Chapter 2 MC solutions Essay

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SOLUTIONS FOR MULTIPLE‑CHOICE QUESTIONS

2.26 a. Correct Gathering audit evidence is a component of the performance principle. b. Incorrect While reasonable assurance is related to gathering audit evidence, this is not one of the categories of principles c. Incorrect The reporting principle relates to the contents of the auditors’ report d. Incorrect The responsibilities principle relates to the personal integrity and professional qualifications of auditors.

2.27 a. Incorrect Due care is related to the ethical requirements of auditors. b. Incorrect Both independence in fact and independence in appearance are related to the ethical requirements of auditors. c. Incorrect Both independence in fact and independence in appearance are related to the ethical requirements of auditors.
d. Correct While professional judgment is part of the responsibilities principle, it is not related to the ethical requirements of auditors.

2.28 a. Incorrect GAAS relates to the conduct of audit engagements and not overall professional services. b. Correct Standards within a system of quality control are firm- (rather than auditor-) related. c. Incorrect Generally accepted accounting principles are not an element related to professional services. d. Incorrect International auditing standards govern the conduct of audits conducted across international borders.

2.29 a. Incorrect Relying more extensively on external evidence is related to the appropriateness (or quality) of evidence. b. Incorrect Focusing on items with more significant financial effects on the financial statements is related to materiality. c. Correct Professional skepticism is characterized by appropriate questioning and a critical assessment of audit evidence. d. Incorrect Financial interests are most closely related to auditors’ independence.

2.30 a. Correct Auditors study internal control to determine the nature, timing, and extent of further audit procedures. b. Incorrect Consulting suggestions are secondary objectives in an audit. c. Incorrect Information about the entity’s internal control is, at best, indirect evidence about assertions in the financial statements. d. Incorrect Information about the entity’s internal control provides auditors with little opportunity to learn about changes in accounting principles.

2.31 a. Incorrect External evidence is considered to be more reliable than the inquiry of management in choice (b). b. Correct Inquiry of management is a form of internal evidence, which is the least reliable form of evidence. c. Incorrect Auditor-prepared evidence is considered to be the most reliable form of evidence.
d. Incorrect Because the entity’s legal counsel is an external party, this form of evidence is more reliable than the inquiry of management in choice (b).

2.32 a. Incorrect Inquiry of management is the least reliable form of evidence. b. Incorrect Although external evidence is considered to be highly reliable, auditors’ personal knowledge (choice d) provides the most reliable form of evidence c. Incorrect While auditor evaluation of client procedures is a reliable form of evidence, this would not be relevant to verifying the existence of newly-acquired equipment.
d. Correct Auditors’ personal knowledge through physical observation provides the most reliable form of evidence; in addition, unlike evaluation of client procedures (choice c), this relates directly to verifying the existence of newly-acquired equipment.

2.33 a. Incorrect Inquiry of client personnel is internal evidence, which is the least reliable form of evidence. b. Incorrect Prenumbered client purchase orders are an internal form of evidence, which is the least reliable form of evidence c. Incorrect While sales invoices are documents created by external parties, the fact that these documents were received from client personnel reduces their reliability. d. Correct Because the statements were received directly from outside parties, this is a more
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