ACCT 555 Week 3 Homework

ACCT 555 Week 3 Homework

6-19 (Objective 6-1) The following questions concern the reasons auditors do audits. Choose the best response.

a. Which of the following best describes the reason why an independent auditor reports on financial statements?

b. Because of the risk of material misstatement, an audit should be planned and performed with an attitude of

c. The major reason an independent auditor gathers audit evidence is to

6-20 (Objective 6-3) The following questions deal with errors and fraud. Choose the best response.

a. An independent auditor has the responsibility to design the audit to provide reasonable assurance of detecting errors and fraud that might have a material effect on the financial statements. Which of the following, if material, is a fraud as defined in auditing standards?

b. What assurance does the auditor provide that errors, fraud, and direct-effect illegal acts that are material to the financial statements will be detected?

c. Which of the following statements describes why a properly designed and executed audit may not detect a material misstatement in the financial statements resulting from fraud?

6-27 (Objectives 6-6, 6-7) The following are specific transaction-related audit objectives applied to the audit of cash disbursement transactions (a through f), management assertions about classes of transactions (1 through 5), and general transaction-related audit objectives (6 through 11).

a. Recorded cash disbursement transactions are for the amount of goods or services received and are correctly recorded.

b. Cash disbursement transactions are properly included in the accounts payable master file and are correctly summarized.

c. Recorded cash disbursements are for goods and services actually received.

d. Cash disbursement transactions are properly classified.

e. Existing cash disbursement transactions are recorded.

f. Cash disbursement transactions are recorded on the correct dates.

7-25 (Objectives 7-3, 7-4) The following questions concern persuasiveness of evidence. Choose the best response.

a. Which of the following types of documentary evidence should the auditor consider to be the most reliable?

b. Which of the following statements concerning audit evidence is true?

c. Audit evidence can come in different forms with different degrees of persuasiveness. Which of the following is the least persuasive type of evidence?

d. Which of the following presumptions is correct about the reliability of audit evidence?

7-26 (Objectives 7-5, 7-6) The following questions concern audit documentation. Choose the best response.

a. Which of the following is not a primary purpose of audit documentation?

b. During an audit engagement, pertinent data are compiled and included in the audit files. The audit files primarily are considered to be

c. Although the quantity, type, and content of audit documentation will vary with the circumstances, audit documentation generally will include the

d. The permanent file of an auditor’s working papers most likely would include copies of the

7-27 (Objective 7-4) The following are examples of documentation typically obtained by auditors:

a. Classify each of the preceding items according to type of documentation: (1) internal or (2) external.

b. Explain why external evidence is more reliable than internal evidence.

7-28 (Objective 7-4) The following are examples of audit procedures:

1. Review the accounts receivable with the credit manager to evaluate their collectability.

2. Compare a duplicate sales invoice with the sales journal for customer name and amount.

3. Add the sales journal entries to determine whether they were correctly totaled.

8-25 (Objectives 8-1, 8-3) The following questions concern the planning of the engagement. Select the best response.

a. Which of the following is an effective audit planning procedure that helps prevent misunderstandings and inefficient use of audit personnel?

b. When auditing related party transactions, an auditor places primary emphasis on

c. Which of the following will most likely indicate the existence of related parties?

d. Which of the following is least likely to be included in the auditor’s engagement letter?

8-28 (Objectives 8-2, 8-3, 8-4, 8-5) The following are various activities an auditor does during audit planning.

1. Send an engagement letter to the client.

2. Tour the client’s plant and offices.

3. Compare key ratios for the company to industry competitors.