Question

8. Audit evidence obtained directly by the auditor will not be reliable if:

		A. The auditor lacks the qualifications to evaluate the evidence
		B. It is impossible for the auditor to obtain additional supporting evidence.
		C. The client denies that it is authentic
		D. It is provided by the client’s attorney

9. Audit documentation should possess certain characteristics such as Audit documentation should be indexed and cross-referenced/audit documentation should be organized to benefit the client’s staff

		A. Yes/No
		B. No/No
		C. No/Yes
		D. Yes/Yes

10. the permanent audit file would usually include the following

		A. Organizational chart of the company’s employees
		B. Summary of the auditors test of controls or the current year’s audit
		C. Summary of the risk assessment procedures performed
		D. Client’s working trial balance

11. Inherent risk is reduced where the likelihood of theft is low. This would be true for an account such as:

		A. Inventory
		B. Cash
		C. Large fixed assets
		D. Marketable securities

Answer 1

8. (A) The auditor lacks the qualifications to evaluate the evidence.

Reason :-  Audit Evidence obtained directly by the auditor will not be reliable if auditor lacks qualification to evaluate the evidence. As it will be more reliable, if Auditor obtains directly but with the skill of proper observation of application of controls, for instance. And also, it is more reliable source than audit evidence obtained indirectly.

9. (A) Yes/No

Reason :-

YES :- Audit documentation should possess indexing because like a book, every workpaper has a unique page number showing its place in the audit file.

And cross referencing is required to improve our efficiency, we want to cross-reference our workpaper to related and supporting workpapers. Doing so eliminates the duplication of work

NO :- Audit documentation is organised for the benefits of auditor's staff and not for client's staff because audit documentation is the property of auditor and at his discretion he may make audit documents available to client .

10. (A).Organizational chart of the company’s employees

Reason :- Permanent Audit file include organizational chart of company's employees because organization chart can be used to depict the structure of an entire business. It can also be more narrowly focused, showing the structure for just a single department or function.

11. (C) Large fixed assets

Reason :- Inherent risk is reduced where likelihood of theft is low and this will be true for an account of LARGE FIXED ASSETS as nature of large fixed asset is less susceptible to theft than other options available.

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