about it; and that
Columbus never saw any part of what is now the United States of
America. For all that, Columbus is properly entitled to be called the
discoverer of the New World, including the New England, Middle,
Gulf, Western, and Pacific States. Who invented steamboats? And
who invented the magnetic telegraph? Every patriotic American echo
will answer, “Fulton and Morse.” There were nevertheless at least
four distinct men who moved vessels by machinery driven by steam
before Fulton built his steamboat, and nearly twice that number of
men had sent messages over a wire by means of electricity before
Morse invented the telegraph. The trouble with the steamboats
invented by the pre-Fultonians, and the telegraphs invented by the
predecessors of Morse, was that their inventions did not stay
invented. Their steamboats and telegraphs were forgotten almost as
soon as they were devised; but Fulton and Morse invented their
steamboats and telegraphs so thoroughly that they have stayed
invented ever since.
Now, the Norwegians discovered America in such an
unsatisfactory way that the discovery came to nothing. They did not
keep it discovered. They came and looked at New England, and,
deciding that they had no use for it, went home and forgot all about
it. Columbus, who knew nothing of the forgotten voyage of the
Norwegians, discovered the West India islands and the route across
the Atlantic in such a workmanlike and efficient way that his
discoveries became permanent. He was the first man to show
people the way to San Domingo and Cuba, and after he had done
this it was an easy thing for other explorers to discover the mainland
of North and South America. He thus discovered the United States
as truly as Fulton discovered the way to drive the City of Rome from
New York to Liverpool, or Morse discovered the method of sending
telegrams over the Atlantic cable.
We need not be in the least disturbed by the learned men who
periodically demonstrate that Leif Ericson, as they familiarly call him,
was the true discoverer of our country. We need never change “Hail
Columbia” into “Hail Ericsonia,” and there is not the least danger
Columbia College will ever be known as Leifia University. We can
cheerfully admit that Leif Ericson—or, to give him what was probably
his full name, Eliphalet B. Ericson—and his Norwegians landed
somewhere in New England, and we can even forgive the prompt
way in which they forgot all about it, by assuming that they landed on
Sunday or on a fast-day, and were so disheartened that they never
wanted to hear the subject spoken of again. We can grant all this,
and still cherish the memory of Columbus as the true and only
successful discoverer of America.
Most biographers have written of Columbus in much the same
way that a modern campaign biographer writes the life of the
Presidential candidate from whom he hopes to receives an office.
They forget that he was never nominated by any regular party
convention, and that it is therefore wrong to assume, without any
sufficient evidence, that he was the greatest and best man that ever
lived. He was undoubtedly a bold sailor, but he lived in an age when
bold sailors were produced in quantities commensurate with the
demands of exploration, and we cannot say that he was any bolder
or better sailor than the Cabots or his own brother Bartholomew. He
was certainly no braver soldier than Ojeda, and his conquests were
trifling in comparison with those of Cortez and Pizarro.
As a civil ruler he was a conspicuous failure. It is true that the
colonists over whom he was placed were, many of them, turbulent
scoundrels; but the unanimity with which they condemned his
administration, and the uniformity with which every commissioner
appointed to investigate his conduct as a ruler condemned him,
compel us to believe that he was not an able governor either of
Spanish colonists or contiguous Indians. He was not habitually cruel,
as was Pizarro, but he insisted upon enslaving the Indians for his
own profit, though Queen Isabella had forbidden him to enslave
them or to treat them harshly.
He could be magnanimous at times, but he would not undertake
a voyage of discovery except upon terms which would ensure him
money and rank, and he did not hesitate to claim for himself the
reward which was offered, during his first voyage, to the man who
should first see the land, and which was fairly earned by one of his
sailors.
As an explorer, he failed to find a path to India, and he died
under the delusion that Pekin was somewhere in Costa Rica. His
first voyage across the broad Atlantic seems to us a wonderful
achievement, but in either difficulty or danger it cannot be compared
with Stanley’s march across the African continent. We must concede
to Columbus a certain amount of boldness and perseverance, but we
cannot shut our eyes to the faults of his conduct and character.
And yet Columbus was a true hero. Whatever flaws there may
have been in the man, he was of a finer clay than his fellows, for he
could dream dreams that their dull imaginations could not conceive.
He belonged to the same land which gave birth to Garibaldi, and, like
the Great Captain, the Great Admiral lived in a high, pure
atmosphere of splendid visions, far removed from and above his
fellow-men. The greatness of Columbus cannot be argued away. The
glow of his enthusiasm kindles our own, even at the long distance of
four hundred years, and his heroic figure looms grander through
successive centuries.
THE END.
INDEX.
Aguado, Juan, appointed investigator, 185;

investigates, 188;
makes nothing by it, 195.
Angel, Luis de St., 56;
offers to advance money, 57.
Astrolabe, invented, 32;
description of, 276.
Black Crook, thought to have broken out in Spain, 194.

Bobadilla, Francisco de, arrives in Hispaniola, 221;
arrests Columbus, 228;
sends Columbus to Spain, 229.
Boyle, Father Bernardo, 133;
desires to burn somebody, 150, 163;
is disappointed, 174.
Caonabo, 160;
captured, 175;
dies, 193.
Cedo, Fermin, alleged scientific person, 158.
Cogoletto, alleged birthplace of Columbus, 1.
Columbus, Bartholomew, born and translated, 4;
is sent to England, 38;
arrives at Hispaniola, 171;
made Governor of Isabella, 191;
able commander, 209;
arrested, 228;
sails with fourth exploring expedition, 236;
defeats Porras, 261.
Columbus, Christopher, born, 1;
translated, 3;
anecdotes of boyhood, 5;
goes to Pavia, 9;
becomes sailor, 11;
engages in Neapolitan expedition, 12;
deceives sailors or posterity, 13;
does not arrive in Portugal, 16;
does arrive there, 18;
marries, 19;
makes maps, 20;
lives at Porto Santo, 21;
goes to Iceland or elsewhere, 28;
talks to King John, 35;
goes to Spain, 38;
deposited with Quintanilla, 41;
meets Scientific Congress, 43;
goes to Convent of Rabida, 49;
meets committee on exploration, 54;
starts for France, 56;
goes to Palos, 61;
sails on first voyage, 67;
keeps false reckoning, 72;
discovers San Salvador, 89;
sails for Spain, 97;
wrecked, 102;
founds colony, 105;
sees Mermaids, 110;
displays seamanship, 115;
arrives at Azores, 116;
arrives at Palos, 125;
flattens egg, 135;
sails on second voyage, 138;
discovers Dominica, 141;
returns to Spain, 191;
loses popularity, 196;
sails on third voyage, 200;
discovers Trinidad, 204;
invents ingenious theory, 205;
arrives at Hispaniola, 208;
arrested, 228;
sent to Spain, 229;
arrives in Spain, 230;
sails on fourth voyage, 237;
reaches Honduras, 240;
searches for Panama Canal, 240;
founds colony at Veragua, 243;
sails away, 250;
reaches Jamaica, 251;
manages lunar eclipse, 258;
reaches Hispaniola, 262;
returns to Spain, 264;
dies, 268;
is extensively buried, 268;
perhaps is a sun-myth, 269;
character, 284.
Columbus, Diego, born, 4;
Governor of Isabella, 162;
sent to Spain to wait for opening in Connecticut, 177;
returns to Hispaniola, 187;
arrested by Bobadilla, 227.
Columbus, Dominico, combs wool, 3.
Compass, variation of, 55.
Congress of Salamanca, 46;
its tediousness, 45.
Correo, Pedro, 21;
he winks, 25;
is talked to death, 34.
Enriquez, Beatrix, loves not wisely but too well, 41;

is mentioned in Columbus’s will, 267.
Ericson, Eliphalet B., discovers America, 281.
Eclipse, story of, 258.
Egg, story of, 135.
Ferdinand, King of Aragon, 40.
Guacanagari, his affection for Columbus, 101;

his suspicious leg, 150;
falls extensively in love, 152;
protects Spaniards, 175.
Isabella, Queen of Castile, 41.
John, King of Portugal, 29;

his dishonorable conduct, 34.
La Navidad, founded, 105;

destroyed, 148.
Ledesma, Pedro, swims ashore, 249.
Marchena, Juan Perez de, prior of a convent, 50;

makes a night of it with Columbus, 51.
Margarite, rebels, 174.
Mendez, Diego, tries to reach Hispaniola from Jamaica, 252;
succeeds, 254.
Mendoza, Cardinal de, gives dinner, 135.
Mexica, De, rebels, 219.
Ojeda, Alonzo de, is a just man, 158;

captures Caonabo, 175;
arrives at Xaragua, 215;
his interview with Roldan, 216.
Ovando, Nicholas de, sent to Hispaniola, 233;
refuses to let Columbus land, 237;
delays to send aid to Columbus, 255;
finally does send it, 262.
Perestrello, Mrs., mother-in-law of Columbus, 20;

her use of the stove-lid, 21.
Pinzon, Martin Alonzo, fits out ship to join Columbus, 56;
has a brilliant idea, 83;
deserts, 97;
met by Columbus, 108;
reaches Palos, 127;
displays good sense, 128.
Pinzon, Vincente Yanez, fits out ship to join Columbus, 56.
Porras, Francisco de, mutinies, 256;
defeated and captured, 261.
Prester John, who he was, 31;
who he was not, 166.
Quibian, attacks colony, 246.

Quintanilla, receives Columbus on deposit, 41.
Roldan, Francisco, rebels, 210;

compromises, 215;
outwits Ojeda, 216;
drowned, 239.
Ships, rigged by Indianians, 64.
Talavera, De, the Queen’s confessor, 43.

Triana, De, discovers land, 86;
is disgusted, 87.
Villejo, Alonzo de, risks his eyes, 229.

Transcriber’s Notes
“Æt.” is an abbreviation for the Latin “aetatis”, which
means “At the age of”. In the original book, this was printed
with Columbus’ age as running headers on the left-hand
pages, and the corresponding years were printed as running
headers on the right-hand pages. In this eBook, they have
been combined, aligned on the right margin, and included at
the beginning of each chapter, as well as whenever they
change. Consecutive duplicates within chapters have been
deleted. Apparent inconsistencies between the ages and the
years have not been changed.
Punctuation, hyphenation, and spelling were made
consistent when a predominant preference was found in the
original book; otherwise they were not changed.
Simple typographical errors were corrected; unbalanced
quotation marks were remedied when the change was
obvious, and otherwise left unbalanced.
The index was not checked for proper alphabetization or
correct page references, but a few errors were corrected.
Page 3: “Kolompo” was printed in Fraktur.
Page 239: The phrase “Panama Canal” is in the original
book, even though the year was 1502 and the book was
published in 1881.
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Auditing And Assurance Services 14th

Edition Arens Test Bank

Learning Objective 7-1

1) There are no questions for this Learning Objective.

Learning Objective 7-2

Learning Objective 7-3

5) Appropriateness of evidence is a measure of the:

7) Two determinants of the persuasiveness of evidence are:

8) The two characteristics of the appropriateness of evidence are:

17) Evidence is generally considered appropriate when:

21) Which of the following statements is true?

Learning Objective 7-4

17) To be considered reliable evidence, confirmations must be controlled by:

24) An important benefit of industry comparisons is as:

27) Which of the following statements is not correct?

Type of Evidence Audit Procedures

________ 1. A calculation done by the auditor independent of the client.

________ 3. A comparison of information in two different locations.

________ 4. A use of the senses to assess certain activities.

________ 5. Following details of transactions from original documents to journals.

________ 6. A less detailed examination of a document or record to determine if there is something

________ 7. Obtaining information from the client in response to specific questions.

________ 8. A determination of assets on hand at a given time.

________ 9. An examination of written information to determine facts pertinent to the audit.

________ 2. Detailed instructions for the collection of a type of audit evidence.

________ 3. The degree to which evidence can be considered believable or trustworthy.

________ 5. This is determined by the amount of evidence obtained.

1) What client information is needed by auditors in creating lead schedules?

When we compare the way in which the Italian republicans have

HITHERTO we have proceeded upon the assumption that

Aguado, Juan, appointed investigator, 185;

Black Crook, thought to have broken out in Spain, 194.

Enriquez, Beatrix, loves not wisely but too well, 41;

Ferdinand, King of Aragon, 40.

Guacanagari, his affection for Columbus, 101;

Isabella, Queen of Castile, 41.

John, King of Portugal, 29;

La Navidad, founded, 105;

Marchena, Juan Perez de, prior of a convent, 50;

Ojeda, Alonzo de, is a just man, 158;

Perestrello, Mrs., mother-in-law of Columbus, 20;

Quibian, attacks colony, 246.

Roldan, Francisco, rebels, 210;

Ships, rigged by Indianians, 64.

Talavera, De, the Queen’s confessor, 43.

Villejo, Alonzo de, risks his eyes, 229.

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