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Exam 5: Audit Evidence

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Question 21

True/False

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The decision of what constitutes sufficient appropriate audit evidence is a matter for professional judgment.

A) True
B) False

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Question 22

Multiple Choice

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Which of the following statements regarding a legal representation letter is incorrect?

A) The letter can include a request to provide details of any legal matters that the lawyer is in disagreement with the client.
B) The letter is sent by the auditor to its lawyers asking them to complete the letter and send it directly to the client.
C) The letter is sent by the client to its lawyers asking them to complete the letter and send it directly to the auditor.
D) The letter can include any legal matters involving the client.

E) B) and C)
F) B) and D)

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Question 23

True/False

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Audit evidence is the information that an auditor uses when arriving at their opinion on the fair presentation of their client's financial statements.

The permanent file includes detailed descriptions of evidence gathered for a particular year's audit.

Observation involves an auditor:

Indicate whether you agree or disagree with the following statements and explain your reasoning. a) Mona Harmon has just completed a risk assessment and has identified key risk factors at Bonavista Emergis. When asked by one of her staff members "What's next?", she replies: "Now that we have identified the risks, its time to perform some planning in order to obtain sufficient appropriate audit evidence." b) Teresa Dziuba was assigned to the Heathcliff Energy audit. She was ensuring that when recognizing revenues, all transactions and events that should have been recorded have been recorded. She was testing the occurrence assertion. c) Steve Slopak, the group partner was reviewing the work of Manny Fernandez on the Lake Shore Gold account. Manny asked Steve for an explanation on how audit risk would affect his work. Steve answered: "Audit risk affects the quantity and quality of evidence gathering." d) Frank Tutino, CA made the following true statement: "The appropriateness of audit evidence refers to its relevance and reliability." He then added: "Reliable information is logically connected to an assertion" "Relevant information reflects the true state of the information"

An auditor verifies amounts recorded in their client's records using:

If the component auditor cannot access sufficient evidence, the engagement partner will:

When testing for accuracy, an auditor searches for evidence:

Observation is an evidence gathering procedure that involves checking the mathematical accuracy of client records.

Describe the purpose and examples of external confirmations.

External confirmations can be sent to:

Lucy Wong's work at Axcan Pharma consisted of reading lease agreements to ensure that leases were disclosed accurately in the notes to the financial statements. Which assertion was she fulfilling?

Dean Tomaszczyk was training junior audit staff and mentioned the importance of third party documentation. Which of the following are not external confirmations?

Which of the following is not an assertion used for transactions and events?

Negative confirmations ask the recipient to reply only if they disagree with the information provided.

Describe the major evidence gathering procedures most often used by auditors.

Lilia Hussey made two statements to Sami Moneymaker about cut-off procedures: Testing cut-off transactions is particularly important for transactions close to year end. Cut-off procedures help determine whether transactions have been recorded in the correct accounting period. Which of these statements were true?

Which broad category of corroborating evidence is the least persuasive to an auditor?

Donna Hum was explaining the importance of documentary evidence. Which assertion was she referring to when she obtained details of the price paid for inventory and traced it to the supplier's invoice to verify the amount recorded?