Auditing and Assurance Training Audit Evidence and Documentation 2 — Questions and Answers
Question 1: The term 'sufficient appropriate audit evidence' means the auditor has obtained enough evidence that is both:
- Formal and documented
- Quantitative and qualitative
- Relevant and reliable to support the opinion (Correct answer)
- Oral and written
Correct answer: Relevant and reliable to support the opinion
Sufficiency relates to the quantity of evidence, while appropriateness encompasses both relevance and reliability — together they must be enough to support the audit opinion.
Question 2: Physical inspection of inventory by the auditor is an example of which type of audit evidence procedure?
- Confirmation
- Observation
- Inspection of tangible assets (Correct answer)
- Recalculation
Correct answer: Inspection of tangible assets
Inspecting tangible assets (like physically counting inventory) is a direct audit procedure providing evidence about the existence and condition of assets.
Question 3: An auditor sends a letter to the client's bank requesting confirmation of balances and loans. This is an example of:
- Management inquiry
- External confirmation (Correct answer)
- Analytical procedure
- Recalculation
Correct answer: External confirmation
External confirmation involves obtaining responses directly from third parties (such as banks) to verify account balances, terms, or transactions.
Question 4: What is the purpose of an engagement completion document (or closing memorandum) in audit documentation?
- To summarize significant findings, open issues resolved, and conclusions reached before report issuance (Correct answer)
- To record time charges for billing purposes
- To list all employees who worked on the engagement
- To replace the management representation letter
Correct answer: To summarize significant findings, open issues resolved, and conclusions reached before report issuance
A completion document summarizes significant matters, confirms that open issues were resolved, and demonstrates the auditor's basis for the overall audit conclusion.
Question 5: Which assertion is most directly tested when an auditor reviews cash receipts after year-end to ensure receivables existed at period end?
- Completeness
- Valuation
- Existence (Correct answer)
- Rights and obligations
Correct answer: Existence
Subsequent cash receipts provide evidence that recorded receivables actually existed as of the balance sheet date.
Question 6: Professional skepticism in evidence evaluation means the auditor should:
- Assume all management representations are fraudulent
- Accept all evidence provided without question
- Critically assess evidence regardless of prior experience with the client (Correct answer)
- Only rely on internally generated documents
Correct answer: Critically assess evidence regardless of prior experience with the client
Professional skepticism requires a questioning mind and critical assessment of all evidence, not assuming honesty or dishonesty, to reduce the risk of overlooking red flags.
Auditing and Assurance Training Audit Evidence and Documentation 2
The term 'sufficient appropriate audit evidence' means the auditor has obtained enough evidence that is both: