Chapter 13 Ans
Chapter 13 Ans
Chapter 13 Ans
AUDIT EVIDENCE
I. Review Questions
9. Factual evidence is direct evidence, in that conclusions may be drawn from the
evidence without further corroboration. An example of factual audit evidence is
physical observation of inventory for existence. Inferential evidence is indirect,
in that direct conclusions cannot be drawn from the evidence. The auditor
typically examines other evidence to further corroborate the inferences drawn.
An oral statement by a product manager that one or more products are fully
saleable and not obsolete is an example of inferential evidence. The auditor may
perform inventory turnover tests and/or determine the date of last sale of the
product to further corroborate the product manager’s statement.
10. Sufficiency of audit evidence is a matter of audit judgment. Materiality and the
quality of internal control are important ingredients in determining sufficiency.
If internal control produces over sales processing and cash receipts, for example,
are effective, the auditor may elect to confirm fewer customers’ accounts
receivables than under conditions of weak internal control.
11. Physical evidence tests the existence assertion. Examples of physical evidence
are inventory observation, examination of securities, inspection of plant asset
additions, and count of cash on hand.
12. The quality of existing internal control is the major factor supporting the
strength of documentary evidence. A voucher produced under conditions of
strong internal control over the processing of vendors’ invoices, for example,
possesses greater validity and is therefore stronger evidence than vouchers
produced under weak control conditions.
15. Evidence is persuasive if the auditor considers the evidence to be sufficient and
competent enough to afford a reasonable basis for an opinion.
1. d 4. c 7. d 10. d 13. b
2. d 5. a 8. b 11. a
3. c 6. d 9. d 12. b
2.
c. Audit computation of expense 1. Mathematical (based on
amounts unaudited data)
a. Letter from bond trustee 2. External
d. Cancelled checks 3. External-internal
b. Minutes of directors’ meetings 4. Internal
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