Question 1.

For each of the following combinations of audit evidence, rank the items in terms of their reliability:

1 A Bank statement from the entity's records

B Bank statement sent directly to the auditor

C Cash at bank ledger

2 D Audit firm conducts the physical count of inventory

E Internal audit reports on the physical count of inventory

F Auditor supervises internal audit conducting the physical count of inventory

3 G Management provides a representation letter on the accuracy of valuations

H The auditor receives a letter from the agent who conducted the valuation confirming its accuracy

I The auditor hires an independent agent to confirm the valuation

4

J The auditor conducted an inventory count two months before reporting date

K Internal audit conducted an inventory count 3 days before reporting date

L   Internal audit conducted a supervised inventory count on reporting date

5

M Management assured the auditor of the probable outcome of a pending court case

N The entity's lawyers assured the auditor of the probable outcome of a pending court case

O The auditor received a representation from the entity's lawyers regarding the probable outcome of a pending court case

Question 2

From the following descriptions, determine what type of auditing procedure is being conducted:

1   the auditor watched two employees open the safe with their respective codes.

2   the amount of depreciation on the company vehicles was recalculated.

3   the auditor confirmed the journal and ledger entries for a purchases receipt were correctly made.

4   The auditor went to the entity's warehouse to examine the existence and condition of inventory.

5   The auditor took a stocktake of inventory on the shelf.

6   The auditor used the computer to randomly select a sample of accounts receivable for confirmation.

7   The auditor receives a letter from the entity's lawyers regarding the total legal fees charged for the period.

8   The auditor sent a letter to the entity's bank asking about the entity's debt covenants.

9   The auditor found the sales invoice and then sales order for an entry made in the accounts receivable ledger.

10 Expected wages expense was determined by proportionately adjusting the previous year's wages upwards by the increase in sales and then this was confirmed with the current period's figure for wages expense.