-Evidence and Risk

Question 1

What constitutes the majority of an auditor’s work in determining an audit opinion?

Answer 1

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Question 2

What does audit evidence consist of?

Answer 2

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Question 3

What is the relationship between evidence and detection risk?

Answer 3

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Question 4

Which aspects of audit risk can an auditor control?

Answer 4

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Question 5

Which aspects of audit risk can an auditor NOT control?

Answer 5

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Question 6

How does a high level of acceptable detection risk affect an audit?

Answer 6

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Question 7

What should occur when a low level of detection risk is acceptable?

Answer 7

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Question 8

What are the primary risks in an audit for a typical for-profit company?

Answer 8

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Exception: If the CPA Exam states that it is a tax-driven company, flip them around.

Question 9

What is the primary constraint on audit evidence?

Answer 9

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Question 10

What characteristics should audit evidence have?

Answer 10

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Question 11

How does the quality of audit evidence vary depending on who has provided it?

Answer 11

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Question 12

Which documents are the most persuasive and credible?

Answer 12

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Question 13

What are substantive procedures?

Answer 13

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Question 14

What are the substantive tests that are most often performed?

Answer 14

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Question 15

When performing audit procedures, what financial statement elements should auditors focus on?

Answer 15

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Question 16

How is cash audited?

Answer 16

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Question 17

How is accounts receivable audited?

Answer 17

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Question 18

How is accounts payable audited?

Answer 18

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Question 19

How is inventory audited?

Answer 19

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Question 20

How are beginning balances audited?

Answer 20

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Question 21

What is the general presumption for auditing ending balances?

Answer 21

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Question 22

How is a statement of cash flows audited?

Answer 22

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Question 23

Under the indirect method, what must be disclosed on a statement of cash flows?

Answer 23

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Question 24

Under the direct method, what must be disclosed on a statement of cash flows?

Answer 24

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Question 25

What are subsequent events and what do they require?

Answer 25

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Question 26

What should occur if the audit report has already been issued and the auditor becomes aware of a situation that was present as of the balance sheet date (*a subsequent event*)?

Answer 26

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Question 27

What should an auditor do if they discover they have forgotten to perform a substantive procedure?

Answer 27

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Question 28

When are analytical procedures required?

Answer 28

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Question 29

How do analytical procedures assist the auditor?

Answer 29

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Question 30

What is the focus of analytical procedures?

Answer 30

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Question 31

How is the current ratio calculated?

Answer 31

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Question 32

How is the quick ratio calculated?

Answer 32

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Question 33

How is the asset turnover calculated?

Answer 33

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Question 34

How is the inventory turnover calculated?

Answer 34

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Question 35

How is Gross Margin % calculated?

Answer 35

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Question 36

What type of testing are **ratios**?

Answer 36

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Question 37

What type of procedure is a **Budget vs. Actual** comparison?

Answer 37

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Question 38

List common types of analytical procedures.

Answer 38

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Question 39

How do management assertions affect the audit?

Answer 39

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Question 40

What assertions do auditors test?

Answer 40

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Question 41

What assertions are tests for transaction classes?

Answer 41

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Question 42

For which assertions are disclosures tested?

Answer 42

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Question 43

Is testing the validity of **direct evidence** a basic audit procedure?

Answer 43

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Question 44

How are management estimates audited?

Answer 44

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Question 45

Whose property are **audit documentation** (audit workpapers)? In what form must they be?

Answer 45

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Question 46

What is the current file?

Answer 46

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Question 47

What is the permanent file?

Answer 47

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Question 48

How long must audit workpapers be maintained?

Answer 48

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Question 49

What is the primary requirement for **audit workpapers** besides being written?

Answer 49

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Question 50

How should documents added to work papers be treated?

Answer 50

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Question 51

How should documents removed from workpapers be treated?

Answer 51

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Question 52

How should an audit procedure be applied to **Required Supplementary Information**?

Answer 52

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