CPA EXAM BECKER AUDIT WITH
CORRECT ANSWERS
1. Audit evidence is support for the ___________. - ANSWER-audit opinion
2. Audit evidence is gathered throughout the audit. What are the four
categories of procedures that are performed to obtain audit evidence? -
ANSWER-1. Risk assessment procedures
2. Tests of controls
3. Substantive procedures
4. Other audit procedures
3. What is the objective of substantive testing? - ANSWER-The objective is to
detect material misstatements in the FS.
4. What are the three general types of audit evidence? - ANSWER-1.
Accounting records
2. Corroborating evidence
3. Electronic evidence
5. What two types of procedures does the auditor use to test the accounting
records? - ANSWER-1. Analytical procedures
2. Substantive procedures
6. ___________ evidence includes minutes of meetings, confirmations,
industry analysts' reports, data about competitors, and information
obtained through ________, __________, and ___________. - ANSWER-
Corroborating, observation, inquiry, inspection
7. What special consideration must the auditor make if some accounting
records or corroborating evidence is only available in electronic form? -
ANSWER-Since electronic information may not be retrievable indefinitely,
, the auditor should consider the time during which information exists or is
available in determining the nature, extent, and timing of auditing
procedures.
8. The auditor provides ________ assurance regarding the fairness of
financial statements. The auditor is NOT a _________. - ANSWER-
reasonable, guarantor
9. T or F: The cost-benefit relationship is not a valid reason for performing
only certain procedures. - ANSWER-F: The cost-benefit relationship IS a
valid reason for performing only certain procedures. However, cost alone
or difficulty in obtaining evidence is NOT a valid basis for omitting
procedures for which there are no alternatives.
10. Sufficiency refers to the _______ of evidence. It should be _______ and
________. - ANSWER-quantity, valid, relavant
11. The auditor's decision regarding the sufficiency of audit evidence is
influenced by two factors. What are they? - ANSWER-1. RMM: greater risk
implies more evidence will be required
12. 2. Quality of evidence: less evidence may be required when that
evidence is of higher quality
13. Appropriate audit evidence must be both _______ and _______. -
ANSWER-relevant, reliable
14. Audit evidence must be _________ and __________. - ANSWER-sufficient,
appropriate
15. What is the hierarchy of audit evidence, from most reliable to least
reliable (hint: AEIO)? - ANSWER-1. Auditor's direct knowledge &
observation
2. External evidence
, 3. Internal evidence
4. Oral evidence
16. For evidence to be relevant, what should it relate to? - ANSWER-The
financial statement assertion(s) under consideration.
17. Substantive procedures can be broken down into two categories. What
are they? - ANSWER-1. Tests of details
2. Substantive analytical procedures
18. What are tests of details? - ANSWER-Tests of details consist of audit
procedures used to gather evidence to support the account balances as
reflected in the FS.
19. What are tests of details performed on? - ANSWER-Tests of details are
performed on ending balances, the details of transactions, or a
combination of the two.
20. Analytical procedures are required in what two phases of the audit? -
ANSWER-1. Planning
2. Final review
21. What is the purpose of analytical procedures in the planning phase? -
ANSWER-To assist the auditor in understanding the entity and its
environment. It is also used for risk measurement to alert the auditor to
problem areas requiring attention.
22. What is the purpose of analytical procedures as a substantive
procedure? - ANSWER-To obtain audit evidence about specific
management assertions related to account balances and transactions.
, 23. What is the purpose of analytical procedures in the final review stage?
- ANSWER-To assist the auditor in the final review of the overall
reasonableness of account balances.
24. What are the two primary categories of analytical procedures? -
ANSWER-1. Comparisons of financial data
2. Ratio analysis
25. Comparisons of financial data is an analytical procedure. What are the
most common comparisons of financial data? - ANSWER-1. Current year
actual vs. current year budget
2. Current year actual vs. prior year actual
26. Ratio analysis is an analytical procedure. Generally ratio analysis
involves comparing ratios developed from recorded amounts to
__________. - ANSWER-expected ratios developed by the auditor.
27. List the five general steps in designing and performing substantive
analytical procedures. - ANSWER-1. Determine the analytical procedures
that are suitable for testing the assertion(s)
2. Evaluate the reliability of the data from which the auditor's
expectation is to be developed
3. Develop an expectation
4. Perform the analytical procedures and compare the results with the
expectations
5. Investigate any significant differences
28. Analytical procedures should be based on _________ relationships. -
ANSWER-predictable
29. In order to provide an appropriate level of assurance, analytical
procedures should be based on predictable relationships. What type of
accounts should be targeted for use in analytical procedures? - ANSWER-
1. Income statement accounts
CORRECT ANSWERS
1. Audit evidence is support for the ___________. - ANSWER-audit opinion
2. Audit evidence is gathered throughout the audit. What are the four
categories of procedures that are performed to obtain audit evidence? -
ANSWER-1. Risk assessment procedures
2. Tests of controls
3. Substantive procedures
4. Other audit procedures
3. What is the objective of substantive testing? - ANSWER-The objective is to
detect material misstatements in the FS.
4. What are the three general types of audit evidence? - ANSWER-1.
Accounting records
2. Corroborating evidence
3. Electronic evidence
5. What two types of procedures does the auditor use to test the accounting
records? - ANSWER-1. Analytical procedures
2. Substantive procedures
6. ___________ evidence includes minutes of meetings, confirmations,
industry analysts' reports, data about competitors, and information
obtained through ________, __________, and ___________. - ANSWER-
Corroborating, observation, inquiry, inspection
7. What special consideration must the auditor make if some accounting
records or corroborating evidence is only available in electronic form? -
ANSWER-Since electronic information may not be retrievable indefinitely,
, the auditor should consider the time during which information exists or is
available in determining the nature, extent, and timing of auditing
procedures.
8. The auditor provides ________ assurance regarding the fairness of
financial statements. The auditor is NOT a _________. - ANSWER-
reasonable, guarantor
9. T or F: The cost-benefit relationship is not a valid reason for performing
only certain procedures. - ANSWER-F: The cost-benefit relationship IS a
valid reason for performing only certain procedures. However, cost alone
or difficulty in obtaining evidence is NOT a valid basis for omitting
procedures for which there are no alternatives.
10. Sufficiency refers to the _______ of evidence. It should be _______ and
________. - ANSWER-quantity, valid, relavant
11. The auditor's decision regarding the sufficiency of audit evidence is
influenced by two factors. What are they? - ANSWER-1. RMM: greater risk
implies more evidence will be required
12. 2. Quality of evidence: less evidence may be required when that
evidence is of higher quality
13. Appropriate audit evidence must be both _______ and _______. -
ANSWER-relevant, reliable
14. Audit evidence must be _________ and __________. - ANSWER-sufficient,
appropriate
15. What is the hierarchy of audit evidence, from most reliable to least
reliable (hint: AEIO)? - ANSWER-1. Auditor's direct knowledge &
observation
2. External evidence
, 3. Internal evidence
4. Oral evidence
16. For evidence to be relevant, what should it relate to? - ANSWER-The
financial statement assertion(s) under consideration.
17. Substantive procedures can be broken down into two categories. What
are they? - ANSWER-1. Tests of details
2. Substantive analytical procedures
18. What are tests of details? - ANSWER-Tests of details consist of audit
procedures used to gather evidence to support the account balances as
reflected in the FS.
19. What are tests of details performed on? - ANSWER-Tests of details are
performed on ending balances, the details of transactions, or a
combination of the two.
20. Analytical procedures are required in what two phases of the audit? -
ANSWER-1. Planning
2. Final review
21. What is the purpose of analytical procedures in the planning phase? -
ANSWER-To assist the auditor in understanding the entity and its
environment. It is also used for risk measurement to alert the auditor to
problem areas requiring attention.
22. What is the purpose of analytical procedures as a substantive
procedure? - ANSWER-To obtain audit evidence about specific
management assertions related to account balances and transactions.
, 23. What is the purpose of analytical procedures in the final review stage?
- ANSWER-To assist the auditor in the final review of the overall
reasonableness of account balances.
24. What are the two primary categories of analytical procedures? -
ANSWER-1. Comparisons of financial data
2. Ratio analysis
25. Comparisons of financial data is an analytical procedure. What are the
most common comparisons of financial data? - ANSWER-1. Current year
actual vs. current year budget
2. Current year actual vs. prior year actual
26. Ratio analysis is an analytical procedure. Generally ratio analysis
involves comparing ratios developed from recorded amounts to
__________. - ANSWER-expected ratios developed by the auditor.
27. List the five general steps in designing and performing substantive
analytical procedures. - ANSWER-1. Determine the analytical procedures
that are suitable for testing the assertion(s)
2. Evaluate the reliability of the data from which the auditor's
expectation is to be developed
3. Develop an expectation
4. Perform the analytical procedures and compare the results with the
expectations
5. Investigate any significant differences
28. Analytical procedures should be based on _________ relationships. -
ANSWER-predictable
29. In order to provide an appropriate level of assurance, analytical
procedures should be based on predictable relationships. What type of
accounts should be targeted for use in analytical procedures? - ANSWER-
1. Income statement accounts
