FINAL EXAM

1For audit evidence to be compelling to the auditor it must be sufficient and appropriate. Which statement below is not correct regarding the appropriateness of audit evidence?The more effective the internal control system, the more assurance it provides the auditor about the reliability of financial reporting by the client.An auditor’s opinion, to be economically useful and profitable to the auditing firm needs to be formed within a reasonable time and based on evidence obtained that assures profits for the auditing firm.The independent auditor’s direct personal knowledge, obtained through inquiry, observation and inspection, is generally more persuasive than information obtained indirectly. Evidence obtained from independent sources outside the entity is generally more reliable than evidence secured solely within the entity2The final step in the evaluation of the audit results is the decision to:project the point estimate.determine sampling error and calculate the estimated total population error.determine the error in each sample.accept the population as fairly stated or to require further action.3The word below that best explains the relationship between required sample size and the acceptable risk of incorrect acceptance is:inverse.proportional.direct.indeterminate.4The introductory paragraph of the standard audit report for a non-public company performs which functions? I.    It states the CPA has performed an audit. II.    It lists the financial statements being audited. III.    It states the financial statements are the responsibility of the auditor.I and IIII, II and IIII and IIII and III5Master files, spreadsheets, and reports that accumulate material, labor, and overhead as the costs are incurred are:finished goods inventory records.accounting systems.storeroom documents.cost accounting records.6Which of the following balance-related audit objectives typically is assessed as having high inherent risk for cash?Presentation and disclosureCutoffExistenceDetail tie-in7In addition to confirming bank balances of your audit client, a bank confirmation would normally contain:the client’s credit history as regards to paying back loans.the client’s managements bank account information.the client’s bank loans with due date, interest rate, and collateral requested.the client’s business prospects.8A commitment is best described as:an agreement to commit the firm to a set of fixed conditions in the future that depends on current market conditions.an agreement to commit the firm to a set of fixed conditions in the future.an agreement to commit the firm to a set of fixed conditions in the future that depends on company profitability.a potential future obligation to an outside party for an as yet to be determined amount