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Auditing - Exam 2 questions and answers graded A+ 2024/2025
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Auditing - Exam 2 questions and answers graded A+ 2024/2025
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Auditing - Exam 2Which of the following procedures would yield the most reliable evidence?
a) a comparison of beginning and ending retained earnings
b) an inquiry of client personnel
c) a scanning of trial balances
d) a recalculation of bad debt expense - ANSd) a recalculation of bad debt expense
Which of the following is least likely to be a factor in the auditor's decision about the extent of
documentation of a particular audit area?
a) whether or not the client has an internal audit function
b) the risk of material misstatement
c) the extent of judgement involved in performing procedures
d) the nature and extent of exceptions identified - ANSa) whether or not the client has an
internal audit function
Which is generally the most reliable form of evidence?
a) internally generated evidence from the client's IT system
b) internally generated evidence based on discussions with upper management
c) externally generated evidence sent directly to the auditor
d) externally generated evidence held by the client - ANSc) externally generated evidence sent
directly to the auditor
Auditors inspecting a sample of AP balances listed on the ledger and verifying that they are
actual payables owed by the client gather evidence in support of the ______ assertion.
a) occurrence
b) completeness
c) existence
d) accuracy - ANSc) existence
Which of the following factors is most likely to affect the extent of the documentation of the
auditor's understanding of a client's system of internal controls?
a) the degree to which the auditor intends to use internal audit personnel to perform substantive
tests
b) the degree to which information technology is used in the accounting function
c) the industry and business and regulatory environments in which the client operates
, d) the relationship between management, the board of directors, and external stakeholders -
ANSb) the degree to which information technology is used in the accounting function
After an initial meeting with the client's senior management, an auditor assigned to the audit of
Bookbinder LLC is attempting to understand the entity-level controls enacted by an
organization. Which of the following would represent the most appropriate way for the auditor to
achieve this understanding?
a) consider conducting a walkthrough of the client's entity-level controls to ensure they are
operating effectively
b) consider reviewing company policies and procedures as well as minutes of board of director
meetings
c) request the internal audit function conduct an audit of entity-level controls, and report the
findings back to the external auditor
d) attempt to obtain written assurances from senior management that all entity-level controls are
operating effectively. - ANSb) consider reviewing company policies and procedures as well as
minutes of board of director meetings
An audit manager is attempting to audit a sample of revenue transactions for a major client. The
auditor is concerned with ensuring that the selected revenue transactions are not fictitious.
Which of the following would be the most prudent method of achieving this?
a) select a sample of revenue transactions an then trace them to the corresponding AP entries
b) Examine copies of sales orders and bills of lading, and attempt to trace cash and AR entries,
respectively.
c) the auditor should begin by examining monthly AR statement balances and tracing to the
customer master file to make sure the clients exist.
d) none - ANSb) Examine copies of sales orders and bills of lading, and attempt to trace cash
and AR entries, respectively.
During the previous year's audit of Babin Enterprises, the external auditors recommended some
changes to internal control as part of the integrated audit. This year, during the initial meeting
between the audit partners and the client's senior management, the Chief Information Officer
apprised the auditors that a new control had been introduced whereby an Accounts Receivable
clerk compares the receivable balance to the sales order which initiated it. What type of control
does this represent?
a) IT-dependent manual control
b) IT transaction control
c) Entity-level control
d) IT application control - ANSa) IT-dependent manual control
Donald, a senior audit partner at Anderson CPA Firm is discussing how best to document
internal control with a new audit associate, Kayla. Kayla has advised she is unsure of how best
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