CHAPTER 7

Audit Evidence

Objective
1. ______________ examination connotes critical examination and scrutiny of
the accounting statements of the undertaking with a view to assessing how far
the statements present True and fair view
2. Audit Evidence
____________________ may be defined as the information used by the
auditor in arriving at the conclusions on which the auditor’s opinion is based
3. Audit evidence includes both
al records
a. information contained in the ______________________and
b. other info that authenticates al records
Test of Controls
4. ________________________- are designed to evaluate the operating
effectiveness of controls in preventing, or detecting and correcting, material
misstatements at the assertion
________ level
-

substantive Procedure
5. ____________________________ . are designed to detect material
assection
misstatements at the ______________ level. They comprise Procedure
-

Test of details
________________ ARP or Substantive analytical
and ____________________
·

(SAP) :

6. The reliability of audit evidence is increased when it is obtained from

outside
independent sources ________________ the entity.
7. The reliability of audit evidence that is generated internally is increased when
controls
the related _________________ imposed by the entity are effective.
sufficient& appropriate
8. The auditor has to obtain _______________________________ audit evidence
quarling
9. Sufficiency is the measure of the _______________ of audit evidence.
-

qually
10.Appropriateness is the measure of the ___________ of audit evidence
Cumulative
11.A.E is _______________
. in nature and is primarily obtained from audit
procedures performed during the course of the audit
Less
12.______________ evidence would be required in case assertions that have a
-

lower risk of material misstatement

/

Risk Abesement Procedure

13._____________________________________ refer to the audit procedures
:

performed to obtain an understanding of the entity and its environment,

including the entity’s internal control, to identify and assess the risks of material
 misstatement, whether due to fraud or error, at the financial statement and
assertion levels.
⑭ Assections
14.__________________ refer to representations by management, explicit or
otherwise, that are embodied in the financial statements
⑭ Audit trail
15.An ___________________ .

is a documented flow of a transaction

⑳
16.Internal audit function refers to A function of an entity that performs
-

assurance and consulting activities designed to evaluate and improve the

effectiveness of the
e
a.
b.
Entitygovernan
Process
c. Internal Control
,

objectivity
:

⑰ 17.__________________ refers to the ability to perform those tasks without

allowing bias, conflict of interest or undue influence of others to override
professional judgments.
18.Competence of the internal audit function refers to the attainment and
-

maintenance ofI -
knowledge and skills of the function as a whole at the level
-

required to enable assigned tasks to be performed diligently and in accordance

with applicable professional standards.
19.According to SA 530 “Audit sampling”, ‘audit sampling’ refers to the
100 %
application of audit procedures to less than ____________ of items within a
population
Population-
20._______________ refers to the entire set of data from which a sample is
selected
21.The individual items that make up the population are known as
Pampling unit
__________________

④ Ed
random
22.Statistical sampling is an approach to sampling that has the __________
&

P selection of the sample units; and the use of probably

-

_____________ theory to
evaluate sample results
23.The non-statistical sampling is criticized on the grounds that it is neither
objective
________________ scientific
nor ___________________
24.Dividing a population into discrete sub population which have identifying
stratification
-
characteristics is called as ___________________________
25.In value weighted selection, the sample size, its selection and evaluation will
units (amounts)
monetary
result in a conclusion in ______________________________. .

-
 no effect
26.There will be _______________________ on sample size due to number of
sampling units in the population
Haphazend
27._____________________selection,
.

in which the auditor selects the sample

without following a structured technique
* 28.Block Sampling: This method involves selection of a block(s) of
contiguous
_______________
- items from within the population
29.The extent of substantive procedures may need to be increased when the
unsatisfactory
results from tests of controls are ____________________________
30.When deviations from controls upon which the auditor intends to rely are
specific .
detected , the auditor shall make _______________ inquiries to understand
these matters and their potential consequences
31.The objective of the auditor in SA 501 is to obtain sufficient appropriate audit
evidence regarding the:
Existence
a) ________________ Conditio
& _______________ of inventory;
Completened
b) _____________________
&
of litigation & claims involving the entity; &
Pregn & disclose of segment information in accordance with the
c) ______________________
applicable financial reporting framework.
32.Physical verification of inventories is the responsibility of the
management
_________________________
33.If the auditor assesses a risk of material misstatement regarding litigation or
claims that have been identified, the auditor need to seek direct communication
external legal Counsel
with the entity's ______________________________________
External Confirmation
34.__________________________is Audit evidence obtained as a direct written
response to the auditor from a third party CSA-505)
·

-
-

35.POSITIVE CONFIRMATION REQUEST - A request that the confirming party

respond directly to the auditor indicating whether the confirming party
or disagree ·
___________________________ with the information in the request, or
agree
providing the requested information
36.NEGATIVE CONFIRMATION REQUEST - A request that the confirming party
respond directly to the auditor only if the confirming party
disagrees
_____________________
- with the information provided in the request.
37.A response that indicates a difference between information requested to be
confirmed and information provided by confirming party is
exception
______________________
-

38.A failure of the confirming party to respond, or fully respond, to a positive

confirmation request, or a confirmation request returned undelivered is

[S
____________________
non-response.
39.Initial Audit Engagement – An engagement in which Prior Period FS:
not audited
a) ___________________________; or
predeceba
b) Audited by a _________________ auditor.(previous )
40.As per the Standard on Auditing (SA) 520 "Analytical Procedures", the term
financial
"analytical procedures" means evaluations of ________________ information
financial
through analysis of plausible relationships among both _______________ &
non-financial data.
________________
trend
41._________________ analysis is a commonly used technique in the comparison
of current data with the prior period balance or with a trend in two or more
- - -
T
- -

prior period balances.

42.Substantive Analytical Procedures are generally more applicable to large volume
predictable
of transactions that tend to be more _________________ over time.
over reliang
43.Risk of _________________ on Test of Controls & Risk of
incorrect acceptance in case of substantive procedures - Effects the
_____________________
effectiveness of audit. It leads to=>
erroneous audit opinion.
true representatis of entire population
44.Sample need to be ______________________
45.A monetary amount set by the auditor in respect of which the auditor seeks to
obtain an appropriate level of assurance that the monetary amount set by the
auditor is not exceeded by the actual misstatement in the population is known
Holerable mis-statement
-

as___________________________
46.Anomaly may be defined as a misstatement or deviation that is demonstrably
-

not representative of misstatements or deviations in a population.

Projected
47.In the case of tests of details, the _________________ misstatement plus
an amolocus
__________________
-
misstatement, if any, is the auditor's best estimate of
misstatement in the population.
48.When the projected misstatement plus anomalous misstatement, if any,
tolerable
exceeds ____________________
. misstatement, the sample does not provide a
reasonable basis for conclusions
49.As per the requirement of SA 530, if the audit procedure is not applicable to the
selected item, the auditor shall perform the procedure on a
replacement item
_________________