auditing ch 7

Which of the following is not one of the four decisions about what evidence to gather and how much of it to accumulate?

which accounts must agree to the general ledger

Appropriateness of evidence is a measure of the

quality of evidence.

Which of the following forms of evidence would be least persuasive in forming the auditor's opinion about marketable securities and other investments held by the company?

responses to auditor's questions by the president and controller regarding the investments account

Which of the following is the most objective type of evidence?

the physical count of securities and cash

Calculating the gross margin for the current audit year as a percent of sales and comparing it with previous years is what type of evidence?

analytical procedures

When the auditor uses tracing as an audit procedure for tests of transactions, she is primarily concerned with which audit objective?

completeness

When auditors use underlying documents to support recorded transactions and amounts in the account, the process is usually called

vouching.

Auditors may decide to replace some tests of details of balance with analytical procedures when possible because the

analytical procedures are considerably less expensive and more efficient.

Factors that affect reliability of a document as evidence include

all of the above.

Which of the following discoveries through performance of analytical procedures would most likely indicate a relatively high risk of financial failure and bankruptcy?

a higher than normal long-term debt to assets ratio as well as a lower than average return on assets

In analytical procedures, auditors compare client data with

all of the above.

Which of the following is an accurate statement regarding a company's ability to meet its long-term debt obligations?

If the debt-to-equity ratio is too high, it may indicate that the company has used up its borrowing capacity.

Audit documents

are designed to facilitate the review and supervision of the work performed by the audit team by a reviewing partner.

The permanent audit file would usually include the

organizational chart of the company's employees.