I. Part 8 Appropriateness of Audit evidence (20 points) As a test of sales for completeness (i.e. understatement), an auditor selects 50 sales recorded in the sales journal and vouches them to sales invoices and then to the respective shipping document. Why would this evidence NOT be appropriate? Discuss briefly. II. For each situation presented below, indicate which means of gathering evidence would be considered more reliable AND indicate a reason from the following list: A. Independent source of the information (Independence of provider); B. Auditor's direct knowledge; C. Effectiveness of the client's Internal Controls. D. Knowledgeable source (qualifications of individuals providing the information); and E. Degree of objectivity or Subjectivity of the account. DO NOT DISCUSS your answer. CHOOSE ONLY ONE CAPITAL LETTER. Answers Item Number more reliable Letter for reason a. b. c. d. a. In testing accounts receivable for existence, (1) An accounts receivable confirmation is sent to customers, requesting that the return letter be sent back directly to the auditors; or (2) The auditor looks at customer balances in the company's records. b. (1) Th auditor relies on an analysis prepared by the controller of gross margin to sales for the current and prior periods; or (2) The auditor calculates gross margin to sales and compares to similar data for prior periods. The auditor considers evidence relating to 1. The cost of land acquired five years ago; or 2.The estimate of bad debts expense. Auditor tests two segments of the company. (1). In the first segment, the auditor assesses control risk as .80; or (2) In the second segment, the auditor assesses control risk as .20. c