1.The evidence considered most reliable by auditors consists of:

1. documentary evidence obtained directly from independent external sources.
2. written representations made by the president of the company.
3. internal documents, such as sales invoice copies produced under conditions of strong internal control.
4. direct personal knowledge obtained through physical observation and mathematical recalculation.

2. When auditing the existence assertion for an asset, auditors start from:

1. the general ledger back to the supporting original transaction documents.
2. the potentially unrecorded items forward to the financial statement numbers.
3. the supporting original transaction documents to the general ledger.
4. the financial statement numbers back to the potentially unrecorded items.

3.The risk model is defined as AR = IR CR DR. The risk of assessing control risk (CR) too low can lead to which of the following scenarios?

1. Poor choice of procedures
2. The auditor performing more work than needed, thus wasting audit resources
3. Increasing the sample size required for statistical sampling of account balances
4. The auditor failing to do Additional work that should be done, creating a threat to the effectiveness of the audit

4. Examining the title documents for the land and building would test which of the following audit assertions?

1. Cut-off
2. Completeness
3. Rights
4. Valuation

5.Which of the following questions is an auditor most likely to include on an internal control questionnaire?

1. Are direct borrowings on notes payable authorized by the Board of Directors?
2. Are two or more authorized signatures required on cheques that repay notes payable?
3. Are the assets that secure notes payable critically needed for the entity's continued existence?
4. Are the proceeds from notes payable used for the purchase of non-current assets?

6. obtaining sufficient audit evidence over the sales of a given company means that the auditor

1. tested more than 50% of the sales transactions for the given period
2. tested a reasonable sample of sales transactions for the given period
3. tested all sales transactions for the given period
4. tested only the sales transactions with an amount higher than the materiality

7.Shirley is the manager of a restaurant. She has been noticing that the inventory of wine is decreasing and bottles often go missing, as she frequently cannot reconcile the beginning inventory, sales, and ending inventory. What could be an indicator of a fraud opportunity?

1. The cellar contains many expensive and rare bottles.
2. Employees are allowed to purchase wine from the restaurant at a discounted price through their employee privilege program.
3. The cellar is located at the back of the restaurant and remains open during dinner service to allow efficient access for wait staff.
4. Her employees always work long hours on weekends and evenings.

8.The primary purpose for obtaining an understanding of an auditee's internal control structure is to:

1. obtain sufficient appropriate evidential matter to afford a reasonable basis for an opinion on the financial statements under examination.
2. provide information for a communication of internal control structure-related matters to management.
3. provide a basis for making constructive suggestions in a management letter.
4. determine the nature, timing, and extent of tests to be performed in the audit.

9.Lucy is working on the audit of Apple Inc. Today she is touring the factory with the production manager, and she is discussing the procedures for recording the flow of goods through the production process with various factory employees. Lucy is applying which kinds of audit evidence techniques?

1. Inquiry and inspection.
2. Inquiry and observation.
3. Observation and documentation.
4. Observation and confirmation.