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DE LA SALLE UNIVERSITY MANILA

RVR – COB DEPARTMENT OF ACCOUNTANCY


INTTHRY 2nd Term AY 17 - 18

Auditing Theory
AT – Quizzer 4 Prof. Francis H. Villamin

“Audit Documentation”

1. According to PSA 230 Redrafted “Documentation”, working papers do not


a. Assist in the planning and performance of the audit.
b. Assist in the supervision and review of the audit work.
c. Record the audit evidence resulting from the audit work performed to support an auditor’s
opinion.
d. Support the client’s financial statements..

2. 1st statement – Working papers are the property of the auditor.


2nd statement – Although portions of or extracts from the working papers maybe made available to the
entity at the discretion of the auditor, they may be substitute for the entity’s accounting records.
a. 1st statement is True ; 2nd statement is False
b. 1st statement is False; 2nd statement is True
c. Both statements are True
d. Both statements are False

3. 1st statement – The auditor should prepare working papers which are sufficiently complete and
detailed to provide an overall understanding of the audit.
2nd statement – The auditor should record in the working papers information on planning the audit
work, the nature, timing and extent of the audit procedures performed, the results thereof, and the
conclusions drawn from the audit evidence obtained.
a. 1st statement is True ; 2nd statement is False
b. 1st statement is False ; 2nd statement is True
c. Both statements are True
d. Both statements are False

4. Why does an auditor document audit evidence?


a. To comply with the requirements of gathering all available evidence.
b. To provide client reference for all account balances and correcting entries.
c. To support audit opinion and to provide evidence that the audit was carried out in accordance
with PSA.
d. To document all records of misstatements noted in the financial statements.

5. Working papers that record the procedures used by the auditor to gather evidence should be
a. Considered the primary support for the financial statements being audited.
b. Viewed as the connecting link between the books of accounts and the financial statements.
c. Designed to meet the circumstances of the particular engagement.
d. Destroyed when the audited entity ceases to be a client.

6. Which of the following conditions constitutes inappropriate working paper preparation?


a. Flowcharts are included in the working papers.
b. Findings are cross-referenced to supporting documentation.
c. Tick marks are explained in working papers.
d. All forms and directives used by the auditee department are included in the working papers.

7. An auditor’s working papers will ordinarily be least likely to include documentation showing how the
a. Client’s schedules were prepared.
b. Engagement was planned.
c. Understanding of the client’s internal control was obtained and control risk was assessed.
d. Unusual matters were resolved.
AT Quizzer 4 “Audit Documentation” 2

8. Which of the following is usually included or shown in the auditor’s working papers?
a. The procedures used by the auditor to verify the personal financial status of members of the
client’s management team
b. Analyses that are designed to be a part of, or a substitute for, the client’s accounting records
c. Excerpts from authoritative pronouncements that support the underlying generally accepted
accounting principles used in preparing the financial statements
d. The manner in which exceptions and unusual matters disclosed by the auditor’s procedures were
resolved or treated

9. Which of the following is not generally included in the working papers file?
a. An indication as to who performed the audit procedures and when they were performed.
b. Documentation of the auditor’s understanding of the accounting and internal control systems.
c. Copy of the internal audit’s audit program.
d. Analyses of significant ratios and trends.

10. Although the quantity and content of audit working papers vary with each particular engagement, an
auditor’s permanent files most likely include
a. Schedules that support the current year’s adjusting entries.
b. Prior years’ accounts receivable confirmations that were classified as exceptions.
c. Documentation indicating that the audit work was adequately planned and supervised.
d. Analyses of capital stock and other owners’ equity accounts.

11. Audit working papers are indexed by means of reference numbers. The primary purpose of indexing
is to
a. Permit cross-referencing and simplify supervisory review.
b. Support the audit report.
c. Eliminate the need for follow-up reviews.
d. Determine that working papers adequately support findings, conclusions, and reports.

12. The audit working paper that reflects the major components of an amount reported in the financial
statements is the
a. Interbank transfer schedule c. Supporting schedule
b. Carryforward schedule d. Lead schedule

13. An auditor ordinarily uses a working trial balance resembling the financial statements without
footnotes, but containing columns for
a. Cash flow increases and decreases c. Reclassifications and adjustments
b. Audit objectives and assertions d. Reconciliations and tickmarks

14. In the course of the audit of financial statements for the purpose of expressing an opinion thereon, the
auditor will normally prepare a schedule of unadjusted differences for which he did not propose
adjustment when they were uncovered. The primary purpose served by this schedule is to
a. Point out to the responsible client officials the errors made by various company personnel.
b. Summarize the adjustments that must be made before the company can prepare and submit its
income tax returns.
c. Identify the potential financial statement effects of errors or disputed items that were considered
immaterial when discovered.
d. Summarize the errors made by the company so that corrections can be made after the audited
financial statements are released.

15. Which of the following analyses appearing in a predecessor’s working papers is the successor auditor
least likely to be interested in reviewing?
a. Analysis of noncurrent balance sheet accounts. c. Analysis of income statement accounts.
b. Analysis of current balance sheet accounts. d. Analysis of contingencies.

16. In an internal audit, the audit supervisor determines that working papers are complete
a. When satisfied that the audit objectives have been met and the working papers support the
conclusions.
b. When working papers refer to the steps outlined in the audit program.
c. Only after the auditor who prepared the working papers has signed and dated them.
d. When proper cross-references to other working papers are noted.

17. Standardized working papers are often used, chiefly because they allow working papers to be
prepared more
a. Efficiently b. Professionally c. Neatly d. Accurately
AT Quizzer 4 “Audit Documentation” 3

18. Ordinarily, the audit may use schedules, analyses and other documentation prepared by entity
personnel in order to:
a. Lessen auditor’s responsibility.
b. Eliminate the need to apply any audit procedures on verifying their correctness.
c. Emphasize that the responsibility on financial statements rests with the client management.
d. Improve audit efficiency.

19. Working papers which contain information relating primarily to the audit of a single period.
a. Current audit files c. Financial reporting files
b. Permanent audit files d. Correspondence files

20. Which of the following is the least required of the audit working papers?
a. Substitute for the entity’s accounting records.
b. Confidentiality of information included in the working papers.
c. Safe custody of the working papers.
d. Retention for a period sufficient to meet the needs of the practice.

21. The form and content of working papers are affected by matters such as the following except:
a. Nature of the engagement
b. Type of opinion to be rendered by the auditor
c. Nature and complexity of the business
d. Needs in the particular circumstances for the direction, supervision and review of work performed
by assistants.

22. Audit working papers should not


a. Include any client-prepared papers or documents other than those prepared by the CPA or his
assistant.
b. Be kept by the CPA after review and completion of the audit except for items required for the
income tax return or the permanent file.
c. Be submitted to the client to support the financial statements and to provide evidence of the audit
work performed.
d. Be themselves be expected to provide sufficient support for the auditor’s opinion.

23. Using laptop computers in auditing may affect the methods used to review the work of staff assistants
because
a. Supervisory personnel may not have an understanding of the capabilities and limitations of
computers.
b. Working paper documentation may not contain readily observable details of calculations.
c. The audit fieldwork standards for supervision may differ.
d. Documenting the supervisory review may require assistance of management services personnel.

24. The current file of the auditor’s working papers generally should include
a. A flowchart of the internal controls. c. A copy of the financial statements
b. Copies of bond and note indentures. d. Organization charts

25. Which of the following eliminates voluminous details from the auditor’s working trial balance by
classifying and summarizing similar or related items?
a. Account analyses
b. Supporting schedules
c. Control accounts
d. Lead schedules

26. Documentation is a form of evidence


a. Used in every financial statement audit.
b. Used in most financial statement audit.
c. Used on the rare occasions when it is both readily available and less costly than other
procedures.
d. Used when nothing is available that is more competent

27. An audit working paper that shows the detailed evidence and procedures regarding the balance in the
accumulated depreciation account in the year under audit will be found in the
a. Current file of working papers.
b. Permanent file of working papers.
c. Other information working papers in the current file.
d. Planning memorandum in the current file.
AT Quizzer 4 “Audit Documentation” 4

28. In the case of recurring audits, some working papers files may be classified as audit files which are
updated with new information of continuing importance. This type of audit file is known as:
a. Current audit file. c. Electronic audit file.
b. Permanent audit file. d. Planning memorandum file

29. A schedule listing account balances for the current and previous years, and columns for adjusting and
reclassifying entries proposed by the auditors to arrive at the final amount that will appear in the
financial statements, is referred to as a
a. Working trial balance. c. Summarizing schedule
b. Lead schedule. d. Supporting schedule

30. A schedule set up to combine similar general ledger accounts, the total of which appears on the
working trial balance as a single amount, is referred to as a
a. Supporting schedule. c. Corroborating schedule
b. Lead schedule. d. Reconciling schedule

31. What do you call the type of working paper where matters of importance are noted down for further
verification?
a. Summary sheet. c. Agenda sheet
b. Audit program. d. Supporting schedules

32. The permanent file portion of the auditor’s working papers generally should include
a. A copy of the engagement letter.
b. A copy of key customer confirmation.
c. Names and addresses of audit staff personnel on the engagements.
d. Time and expense reports.

33. The permanent file section of the working papers that is kept for each audit client most likely contains
a. Review notes pertaining to questions and comments regarding the audit work performed.
b. A schedule of time spent on the engagement by each individual auditor.
c. Correspondence with the client’s legal counsel concerning pending litigation.
d. Narrative descriptions of the client’s accounting procedures and internal controls.

34. In general, which of the following statements is correct with respect to ownership, possession, or
access to working papers prepared by a CPA firm in connection with an audit?
a. The working papers may be obtained by third parties where they appear to be relevant to issues
raised in litigation.
b. The working papers are subject to the privileged communication rule which, in a majority of
jurisdictions, prevents third-party access to the working papers.
c. The working papers are the property of the client after the client pays the fees.
d. The working papers must be retained by the CPA firm for a period of ten years.

35. For what minimum period should audit working papers be retained by the independent CPA?
a. For the period during which the entity remains a client of the independent CPA.
b. For the period during which an auditor-client relationship exists but not more than six (6) years.
c. For the statutory period within which legal action may be brought against the independent CPA.
d. For as long as the CPA is in public practice.

36. Which of the following documentation is required for an audit in accordance with PSA?
a. An internal control questionnaire.
b. A client engagement letter.
c. A planning memorandum or checklist.
d. A client representation letter.

37 Audit documentation is the record of audit procedures performed, relevant audit evidence, and the
auditor’s conclusions. Which of the following statements concerning audit documentation is
incorrect?
a. Audit documentation should include superseded drafts of working papers and financial
statements.
b. Audit documentation prepared after the performance of the audit work is likely to be less accurate
than documentation prepared at the time such work is performed.
c. Audit documentation may include abstracts or copies of the entity’s records such as significant
and specific contracts and agreements
d. Audit documentation is not a substitute for the entity’s accounting records.
AT Quizzer 4 “Audit Documentation” 5

38 The auditor is required to complete the administrative process of assembling the final audit file on a
timely basis after the date of the auditor’s report. The time limit within which to complete the
assembly of the audit file is ordinarily
a. Not more than 30 days after the date of the auditor’s report.
b. Not more than 60 days after the date of the auditor’s report.
c. Not more than 90 days after the end of the entity’s reporting period.
d. Not more than 60 days after the date the entity’s financial statements are authorized for issue.

39. Audit documentation (working papers) should


a. Be considered the primary support for the financial statements being audited.
b. Show that the accounting records agree or reconcile with the financial statements.
c. Evaluate management’s performance against company goals for the year under audit.
d. Be provided to the client upon request.

40. Audit documentation (working papers)


a. Provides evidence of the auditor's compliance with generally accepted auditing standards.
b. Is a record to be used as a basis for the following year's engagement.
c. Includes an analysis of the client’s marketing strategies.
d. Is a client-owned record of conclusions reached by the auditors.

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