Chapter 05: Audit Evidence and Documentation Test Bank Assignements

Prepared by: Mohammad Maruf Sezar

True / False Questions

1. The professional standards consider calculating depreciation expense a "routine"

transaction.
FALSE

2. The most reliable form of documentary evidence generally is considered to be documents

created by the client.
FALSE

3. A vendor's invoice is an example of documentary evidence created by a third party and

held by the client.
TRUE

4. In performing analytical procedures, the auditors may use dollar amounts, physical
quantities, or percentages.
TRUE

5. The primary purpose of a letter of representations is to obtain additional evidence about

specific accounts.
FALSE

6. The auditors should propose an adjusting journal entry for all material related-party
transactions.
FALSE

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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7. When the risk of material misstatement for an account is high, the auditors may perform
additional substantive procedures to restrict detection risk to a lower level.
TRUE

8. Working papers of continuing audit interest usually are filed with the administrative
working papers.
FALSE

9. The use of lead schedules is designed to increase the detail of the working trial balance.
FALSE

10. Adjusting journal entries are ordinarily recorded by the client, while reclassifying journal
entries need not be recorded.
TRUE

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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Multiple Choice Questions

11. To be effective, analytical procedures in the overall review stage of an audit engagement
should be performed by.
A. The staff accountant who performed the substantive auditing procedures.
B. A beginning staff accountant who has had no other work related to the engagement. C.
A manager or partner who has a comprehensive knowledge of the client's business and
industry.
D. The CPA firm's quality control manager.

12. The components of the risk of misstatement are:

A. Option A
B. Option B
C. Option C
D. Option D

13. Financial statement assertions are established for classes of transactions,

A. Option A
B. Option B
C. Option C
D. Option

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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14. Further audit procedures include:

Risk assessment Tests of

procedures controls
A. Yes Yes
B. Yes No
C. No Yes
D. No No
A. Option A
B. Option B
C. Option C
D. Option D

15. Assertions that have a meaningful bearing on whether an account balance, transaction
class, or disclosure is fairly stated are referred to as:
A. Appropriate assertions.
B. Sufficient assertions.
C. Relevant assertions.
D. Reliable assertions.

16. Which of the following is not an assertion relating to classes of transactions?

A. Accuracy.
B. Sufficiency.
C. Cutoff.
D. Classification.

17. Audit documentation should be sufficient to allow which individual to understand the
audit work performed, the evidence obtained, and the significant conclusions?

A. A certified public accountant.

B. A partner in a CPA firm.
C. An experienced auditor.
D. The controller at the company being audited.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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18. Which of the following is not considered to be an analytical procedure?

A. Comparisons of financial statement amounts with source documents.

B. Comparisons of financial statement amounts with nonfinancial data.
C. Comparisons of financial statement amounts with budgeted amounts.
D. Comparisons of financial statement amounts with comparable prior year amounts.

19. An auditor plans to apply substantive tests to the details of asset and liability accounts as
of an interim date rather than as of the balance sheet date. The auditor should be aware that
this practice.

A. Eliminates the use of certain statistical sampling methods that would otherwise be
available.
B. Presumes that the auditor will reperform the tests as of the balance sheet date.
C. Should be especially considered when there are rapidly changing economic conditions.
D. Potentially increases the risk that errors which exist at the balance sheet date will not be
detected

20. An auditor compared the current-year gross margin with the prior-year gross margin to
determine if cost of sales is reasonable. What type of audit procedure was performed?
A. Test of transactions.
B. Analytical procedures.
C. Test of controls.
D. Test of details.

21. The inspection of a vendor's invoice by the auditors is:

A. Direct evidence about occurrence of a transaction.
B. Physical evidence about occurrence of a transaction.
C. Documentary evidence about occurrence of a transaction.
D. Part of the client's accounting system.

22. The auditors of Smith Electronics wish to limit the audit risk of material misstatement in
the test of accounts receivable to 5 percent. They believe that inherent risk is 100%, and there
is a 40% risk that material misstatement could have bypassed the client's system of internal
control. What is the maximum detection risk the auditors should specify in their substantive
procedures of details of accounts receivable?
A. 5%.
B. 12.5%.
C. 42.7%.
D. 60%.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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23. Analytical procedures are required at the risk assessment stage and as:
A. Tests of internal control.
B. Substantive procedures.
C. Procedures near the end of the audit.
D. Computer generated procedures.

24. During financial statement audits, auditors seek to restrict which type of risk?
A. Control risk.
B. Detection risk.
C. Inherent risk.
D. Account risk.

25. Which of the following groups are not considered a specialist by AICPA
Professional Standards?
A. Appraisers.
B. internal auditors.
C. Engineers.
D. Geologists.

26. A CPA wishes to use a representation letter as a substitute for performing other audit
procedures. Doing so:
A. Violates professional standards.
B. Is acceptable, but should only be done when cost justified.
C. Is acceptable, but only for non-public clients.
D. Is acceptable and desirable under all conditions.

27. Which of the following best describes the problem with the use of published industry
averages for analytical procedures?
A. Lack of comparability.
B. Lack of sufficiency. C.
Lack of accuracy.
D. Lack of availability.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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28. In auditing an asset valued at fair value, which of the following potentially provides the
auditor with the strongest evidence?
A. A price for a similar asset obtained from an active market.
B. An appraisal obtained discounting future cash flows.
C. Management's judgment of the cost to purchase an equivalent asset.
D. The historical cost of the asset.
29. An auditor should expect that fair value is the price that would be received to sell an asset
in an orderly transaction between the market participants at the:
A. Acquisition date of the asset.
B. Audit report date.
C. Expected replacement date of the asset.
D. Measurement date (ordinarily the date of the financial statements).

30. Which of the following best describes the reason that auditors are concerned with the
detection of related party transactions?
A. The financial statements must often be adjusted for the effects of material related party
transactions.
B. Material related party transactions must be disclosed in the notes to the financial
statements.
C. The substance of related party transactions will differ from their form.
D. In a related party transaction one party has the ability to exercise significant influence over
the other party.

31. Which of the following is not a basic procedure used in an audit?

A. Risk assessment procedures.
B. Substantive procedures.
C. Tests of controls.
D. Tests of direct evidence.

32. Which of the following is not a financial statement assertion relating to account balances?

A. Completeness.
B. Existence.
C. Rights and obligations.
D. Recorded value and discounts.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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33. Which of the following is generally true about the sufficiency of audit evidence?
A. The amount of evidence that is sufficient varies directly with the acceptable risk of
material misstatement.

B. The amount of evidence concerning a particular account varies inversely with

the materiality of the account.

C. The amount of evidence concerning a particular account varies inversely with the
inherent risk of the account.

D. When evidence is appropriate with respect to an account it is also sufficient.

34. Which of the following is true about analytical procedures?

A. Performing analytical procedures results in the most reliable form of evidence.

B. Analytical procedures are tests of controls used to evaluate the quality of a

client's internal control.

C. Analytical procedures are used for planning, but they should not be used to
obtain evidence as to the reasonableness of specific account balances.

D. Analytical procedures are used in risk assessment, as a substantive procedure

for specific accounts, and near the completion of the audit of the audited
financial statements.

35. Which of the following is a basic approach often used by auditors to evaluate
the reasonableness of accounting estimates?
A. Confirmation.

B. Observation.

C. Reviewing subsequent events or transactions.

D. Analyzing corporate organizational structure.

36. An auditor is performing an analytical procedure that involves comparing a

client's account balances over time. This technique is referred to as:
A. Vertical analysis.

B. Horizontal analysis.

C. Cross-sectional analysis.

D. Comparison analysis.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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37. An auditor is performing an analytical procedure that involves comparing a client's
ratios with other companies in the same industry. This technique is referred to as:

A. Vertical analysis.

B. Horizontal analysis.

C. Cross-sectional analysis.

D. Comparison analysis.

38. An auditor is performing an analytical procedure that involves developing common-

size financial statements. This technique is referred to as:
A. Vertical analysis.

B. Horizontal analysis.

C. Cross-sectional analysis.

D. Comparison analysis.

39. Which of the following is not a basic approach often used by auditors to evaluate
the reasonableness of accounting estimates?
A. Confirmation of amounts.

B. Review of management's process of development.

C. Independent development of an estimate.

D. Review of subsequent events.

40. The audit time budget is an example of:

A. A supporting schedule.

B. An administrative working paper.

C. A lead schedule.

D. A corroborative working paper.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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41. A schedule set up to combine similar general ledger accounts, the total of which
appears on the working trial balance as a single amount, is referred to as a:
A. Supporting schedule.

B. Lead schedule.

C. Corroborating schedule.

D. Reconciling schedule.

42. Which of the following is not a function of working papers?

A. Provide support for the auditors' report.

B. Provide support for the

accounting records.

C. Aid partners in planning and conducting future audits.

D. Document staff compliance with generally accepted auditing standards.

43. A schedule listing account balances for the current and previous years, and columns
for adjusting and reclassifying entries proposed by the auditors to arrive at the final
mount that will appear in the financial statement, is referred to as a:
A. Working trial balance.

B. Lead schedule.

C. Summarizing schedule.

D. Supporting schedule.

44. The auditors use analytical procedures during the course of an audit. The most
important phase of performing these procedures is the:
A. Vouching of all data supporting various ratios.

B. Investigation of significant variations and unusual relationships.

C. Comparison of client-computed statistics with industry data on a quarterly and full-year

basis.

D. Recalculation of industry date.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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45. The auditors must obtain written client representations that normally should be signed by:
A. The president and the chairperson of the board.

B. The treasurer and the internal auditor.

C. The chief executive officer and the chief financial officer.

D. The corporate counsel and the audit committee chairperson.

46. Which of the following ultimately determines the specific audit procedures necessary to
provide independent auditors with a reasonable basis for the expression of an opinion?
A. The audit time budget.

B. The auditors' judgment.

C. Generally accepted accounting quality standards.

D. The auditors' working papers.

47. Failure to detect material dollar errors in the financial statements is a risk which
the auditors primarily mitigate by:
A. Performing substantive procedures.

B. Performing tests of controls.

C. Assessing control risk.

D. Obtaining a client representation letter.

48. An independent auditor finds that the Simmer Corporation occupies office space, at no
charge, in an office building owned by a shareholder. This finding indicates the
existence of:
A. Management fraud.

B. Related party transactions.

C. Window dressing.

D. Weak internal control.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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49. Which of the following would not necessarily be considered a related party transaction?
A. Payment of a bonus to the president.

B. Purchases from another corporation that is controlled by the corporation's

chief stockholder.

C. Loan from the corporation to a major stockholder.

D. Sale of land to the corporation by the spouse of a director.

50. The date of the management representation letter should coincide with the:
A. Date of the auditor's report.

B. Balance sheet date.

C. Date of the latest subsequent event referred to in the notes to the financial statements.

D. Date of the engagement agreement.

51. An example of an analytical procedure is the comparison of:

A. Financial information with similar information regarding the industry in which the
entity operates.

B. Recorded amounts of major disbursements with appropriate invoices.

C. Results of a statistical sample with the expected characteristics of the actual population.

D. EDP generated data with similar data generated by a manual accounting system.

52. When considering the use of management's written representations as audit evidence about
the completeness assertion, an auditor should understand that such representations:
A. Complement, but do not replace, substantive procedures designed to support the
assertion.

B. Constitute sufficient evidence to support the assertion when considered in

combination with a moderate assessed level of control risk.

C. Are generally sufficient audit evidence to support the assertion regardless of

the assessed level of control risk.

D. Replace the assessed level of control risk as evidence to support the assertions.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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53. Which of the following expressions is least likely to be included in a
client's representation letter?
A. No events have occurred subsequent to the balance sheet date that require
adjustment to, or disclosure in, the financial statements.

B. The company has complied with all aspects of contractual agreements that would have
a material effect on the financial statements in the event of noncompliance.

C. Management acknowledges responsibility for illegal actions committed by employees.

D. Management has made available all financial statements, including notes.

54. Which of the following statements is generally correct about audit evidence?
A. The auditor's direct personal knowledge, obtained through observation and inspection,
is more persuasive than information obtained indirectly from independent outside
sources.

B. To be appropriate, audit evidence must be sufficient.

C. Accounting data alone may be considered sufficient appropriate audit evidence to

issue an unqualified opinion on financial statements.

D. Appropriateness of audit evidence refers to the amount of corroborative evidence to be

obtained.

55. Which of the following statements relating to audit evidence is the most
accurate statement?
A. Audit evidence gathered by an auditor from outside an enterprise is reliable.

B. Accounting data developed under satisfactory conditions of internal control are

more relevant than data developed under unsatisfactory internal control conditions.

C. Oral representations made by management are not valid evidence.

D. The auditor must obtain sufficient appropriate audit evidence.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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56. Which of the following is not a typical analytical procedure?
A. Study of relationships of the financial information with relevant nonfinancial
information.

B. Comparison of the financial information with similar information regarding

the industry in which the entity operates.

C. Comparison of recorded amounts of major disbursements with appropriate invoices.

D. Comparison of the financial information with budgeted amounts.

57. Which of the following is not a primary purpose of audit working papers?
A. To coordinate the examination.

B. To assist in preparation of the audit report.

C. To support the financial statements.

D. To provide evidence of the audit work performed.

58. Concerning retention of working papers, the Sarbanes-Oxley Act:

A. Has no provisions.

B. Requires permanent retention.

C. Requires retention for at least 7 years.

D. Requires retention for a period of 4 or less years.

59. During an audit engagement pertinent data are prepared and included in the audit
working papers. The working papers primarily are considered to be:
A. A client-owned record of conclusions reached by the auditors who performed the
engagement.

B. Evidence supporting financial statements.

C. Support for the auditors' representations as to compliance with generally accepted

auditing standards.

D. A record to be used as a basis for the following year's engagement.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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60. Although the quantity, type, and content of working papers will vary with
the circumstances, the working papers generally would include the:
A. Copies of those client records examined by the auditor during the course of the
engagement.

B. Evaluation of the efficiency and competence of the audit staff assistants by the
partner responsible for the audit.

C. Auditor's comments concerning the efficiency and competence of client

management personnel.

D. Auditing procedures followed and the testing performed in obtaining audit evidence.

61. The permanent file section of the working papers that is kept for each audit client
most likely contains:
A. Review notes pertaining to questions and comments regarding the audit
work performed.

B. A schedule of time spent on the engagement by each individual auditor.

C. Correspondence with the client's legal counsel concerning pending litigation.

D. Narrative descriptions of the client's accounting procedures and controls.

62. Working papers that record the procedures used by the auditor to gather evidence
should be:
A. Considered the primary support for the financial statements being examined.

B. Viewed as the connecting link between the books of account and the financial
statements.

C. Designed to meet the circumstances of the particular engagement.

D. Destroyed when the audited entity ceases to be a client.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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63. In general, which of the following statements is correct with respect to ownership,
possession, or access to working papers prepared by a CPA firm in connection with
an audit?
A. The working papers may be obtained by third parties where they appear to be
relevant to issues raised in litigation.

B. The working papers are subject to the privileged communication rule which, in
a majority of jurisdictions, prevents third-party access to the working papers.

C. The working papers are the property of the client after the client pays the fee.

D. The working papers must be retained by the CPA firm for a period of ten years.

64. Confirmation would be most effective in addressing the existence assertion for the:
A. Addition of a milling machine to a machine shop.

B. Payment of payroll during regular course of business.

C. Inventory held on consignment.

D. Granting of a patent for a special process developed by the organization.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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65. In preparing for an audit of the retail footwear division of a major retail organization,
the auditor gathered the following information about the organization's stores:

All Northeast Southwest Mid-Central

Stores Region Region Region
Average sales per store $736,000 $840,000 $760,000 $630,000
Average cost of goods sold per store $375,000 $420,000 $325,000 $395,000
Number of stores 48 13 18 17
Average square feet per store 1,800 2,200 1,850 1,550
Average sales per full-time employee $137,000 $152,000 $140,000 $122,000
Average wage related expense per store $98,000 $102,000 $82,000 $112,000
Average net profit contribution per store $238,000 $285,000 $320,000 $115,000

An auditor performs analytical procedures that involve comparing the gross margins of
various divisional operations with those of other divisions and with the individual
division's performance in previous years. The auditor notes a significant increase in the
gross margin at one division. The auditor does some preliminary investigation and also
notes that there were no changes in products, production methods, or divisional
management during the year. Based on the above information, the most likely cause of
the increase in gross margin would be:

A. An increase in the number of competitors selling similar products.

B. A decrease in the number of suppliers of the material used in manufacturing

the product.

C. An overstatement of year-end inventory.

D. An understatement of year-end accounts receivable.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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66. Management is concerned about the lower level of profitability in the Mid-Central
Region. Which of the following would be a reasonable possible explanation(s) of
the lower profitability for the Mid-Central Region?
I. The lower number of stores in the Mid-Central Region.
II. Sales employees are not as productive in generating sales as those in other regions.
III. The Mid-Central Region has a lower gross margin.

A. I only.

B. II only.

C. II and III only.

D. I, II and III.

67. Based on the previous information, which of the following preliminary conclusions
can the auditor use as a basis for further investigations?
A. Sales per store are directly related to the size of the store.

B. Sale clerks are less productive in larger size stores.

C. Gross margin is directly related to the size of the store.

D. Average square feet of store correlates with the number of stores in the district.

68. Which of the following statements is not correct regarding the auditor's further analysis?
A. The Mid-Central Region has fewer average full-time equivalent employees per
store than the other regions per store.

B. The other regions all generate higher sales per square foot than the Mid-
Central Region.

C. The Mid-Central Region has the highest average wages per full-time
equivalent employee.

D. The largest contributor to total corporate profits is the Southwest Region.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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69. Management has centralized purchasing and uses a model based upon previous year's sales
with adjustments for trends in the market place (e.g., the trend to more casual shoes).
A staff auditor has suggested that the centralized purchasing may be one of the reasons
for the lower level of profitability in the Mid-Central Region. Which of the following
would be the best single audit procedure to address the staff auditor's assertion?
A. Take a sample of receiving documents at stores and trace to purchase orders to
determine the length of time between the purchase and delivery of the goods.

B. Interview store managers in the Mid-Central Region to determine their attitude toward
centralized purchasing.

C. Perform an inventory count at selected stores in the Mid-Central Region and

determine if adjustments are needed to the perpetual records.

D. Perform a product-line analysis of sales and purchases in the Mid-Central Region and
compare with other regions.

70. What type of transactions ordinarily have high inherent risk because they involve
management judgments or assumptions in formulating accounting balances?
A. Estimation.

B. Nonroutine.

C. Qualified.

D. Routine.

71. Assertions with high inherent risk are least likely to involve:
A. Complex calculations.

B. Difficult accounting issues.

C. Routine transactions.

D. Significant judgment by management.

72. The date on which no information may be deleted from audit documentation is the
A. Client's year-end.

B. Documentation completion date.

C. Last date of significant fieldwork.

D. All of these are incorrect in that no information may ever be deleted from audit
documentation.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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73. In evaluating an entity's accounting estimates, one of the auditor's objectives is
to determine whether the estimates are
A. Prepared in a satisfactory control environment.

B. Consistent with industry guidelines.

C. Based on verifiable objective assumptions.

D. Reasonable in the circumstances.

74. In obtaining sufficient appropriate audit evidence, the work of which type or types
of specialists may be relied upon?

Client Engaged Auditor Engaged

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

A. Option A

B. Option B

C. Option C

D. Option D

75. Which of the following is most likely to be considered an analytical procedure?

A. Testing purchases at year-end to determine they were recorded in the proper period.

B. Comparing inventory balances to recent

sales activities.

C. Selecting a sample of year-end receivables for confirmation.

D. Reconciling physical counts of inventory to perpetual records.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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76. An unexpected economic downturn is likely to have which effect on inventory turnover.
A. Increase.

B. Decrease.

C. No effect.

D. Each of these replies is equally likely.

77. Which of the following is most consistent with an increase in the ratio of debt to equity?
A. Payment of a required principal payment on long-term debt.

B. Repurchase of a portion of the company's outstanding common stock.

C. Higher than expected profits due to a decrease in cost of goods sold.

D. Payment of most accounts receivable immediately prior to year-end using a portion

of the company's cash.

78. Fraudulent sales and accounts receivables recorded at year-end (with no cost of
goods sold entry) will:
A. Decrease recorded net income.

B. Decrease the current ratio.

C. Increase days of sales in accounts receivable.

D. Increase year-end recorded inventory.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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Essay Questions

79. For each of the audit procedures listed below select the type of audit procedure, if any, that
the auditor performed. A type of audit procedure may be selected once or not at all.

Type of audit
Audit Procedures
procedure
During the physical inventory count, the auditor requested
Analytical
A. that certain containers of inventory items be opened to ensure 1. procedures
they were not empty.
During a site visit to a branch warehouse, the auditor noted External
B. unauthorized personnel have access to the inventory. 2. confirmation
The auditor obtained a copy of the company’s accounting
C. manual and read the section on inventory to prepare for the 3. Inquiry
physical inventory observation.
The auditor sent a letter to the company’s outside attorney
Inspection of
accompanied by management’s request for information
D. concerning pending or threatened litigation, claims, and 4. records or
assessments. documents
The auditing firm’s computer assisted audit specialist
Inspection of
E. obtained an electronic billing file from the company and 5. tangible assets
checked the accuracy of the summarized billings file.
The auditor selected a sample of invoices and agreed the
F. vendor to the approved vendor list, as had been required by 6. Observation
the client's internal control procedures.
The auditor scanned the repairs and maintenance account for
G. unusually large amounts. 7. Recalculation
8. Reperformance

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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80. Analytical procedures are substantive procedures that may be used to provide
evidence about specific accounts and classes of transactions.

a. Describe three major types of comparisons the auditor might make in

performing analytical procedures.
b. At what stages of the audit are analytical procedures performed and what purpose
do they serve at each stage?

A.Comparisons made in performing analytical procedures include:

• Comparisons with prior years' data.
• Comparisons with budgets and forecasts.
• Comparisons with industry statistics.
• Comparisons with nonfinancial data.
• Comparisons of predictable relationships based on past history.

B. Analytical procedures may be performed:

1. During risk assessment to identify items that require more audit attention (required
analytical procedures).
2. Throughout the audit as a substantive procedure for accounts or classes of transactions.
3. Near the end of the audit to corroborate audit evidence obtained during the audit to assist
the auditor in drawing reasonable conclusions (required analytical procedures).

81. Audit working papers are an integral part of an examination in accordance with
generally accepted auditing standards.

a. Describe three major functions of the audit working papers.

b. Distinguish between the permanent working paper file and the current working
paper file.

a. The functions of audit working papers include:

• Provide a means of assigning and coordinating audit work.
• Aid in review of the work.
• Provide support for the auditors' report.
• Document compliance with generally accepted auditing standards.
• Aid in planning and conducting future audits.

b. The permanent file is used to organize working papers of continuing audit interest over a
number of years. The current file contains the administrative and evidence working papers
for the year under examination.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
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82. The following is an audit working paper prepared by an assistant on the Williams audit:

Prepared by ___
Reviewed by ___

Williams Inc.
Bank Confirmation-General Account
12/31/0X
Balance per Bank @
$20,200.22 ♥
12/31/0X
Deposit in Transit – per A-1-
2,000.00 Γ
2
Outstanding Checks – per A-
(5,200.00)
1-3
Other – Note Collected by (10,000.00)
Bank √
Bank Service Charge (9.50)
Balance per Books @ $8,990.69 ♥
12/31/0X

ƒ Column footed.

√ Amount agrees to amount recorded as a deposit on the bank statement and

description agrees with receipt enclosed with 12/31/0X bank statement. This note is the
Wilde note receivable that was recorded as a receipt by the client in the cash receipts
journal on 1/3/0X. The receivable was appropriately credited and properly reflected in
the January cash receipts journal. No adjustment needed as bank and books simply
record this in different periods.

Γ Agreed to 12/31/0X bank statement.

♥ Agreed to general ledger.
A–1

Required:
Prepare a list of review points as the preparer of this working. You may assume that any
other working papers referred to appropriate. You will receive credit for proper points
you bring up and lose credit for improper ones and omissions.

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Chapter 05: Audit Evidence and Documentation Test Bank Assignements
Prepared by: Mohammad Maruf Sezar
Answer:

The working paper's deficiencies include:

 "prepared by" is not initialed ("Rev. by" isn't either, but since we are still performing
the review it need not be).
 Title of schedule is wrong, this is not a bank confirmation, it is a bank reconciliation.
 The by Balance per Bank is incorrect for two reasons. First, the balance would not be
in the general ledger. Second, the balance per bank should be agreed to either a bank
confirmation, bank statement, or both.
 The bank service charge should be added, not subtracted.
 Concerning balance per books, two things are wrong. First it is not footed in that the
 is missing. Second, it does not foot properly.
 The tickmark ;is incorrect relating to the deposit in transit. If it was on the
12/31/0X bank statement, it would not be a deposit in transit.
 The description is not correct since it should be recorded as a cash receipt as
of 12/31/OX if the bank collected it prior to year-end. It is handled on the
reconciliation properly, but the final comment is wrong.

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