Reference no: EM132609454

Question 1: The reliability of audit evidence is affected by its source and its nature. Which of the following statements about the sources or nature of evidence is true?

a) In comparing the three sources of audit evidence, externally generated evidence held by the client will generally be the most reliable.

b) Of the three categories representing the nature of evidence, natural evidence is the most reliable, followed by created evidence and, finally, rational argument.

c) Of the three categories representing the nature of evidence, natural evidence is the most reliable, followed by rational argument and, finally, created evidence.

d) In comparing the three sources of audit evidence, client-generated evidence will be the most reliable and will depend on the effectiveness of the client's internal controls.

Question 2: Which of the following is considered a test of controls?

a) Recalculating the allowance for doubtful accounts using the rates established by management

b) Recalculating the gain/loss on disposal of assets, agreeing the proceeds to sales invoices, and agreeing net book value to the capital asset register

c) Selecting a sample of shipping documents to ensure there are no missing numbers

d) Vouching a sample of current balances on the aged trial balance to sales invoices to determine proper aging