Question

1. The following are several multiple-choice questions adapted from the CPA exam that concern audit documentation. For each question, selected the best answer and then explain why it is better than all the alternatives. Your explanations should address all the possible alternatives presented in the question.

1. Which of the following is not a primary purpose of audit documentation?
   1. To coordinate the audit.
   2. To assist in preparation of the audit report.
   3. To support the financial statements.
   4. To provide evidence of the audit work performed.

Hint - Stay focused on what an auditor's responsibilities are versus what the client's are.

Answer:

Explanation:

2. During an audit engagement, pertinent data are compiled and included in the audit files. The audit files primarily are considered to be
   1. a client-owned record of conclusions reached by the auditors who performed the engagement.
   2. evidence supporting financial statements.
   3. support for the auditor's representations as to compliance with auditing standards.
   4. a record to be used as a basis for the following year's engagement.

Hint - Same as above. Stay focused on the auditor's responsibilities.

Answer:

Explanation:

Answer 1

a. The correct answer is to support the financial statements (iii). As an initital step, audit documentation can be used to coordinate the audit, further it helps to provide evidence of audit work performed and assisting in preparation of the report. These serve as the main purpose of audit documentation however supporting financial statement does not happen to be the primary purpose.

b. The correct answer is support for the auditor's representations as to compliance with auditing standards (iii). As per auditing standard 3, it is a written record which provides support for the representations in the auditor's report with regards to compliance with auditing standards. It pertains mainly to current year and less from following year's engagement. All other reason happen to be secondary and does not neccesarily relate to main objective.