ACCT 3101 L4 EXAM - QUESTIONS WITH
ANSWERS VERIFIED 100% CORRECT
obtain a written statement from a bank stating that the client has $15671 on deposit
and liabilities of $50,000 on a demand note.
audit evidence type? - ✔✔confirmation
Explain why confirmations are normally more reliable evidence than inquiries of the client. -
✔✔They come from 3rd parties and are more independent.
Describe a situation in which confirmation would be considered highly reliable and another
in which it wouldn't be reliable. - ✔✔1) Confirmation from a bank as to total liabilities of
company
2) Department store credit account. (banks have excellent accounting records)
under what circumstances is the physical observation of inventory considered relatively
unreliable evidence? - ✔✔If the auditor is not able to distinguish between valuable
inventory and worthless inventory (eg. diamonds and glass).
Explain why re-performance tests are highly reliable but of relatively limited use -
✔✔Auditor is able to gain 100% assurance of the accuracy, but the tests only verify whether
the recorded amounts are calculated accurately. Does not uncover omissions/fake amounts.
, Give three examples of relatively reliable documentation and three examples of less reliable
documentation. What characteristics distinguish the two? - ✔✔1) Vendor statements
2) bank statements
3) signed lease agreements
unreliable
1) copies of customer invoices
2) internal memoranda
3) listing of fixed asset additions
Difference is whether documents were generated externally or internally.
Give several examples in which the qualifications of the respondent or the qualifications of the
auditor affect the reliability of evidence - ✔✔1) Solicitor's letter - general counsel
compared to a solicitor involved only with patents
2) examination of the corporate minutes - experienced partner compared to a new assistant
Explain why analytical procedures are important evidence even though they are relatively
unreliable by themselves - ✔✔AP can only suggest that there are unusual fluctuations in
data it is up to the auditor to investigate further as to where the unusual data arose from error
or misstatement/fraud.
ie supportive evidence is required to substantiate analytical procedures.
What is an audit procedure? - ✔✔A detailed instruction for the collection of a type
of evidence to be obtained during an audit.
ANSWERS VERIFIED 100% CORRECT
obtain a written statement from a bank stating that the client has $15671 on deposit
and liabilities of $50,000 on a demand note.
audit evidence type? - ✔✔confirmation
Explain why confirmations are normally more reliable evidence than inquiries of the client. -
✔✔They come from 3rd parties and are more independent.
Describe a situation in which confirmation would be considered highly reliable and another
in which it wouldn't be reliable. - ✔✔1) Confirmation from a bank as to total liabilities of
company
2) Department store credit account. (banks have excellent accounting records)
under what circumstances is the physical observation of inventory considered relatively
unreliable evidence? - ✔✔If the auditor is not able to distinguish between valuable
inventory and worthless inventory (eg. diamonds and glass).
Explain why re-performance tests are highly reliable but of relatively limited use -
✔✔Auditor is able to gain 100% assurance of the accuracy, but the tests only verify whether
the recorded amounts are calculated accurately. Does not uncover omissions/fake amounts.
, Give three examples of relatively reliable documentation and three examples of less reliable
documentation. What characteristics distinguish the two? - ✔✔1) Vendor statements
2) bank statements
3) signed lease agreements
unreliable
1) copies of customer invoices
2) internal memoranda
3) listing of fixed asset additions
Difference is whether documents were generated externally or internally.
Give several examples in which the qualifications of the respondent or the qualifications of the
auditor affect the reliability of evidence - ✔✔1) Solicitor's letter - general counsel
compared to a solicitor involved only with patents
2) examination of the corporate minutes - experienced partner compared to a new assistant
Explain why analytical procedures are important evidence even though they are relatively
unreliable by themselves - ✔✔AP can only suggest that there are unusual fluctuations in
data it is up to the auditor to investigate further as to where the unusual data arose from error
or misstatement/fraud.
ie supportive evidence is required to substantiate analytical procedures.
What is an audit procedure? - ✔✔A detailed instruction for the collection of a type
of evidence to be obtained during an audit.
