Audit Procedures: Types, Evidence, and Sampling Techniques

Question 1

Which audit procedure involves the auditor independently repeating the client's mathematical calculations?

Accepted Answer

Recalculation

Answer

Analytical procedures

Answer

Inquiry of management

Answer

Confirmation

Question 2

The distinction between a substantive procedure and an analytical procedure is that:

Accepted Answer

Substantive procedures test the accuracy of recorded amounts, while analytical procedures compare actual results to expected results.

Answer

Analytical procedures test the accuracy of recorded amounts, while substantive procedures compare actual results to expected results.

Answer

Substantive procedures are more important than analytical procedures.

Answer

There is no difference between substantive procedures and analytical procedures.

Question 3

The primary purpose of vouching is to:

Accepted Answer

Verify the authenticity of supporting documents

Answer

Ensure that transactions are properly authorized

Answer

Test the accuracy of recorded amounts

Answer

Evaluate the effectiveness of internal controls

Question 4

A limitation of audit evidence is that it:

Accepted Answer

May be incomplete or unreliable

Answer

Is always subjective

Answer

Cannot be used to support conclusions

Answer

Is always sufficient to support an audit opinion

Question 5

What is the primary source of audit evidence used to support the auditor's opinion?

Accepted Answer

Underlying accounting records

Answer

Management assertions

Answer

Auditor's observations

Answer

Financial statements

Question 6

What is the main purpose of analytical procedures in an audit?

Accepted Answer

To identify potential errors or inconsistencies

Answer

To gather evidence about the effectiveness of internal controls

Answer

To confirm the validity of management assertions

Answer

To provide assurance on the completeness of transactions

Question 7

What is the fundamental distinction between inquiry and confirmation procedures?

Accepted Answer

Inquiry procedures involve direct communication with the client, while confirmation procedures involve third-party corroboration.

Answer

Confirmation procedures are always more reliable than inquiry procedures.

Answer

Inquiry procedures are more commonly used in external audits, while confirmation procedures are more commonly used in internal audits.

Answer

There is no fundamental difference between inquiry and confirmation procedures.

Question 8

Which of the following is NOT a limitation of audit sampling?

Accepted Answer

Inherent risk

Answer

Sampling risk

Answer

Control risk

Answer

Non-sampling risk

Question 9

What is the main advantage of using statistical sampling in auditing?

Accepted Answer

It allows the auditor to make inferences about the entire population.

Answer

It eliminates the risk of sampling error.

Answer

It reduces the number of items that need to be tested.

Answer

It provides a higher level of assurance than non-statistical sampling.

Question 10

Which of the following is NOT a primary type of audit evidence?

Accepted Answer

Reperformance

Answer

Inspection of documents

Answer

Confirmation

Answer

Observation

Question 11

Which technique involves selecting a small number of items from a large population and examining them to draw conclusions about the entire population?

Accepted Answer

Audit sampling

Answer

Analytical review

Answer

Physical inspection

Answer

Confirmation

Question 12

Which audit procedure is primarily used to verify the existence of inventory items?

Accepted Answer

Physical inspection

Answer

Observation

Answer

Analytical review

Answer

Vouching

Question 13

Which subtopic of audit procedures deals with the examination of written records, such as invoices and bank statements?

Accepted Answer

Document examination

Answer

Vouching

Answer

Analytical review

Answer

Inquiry

Question 14

What is the primary objective of performing audit procedures?

Accepted Answer

To gather sufficient and appropriate evidence

Answer

To express an opinion on the financial statements

Answer

To identify potential fraud

Answer

To improve internal controls

Question 15

Which of the following is NOT a characteristic of reliable audit evidence?

Accepted Answer

Consistent and corroborated

Answer

Relevant and sufficient

Answer

Objective and verifiable

Answer

Competent

Question 16

When are analytical procedures most commonly used as an audit procedure?

Accepted Answer

During the planning phase

Answer

During the execution phase

Answer

During the evaluation phase

Answer

During the conclusion phase

Question 17

What is the primary responsibility of an auditor in performing audit procedures?

Accepted Answer

To obtain reasonable assurance that the financial statements are free from material misstatement

Answer

To provide an absolute guarantee that the financial statements are accurate

Answer

To identify and report all instances of fraud

Answer

To improve the company's internal controls

Question 18

Which of the following is NOT a potential benefit of using computer-assisted audit techniques?

Accepted Answer

Increased subjectivity

Answer

Improved efficiency

Answer

Reduced risk of error

Answer

Ability to detect complex fraud schemes

Question 19

What is the primary source of audit evidence?

Accepted Answer

Client documentation

Answer

Observation

Answer

Inquiry

Answer

Physical examination

Question 20

What is the purpose of performing an internal control evaluation?

Accepted Answer

To assess the effectiveness of the client's internal control system

Answer

To gather evidence to support the audit opinion

Answer

To identify potential errors or fraud

Answer

To provide assurance to the client's management

Question 21

What is the role of the audit risk assessment in the audit process?

Accepted Answer

To determine the nature and extent of audit procedures

Answer

To identify areas of high risk

Answer

To evaluate the adequacy of internal control

Answer

To conclude on the fairness of the financial statements

Question 22

Which of the following is a primary responsibility of the auditor?

Accepted Answer

To express an opinion on the fairness of the financial statements

Answer

To provide management with advice on how to improve internal controls

Answer

To investigate any suspected fraud

Answer

To prepare the client's tax return

Question 23

What are the three most common types of audit opinions?

Accepted Answer

Unqualified, Qualified, Adverse

Answer

Fair, Qualified, Unfair

Answer

Good, Satisfactory, Poor

Answer

Material, Moderate, Immaterial

Question 24

Which of the following is not a primary responsibility of an auditor?

Accepted Answer

Prepare the financial statements

Answer

Express an opinion on the fairness of financial statements

Answer

Design and perform audit procedures to obtain sufficient and appropriate audit evidence

Answer

Provide management with recommendations for improving internal control

Question 25

What is the primary purpose of analytical procedures in auditing?

Accepted Answer

Identify unusual fluctuations or relationships in financial data

Answer

Test the accuracy of individual account balances

Answer

Verify the existence of assets

Answer

Evaluate the effectiveness of internal control

Question 26

When determining the sample size for an audit sample, which of the following is the primary consideration?

Accepted Answer

Tolerable error rate

Answer

Risk of incorrect acceptance

Answer

Population size

Answer

Expected error rate

Question 27

What is the purpose of an audit trail?

Accepted Answer

Allow the auditor to trace transactions from source documents to financial statements

Answer

Prevent unauthorized alterations of accounting records

Answer

Provide evidence of the accuracy of accounting information

Answer

Ensure the confidentiality of financial information

Question 28

Which of the following is a common audit procedure used to verify the existence of inventory?

Accepted Answer

Physical observation

Answer

Confirmation from a third party

Answer

Analytical review

Answer

Vouching

Question 29

What is the key difference between a substantive procedure and an analytical procedure in auditing?

Accepted Answer

Substantive procedures test the details of transactions and balances, while analytical procedures focus on relationships and trends.

Answer

Analytical procedures are more reliable than substantive procedures.

Answer

Substantive procedures are always more time-consuming than analytical procedures.

Answer

Analytical procedures are never used in an audit.

Question 30

Which of the following is not a characteristic of a well-designed audit program?

Accepted Answer

So detailed that there is no room for auditor judgment

Answer

Tailored to specific audit objectives

Answer

Flexible enough to allow for changes in circumstances

Answer

Documented clearly and concisely

Question 31

What is the primary purpose of internal audit?

Accepted Answer

Provide assurance to management and the board of directors on the effectiveness of internal control

Answer

Detect and prevent fraud

Answer

Improve the efficiency and effectiveness of operations

Answer

Assist external auditors with their audit

Question 32

What is the primary source of evidence for an auditor in expressing an opinion on the financial statements?

Accepted Answer

Financial Statements

Answer

Management Representations

Answer

Internal Control Documents

Answer

Bank Statements

Question 33

What is the primary purpose of an analytical procedure?

Accepted Answer

To identify unusual fluctuations or relationships in financial data

Answer

To test the accuracy of account balances

Answer

To obtain an understanding of the client's business and industry

Answer

To evaluate the effectiveness of internal controls

Question 34

What is the responsibility of an auditor in relation to fraud?

Accepted Answer

To assess the risk of fraud and to design and perform audit procedures to respond to the assessed risks of material misstatement due to fraud

Answer

To detect all instances of fraud

Answer

To prevent fraud from occurring

Answer

To report all instances of suspected fraud to the authorities

Question 35

What is the ultimate goal of an audit of financial statements?

Accepted Answer

To express an opinion on the fairness of the financial statements

Answer

To detect fraud

Answer

To improve the client's internal control system

Answer

To provide consulting services to the client

Question 36

Which factors influence the determination of sample size in audit sampling?

Accepted Answer

Materiality and tolerable error

Accepted Answer

Risk assessment

Accepted Answer

Sampling method

Accepted Answer

Auditor's judgment

Question 37

Which of the following is NOT a type of audit procedure?

Accepted Answer

Confession by the client

Answer

Inspection of documents

Answer

Observation of processes

Answer

Consultation with experts

Question 38

What is the primary source of audit evidence?

Accepted Answer

Supporting documentation

Answer

Financial statements

Answer

Management's written assertions

Answer

Auditor's own observations

Question 39

What is the purpose of vouching in an audit?

Accepted Answer

To verify the authenticity and validity of recorded transactions

Answer

To assess the reasonableness of management's estimates

Answer

To identify potential errors or fraud

Answer

To evaluate the effectiveness of internal controls

Question 40

What is the primary responsibility of the auditor in an audit engagement?

Accepted Answer

To express an opinion on the fairness of the financial statements

Answer

To develop an audit plan

Answer

To provide management with recommendations for improving the accounting system

Answer

To detect all instances of fraud

Question 41

What is the primary objective of analytical procedures during an audit?

Accepted Answer

To identify unexpected relationships or fluctuations in financial data.

Answer

To assess the effectiveness of internal controls.

Answer

To verify the accuracy of accounting records.

Question 42

Which audit procedure involves obtaining written or verbal representations from management?

Accepted Answer

Inquiry

Answer

Observation

Answer

Recalculation

Answer

Confirmation

Question 43

What is the primary purpose of an audit sampling plan?

Accepted Answer

To determine the appropriate sample size and select a representative sample from a population of data.

Answer

To evaluate the results of the sample.

Answer

To design the audit procedures.

Question 44

Which of the following is considered a reliable source of audit evidence?

Accepted Answer

Bank statements

Answer

Management's assertions

Answer

Financial press releases

Answer

Analyst reports

Question 45

What is the auditor's main responsibility regarding internal controls?

Accepted Answer

To assess whether internal controls are adequately designed and functioning effectively.

Answer

To maintain the client's internal controls.

Answer

To establish internal controls for the client.

Question 46

Which of the following is a limitation inherent to audit sampling?

Accepted Answer

Sampling risk

Answer

Detection risk

Answer

Inherent risk

Answer

Control risk

Question 47

What is the key purpose of documentation in an audit?

Accepted Answer

To provide evidence of the audit procedures performed and the conclusions reached.

Answer

To fulfill regulatory requirements.

Answer

To impress the client.

Question 48

How do computer-assisted audit techniques (CAATs) generally benefit an audit?

Accepted Answer

Increased efficiency and effectiveness of audit procedures.

Answer

Guaranteed accuracy of audit findings.

Answer

Reduced cost of the audit.

Question 49

Explain the fundamental difference between vouching and tracing during an audit.

Accepted Answer

Vouching verifies the origin of a transaction, while tracing verifies its flow and ultimate destination.

Answer

Vouching is more important than tracing.

Question 50

Which of the following is NOT a type of primary audit procedure?

Accepted Answer

Historical Analysis

Answer

Confirmation

Answer

Inspection

Answer

Observation

Question 51

What is the primary source of audit evidence?

Accepted Answer

Accounting Records

Answer

Written Representations

Answer

Oral Inquiries

Answer

Physical Evidence

Question 52

What is the primary purpose of analytical procedures in auditing?

Accepted Answer

To identify potential financial statement misstatements

Answer

To provide conclusive audit evidence

Answer

To corroborate other audit evidence

Question 53

Which of the following is a primary benefit of using computer-assisted audit techniques (CAATs)?

Accepted Answer

Increased efficiency and effectiveness of audit procedures

Answer

Reduced risk of auditor bias

Answer

Elimination of the need for audit sampling

Question 54

What is the primary reason for the importance of maintaining independence in auditing?

Accepted Answer

To ensure objectivity and impartiality in audit judgments

Answer

To reduce the risk of audit failures

Answer

To enhance the reputation of the auditor

Question 55

What is the purpose of an audit trail?

Accepted Answer

To document the flow of transactions through an accounting system

Answer

To provide a basis for reversing transactions

Answer

To prevent unauthorized access to financial data

Question 56

Which of the following is a key principle of internal control?

Accepted Answer

Segregation of duties

Answer

Adequate documentation

Answer

Independent verification

Answer

Physical safeguards

Question 57

What is the primary goal of an audit?

Accepted Answer

To express an opinion on the fairness of the financial statements

Answer

To provide management with recommendations for improvement

Answer

To detect and prevent fraud