Chapter 5

Question 1

statements made by management regarding the recognition, measurement, presentation, and disclosure of items included in the financial statements

Answer 1

Assertions

Question 2

Assertions classes of transactions

Answer 2

Occurrence
Completeness
Accuracy
Cut-off
Classification

Question 3

Transactions and events that have been recorded have occurred and pertain to the entity.

Answer 3

Occurrence

Question 4

All transactions and events that should have been recorded have been recorded.

Answer 4

Completeness

Question 5

Amounts and other data relating to recorded transactions and events have been recorded appropriately.

Answer 5

Accuracy

Question 6

Transactions and events have been recorded in the correct accounting period.

Answer 6

Cut-off

Question 7

Transactions and events have been recorded in the proper accounts.

Answer 7

Classification

Question 8

recorded assets, liabilities, and equity interests exist

Answer 8

Existence

Question 9

rights to assets held or controlled by the entity, and liabilities (obligations) of the entity

Answer 9

Rights and obligations

Question 10

assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded

Answer 10

Valuation and allocation

Question 11

quantity (sufficiency) and quality (appropriateness) of audit evidence gathered

Answer 11

Sufficient appropriate evidence

Question 12

extent to which information is logically connected to an assertion

Answer 12

Relevance

Question 13

extent to which information reflects the true state of the information

Answer 13

Reliability

Question 14

evidence obtained as a direct written response to the auditor from a third party, in paper form, or by electronic or other medium

Answer 14

External confirmation

Question 15

a letter sent directly by an auditor to their client’s bank requesting information such as the amount of cash held in the bank (or overdraft), details of any loans with the bank, and interest rates charged

Answer 15

Bank confirmation

Question 16

a letter sent directly by an auditor to their client’s vendor or supplier requesting information about amounts owed by the client to the vendor or supplier

Answer 16

Payable confirmation

Question 17

a letter sent directly by an auditor to their client’s credit customers requesting information about amounts owed to the client by the debtor

Answer 17

Receivable confirmation

Question 18

a letter sent directly by an auditor to a third party, who is asked to respond to the auditor on the matter(s) included in the letter in all circumstances (that is, whether they agree or disagree with the information included in the auditor’s letter)

Answer 18

Positive confirmation

Question 19

a letter sent directly by an auditor to a third party, who is asked to respond to the auditor on the matter(s) included in the letter only if they disagree with the information provided

Answer 19

Negative confirmation

Question 20

information that provides evidence about details recorded in a client’s list of transactions (for example, invoices and bank statements)

Answer 20

Documentary evidence

Question 21

a letter sent to a client’s lawyer asking them to confirm the details of legal matters outstanding identified by management

Answer 21

Legal letter

Question 22

a letter from the client’s management to the auditor acknowledging management’s responsibility for the preparation of the financial statements and details of any verbal representations made by management during the course of the audit

Answer 22

Management representation letter

Question 23

responses of key client personnel to auditor enquiries throughout the course of the audit

Answer 23

Verbal evidence

Question 24

evidence gathered by an auditor checking the mathematical accuracy of the numbers that appear in the financial statements

Answer 24

Computational evidence

Question 25

inspection of a client's tangible assets, such as its inventory and fixed assets

Answer 25

Physical evidence

Question 26

data held on a client's computer, files sent by e-mail to the auditor, and items scanned and faxed

Answer 26

Electronic evidence

Question 27

information created by the client (for example, customer invoices, purchase orders)

Answer 27

Internally generated evidence

Question 28

information created by a third party (for example, supplier statements, bank statements)

Answer 28

Externally generated evidence

Question 29

the auditor responsible for signing the audit report

Answer 29

Group engagement partner

Question 30

an auditor who, at the request of the group engagement team, performs work on financial information related to a component for the group audit

Answer 30

Component auditor

Question 31

an evidence-gathering procedure that involves watching a procedure being carried out by another party

Answer 31

Observation

Question 32

an evidence-gathering procedure that involves asking questions verbally or in written form to gain an understanding of various matters throughout the audit

Answer 32

Enquiry

Question 33

an evidence-gathering procedure that involves checking the mathematical accuracy of client records

Answer 33

Recalculation

Question 34

an evidence-gathering procedure that involves redoing processes conducted by the client

Answer 34

Re-performance

Question 35

an evaluation of financial information by studying plausible relationships among both financial and non-financial data

Answer 35

Analytical procedures

Question 36

file that contains client information that is relevant for more than one audit

Answer 36

Permanent file

Question 37

file that contains client information that is relevant for the duration of one audit

Answer 37

Current file