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Audit one
Terms in this set (43)
Which of the following would be considered an assurance engagement ?
A) Giving an opinion on a prize promoter's claims about the amount of sweepstakes prizes awarded in the past.
B) Giving an opinion on the conformity of the financial statements of a university with
generally accepted accounting principles.
C) Giving an opinion on the fair presentation of a newspaper's circulation data.
D) Giving assurance about the average drive length achieved by golfers with a client's golf balls.
E) All of the above.
E) all of the above
It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that
A) In audits
of financial statements, the auditor acts exclusively in the capacity of an auditor.
B) A potential conflict of interest always exists between the auditor and the management of the enterprise under audit.
C) Financial statements and financial data are verifiable.
D) The professional status of the independent auditor imposes commensurate professional obligations.
B) A potential Conflict of interest always exists between the auditor and the management of the enterprise under audit.
In an attestation engagement, a CPA practitioner is engaged to
A) Prepare a written report containing a conclusion about the reliability of a management assertion.
B) Compile a company's financial forecast based on management's assumptions without expressing any form of assurance.
C) Give expert testimony in court on particular facts in a corporate income tax controversy.
D) Prepare a tax return using
information the CPA has not audited or reviewed.
A) Prepare a written report containing a conclusion about the reliability of a management assertion.
According to the AICPA, the purpose of an audit of financial statements is to
A) Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the U.S.
Securities and Exchange Commission.
B) Enhance the degree of confidence that intended users can place in the financial statements.
D) Obtain systematic and objective evidence about financial assertions and report the results to interested users.
E) Express an opinion on the fairness with which they present financial position, results of operations, and cash flows inconformity with accounting standards promulgated by the Financial Accounting Standards Board.
B) Enhance the degree of confidence that intended users can place in the financial statements.
Bankers who are processing loan applications from companies seeking large loans will probably ask for financial statements audited by an independent CPA because...
A) Financial statements are too complex for the bankers to analyze themselves.
B) They are too far away from company headquarters to perform accounting and auditing themselves.
C) The
consequences of making a bad loan are very undesirable.
D) They generally see a potential conflict of interest between company managers who want to get loans and the bank's needs for
reliable financial statements.
D) They generally see a potential conflict of interest between company managers who want to get loans and the banks needs for reliable financial statements.
The Sarbanes-Oxley Act of 2002
prohibits public accounting firms from providing which of the following services to an audit client?
A) Bookkeeping services.
B) Internal audit services.
C) Valuation services.
C)All of the above.
C) All of the above
Independent auditors of financial statements perform audits that reduce
A) Information risk faced by investors.
B)Complexity of financial statements.
C) Business risks faced
by investors.
D) Timeliness of financial statements
A) information risk
The organization primarily responsible for ensuring that public officials are using public funds efficiently, economically, and effectively is the
A) Central Internal Auditors (CIA).
B) Government Accountability Office (GAO).
C)Securities and Exchange Commission (SEC).
D) Governmental Internal Audit Agency
(GIAA).
B) Government Accountability Office (GAO)
Jones, CPA, is planning the audit of Rhonda's Company. Rhonda verbally asserts to Jones that all expenses for the year have been recorded in the accounts. Rhonda's representation in this regard
A) Is sufficient evidence for Jones to conclude that the completeness assertion is supported for expenses. B)Should be disregarded because it is not in writing.
C)
Can enable Jones to minimize the work on the gathering of evidence to support Rhonda's completeness assertion.
D)Is not considered a sufficient basis for Jones to conclude that all expenses have been recorded.
D) Is not considered a sufficient basis for Jones to conclude that all expenses have been recorded.
A risk to investors that a company's financial statements may be materially misleading is called
A)
Information risk.
B) Business risk.
C) Moral hazard.
D) Client acceptance risk.
A) information risk
The Sarbanes-Oxley Act of 2002 generally prohibits public accounting firms from
A) Acting in a managerial decision-making role for an audit client.
B)Auditing the firm's own work on an audit client.
C)Providing tax consulting to an audit client without audit committee approval.
D)All of the
above.
d)All of the above.
Which of the following best describes the relationship between auditing and attestation engagements?
A)Auditing is a subset of attestation engagements that focuses on the certification of financial statements.
B) Auditing is a subset of attestation engagements that focuses on providing clients with advice and decision support.
C) Attestation is a subset of auditing that
provides lower assurance than that provided by an audit engagement.
D) Attestation is a subset of auditing that improves the quality of information or its context for decision makers.
a) Auditing is a subset of attestation engagement that focuses on the certification of financial statements.
Which of the following best describes the focus of the following engagements?
Auditing Engagement
Attestation
Engagement
Assurance Engagement
Consulting Services Engagement
d)
Financial statements
Financial information
Any information
Advice and decision support
The audit objective that all transactions and accounts that should be presented in the financial statements are in fact included is related to which of the PCAOB assertions?
A) Existence
B) Rights and obligations
C)
Completeness
D) Valuation
C) Completeness
Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?
A) The entity has rights to the inventory.
B) Inventory is properly valued.
C) Inventory is properly presented in the financial statements.
D)Inventory is
complete.
D) inventory is complete
In auditing the long-term debt account, an auditor's procedures most likely would focus primarily on management's assertion of
A) existence.
B) completeness.
C) allocation.
D)rights and obligations.
Completeness
When testing the completeness assertion for a liability account, an auditor ordinarily
works from the
A) financial statements to the potentially unrecorded items.
B) potentially unrecorded items to the financial statements.
C) accounting records to the supporting evidence.
D) trial balance to the subsidiary ledger.
B)Potentially unrecorded items to the financial statements.
The audit objective that all transactions are recorded in the proper period is related most closely to which of
the Audit Standards Board (ASB) transaction assertions?
A)Occurrence
B)Completeness
C)Cutoff
D)Accuracy
C) cutoff
The audit objective that all transactions are recorded in the proper account is related most closely to which one of the ASB transaction assertions?
A) Occurrence
B) Completeness
C) Accuracy
D) Classification
D) Classification
The audit objective that all balances include items owned by the client is related most closely to which one of the ASB balance assertions?
A)Existence
B) Rights and obligations
C) Completeness
D) Valuation
B) Rights and obligations
The audit objective that all balances include all items that should be recorded in that account is
related most closely to which one of the ASB balance assertions?
A)Existence
B)Rights and obligations
C)Completeness
D)Valuation
C)Completeness
Inquiries of warehouse personnel concerning possible obsolete or slow moving inventory items provide assurance about the ASB balance assertion of
A)completeness.
B)existence.
C)presentation.
D)valuation.
E)rights and
obligations.
D) valuation
What is the term used to identify the risk that the client's financial statements may be materially false and misleading?
A) Business risk
B) Information risk
C) Client risk
D) Risk assessment
B)Information risk
What type of evidence would provide the highest level of assurance in an
attestation engagement?
A) Evidence secured solely from within the entity
B)Evidence obtained from independent sources
C)Evidence obtained indirectly
D)Evidence obtained from multiple internal inquiries
B) evidence obtained from independent sources.
An auditor selected items from the client's detailed inventory listing (that agreed to the financial statements). During the physical inventory
observation, the auditor then found each item selected and counted the number of units on hand.
Assuming that the amount on hand was the same as the amount in the client's detailed inventory listing, this procedure most likely would provide evidence concerning management's assertion of
A)completeness.
B)valuation.
C)presentation and disclosure.
D)existence.
E) rights and obligations.
D)existence
Which
of the following questions would be inappropriate for an auditor to ask a client when exhibiting an appropriate level of professional skepticism while completing an audit procedure related to the internal control system?
A)What can go wrong in this process?
B)Which of your employees is a fraudster?
C)What else is important to know about this process? D)What happens when a key employee goes on vacation?
B)Which of your employees is a fraudster?
To be proficient as an auditor, a person must first be able to accomplish which of these tasks in a decision-making process?
A)Identify audit evidence relevant to the verification of assertions management makes in its unaudited financial statements and notes.
B)Formulate evidence-gathering procedures (audit plan) designed to obtain sufficient, competent evidence about assertions management makes in financial statements and
notes.
C)Recognize the financial assertions made in management's financial statements and footnotes.
D)Evaluate the evidence produced by the performance of procedures and decide whether management's assertions conform to generally accepted accounting principles and reality.
C) Recognize the financial assertions made in management's financial statements and footnotes.
Which of the following is an underlying
condition that in part creates the demand by users for reliable information?
A)Economic transactions that are numerous and complex
B) Decisions that are time-sensitive
C)Users separated from accounting records by distance and time
D)Financial decisions that are important to investors and users
E)All of these
E)All of these
What is the term used to identify the risk that the client's financial
statements may be materially false and misleading?
A)Business risk
B)Information risk
C)Client risk
D)Risk assessment
B) Information risk
Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of
A) objective judgment.
B)independent integrity.
C)professional
skepticism.
D)Impartial conservatism.
C) professional skepticism.
Accuracy
Assertion is that full amounts of all transactions were recorded without error.
Completeness
The assertion is that all business events to which the company was subjected were recorded.
cutoff
The assertion is that all transaction were recorded within the correct reporting period.
occurrence
the assertion is that recorded business transactions actually took place.
The assertion is that all reported asset, liability, and equity balances have been fully reported.
Completeness assertion
The assertion is that all account balances exist for asset, liability, and equity.
Existence assertion
The assertion is that the entity has the rights to the assets it owns and is obligated under its reported liabilities.
Rights and obligations assertion
The assertion is that all asset, liability, and equity balances have been recorded at the proper valuations.
valuation assertion
Presentations and disclosure assertions
Accuracy, completeness, occurrence, rights and obligations, understandably
Accurancy
assertion that all information diclosed is the correct amounts and which reflect their proper values.
Completeness
The assertion is that all transactions that should be disclosed have been disclosed.
Occurrence
The assertion is that disclosed transactions have indeed occured.
understandability
The assertion is that the information included in the financial statement has been appropriately presented and is clearly understandable.
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