Question 1

A free market can only exist if there is sharing of perfectly reliable information.

Accepted Answer

A) True 
 B)False

Question 2

Which one of the following is a potential problem with management's communication of financial information that causes third parties to desire the independent auditor's assessment of the financial statement presentation?

Accepted Answer

A) Complexity of transactions affecting the financial statements. 
B) Lack of criteria on which to base information. 
C) Remoteness of the user from the organization. 
D) Both A and C. 
E) Both A and B. 
A) Complexity of transactions affecting the financial statements. 
B) Lack of criteria on which to base information. 
C) Remoteness of the user from the organization. 
D) Both A and C. 
E) Both A and B.

Question 3

If the auditor has no reservations about management's financial statements then the auditor will issue a qualified opinion.

Accepted Answer

A) True 
 B)False

Question 4

What can users of the audit report reasonably expect from the audited financial statements?

Accepted Answer

A) The financial statements are complete and contain many of the important financial disclosures. 
B) The financial statements are presented fairly according to the substance of GAAP. 
C) The financial statements are free from all errors. 
D) All of the above. 
E) None of the above. 
A) The financial statements are complete and contain many of the important financial disclosures. 
B) The financial statements are presented fairly according to the substance of GAAP. 
C) The financial statements are free from all errors. 
D) All of the above. 
E) None of the above.

Question 5

Who are the users of the financial statements?

Accepted Answer

A) Management. 
B) Auditors. 
C) Taxing Authorities. 
D) Both A and C. 
A) Management. 
B) Auditors. 
C) Taxing Authorities. 
D) Both A and C.

Question 6

The Sarbanes-Oxley Act sought to improve audit quality by removing the auditor independence requirements.

Accepted Answer

A) True 
 B)False

Question 7

What must audit firms do to perform financial statement audits for public companies?

Accepted Answer

A) Register with the American Institute of Certified Public Accountants. 
B) Register with the Institute of Internal Auditors. 
C) Register with the U.S.General Accounting Office. 
D) Register with the Public Company Accounting Oversight Board. 
A) Register with the American Institute of Certified Public Accountants. 
B) Register with the Institute of Internal Auditors. 
C) Register with the U.S.General Accounting Office. 
D) Register with the Public Company Accounting Oversight Board.

Question 8

The need for assurance services arises because the interests of the users of information may be different from that of the interests of those responsible for providing information.

Accepted Answer

A) True 
 B)False

Question 9

Being free from material errors is the same as being free from all errors.

Accepted Answer

A) True 
 B)False

Question 10

According to the Financial Reporting Council (FRC),when is the culture of an audit firm likely to provide a positive contribution to audit quality?

Accepted Answer

A) When the leadership of the audit firm ensures partners and other staff have sufficient time and resources to deal with difficult issues as they arise. 
B) When the leadership of the audit firm ensures robust systems for client acceptance and continuation based on ability to pay fees. 
C) When the leadership of the audit firm creates an environment where achieving efficiency is valued,invested in and rewarded. 
D) When the leadership of the audit firm ensures financial considerations drive actions. 
A) When the leadership of the audit firm ensures partners and other staff have sufficient time and resources to deal with difficult issues as they arise. 
B) When the leadership of the audit firm ensures robust systems for client acceptance and continuation based on ability to pay fees. 
C) When the leadership of the audit firm creates an environment where achieving efficiency is valued,invested in and rewarded. 
D) When the leadership of the audit firm ensures financial considerations drive actions.

Question 11

What is the audit committee of the board of directors of a company is responsible for?

Accepted Answer

A) Hiring the auditor. 
B) Preparing the financial statements. 
C) The audit workpapers. 
D) Obtaining evidence. 
A) Hiring the auditor. 
B) Preparing the financial statements. 
C) The audit workpapers. 
D) Obtaining evidence.

Question 12

The SEC has authority to establish GAAP for all business enterprises.

Accepted Answer

A) True 
 B)False

Question 13

The Public Company Accounting Oversight Board provides the criteria against which the auditor measures the fairness of financial statement presentation.

Accepted Answer

A) True 
 B)False

Question 14

The SEC is the governmental body with the oversight responsibility for the efficient operation of capital markets in the United States.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following does the public expect of auditors?

Accepted Answer

A) Understand and enforce principles that best portray the spirit of FASB concepts. 
B) Be neutral to preparers and users of financial information. 
C) Recognize that the investing public is the primary user of audit services. 
D) Take responsibility for the discovery of fraud. 
E) All of the above are expectations of the public. 
A) Understand and enforce principles that best portray the spirit of FASB concepts. 
B) Be neutral to preparers and users of financial information. 
C) Recognize that the investing public is the primary user of audit services. 
D) Take responsibility for the discovery of fraud. 
E) All of the above are expectations of the public.

Question 16

What is the first phase in an audit?

Accepted Answer

A) Client acceptance or client continuance. 
B) Understanding the client. 
C) Understanding internal controls. 
D) Testing of account balances. 
A) Client acceptance or client continuance. 
B) Understanding the client. 
C) Understanding internal controls. 
D) Testing of account balances.

Question 17

What is the term used to describe a systematic process of objectively obtaining evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users?

Accepted Answer

A) Internal audit. 
B) Financial audit. 
C) External audit. 
D) Integrated audit 
A) Internal audit. 
B) Financial audit. 
C) External audit. 
D) Integrated audit

Question 18

What should internal controls be design to do?

Accepted Answer

A) Detect errors. 
B) Detect and prevent errors. 
C) Prevent errors. 
D) Eliminate the possibility of fraud. 
A) Detect errors. 
B) Detect and prevent errors. 
C) Prevent errors. 
D) Eliminate the possibility of fraud.

Question 19

Audit committees play an important role in promoting independence of both internal and external auditors.Which of the following is the most important limitation on the effectiveness of audit committees?

Accepted Answer

A) Audit committees may have close personal and professional friendships with management. 
B) Audit committee members are compensated by the PCAOB. 
C) Audit committees devote their efforts to external audit concerns and do not pay much attention to internal auditing. 
D) Audit committee members are required to have degrees in non-accounting fields. 
A) Audit committees may have close personal and professional friendships with management. 
B) Audit committee members are compensated by the PCAOB. 
C) Audit committees devote their efforts to external audit concerns and do not pay much attention to internal auditing. 
D) Audit committee members are required to have degrees in non-accounting fields.

Question 20

Which the following is not a reason for a public company to receive an audit?

Accepted Answer

A) Potential bias in providing information. 
B) Closeness between a user and the organization. 
C) Complexity of the processing systems. 
D) Remoteness between a user and the organization. 
A) Potential bias in providing information. 
B) Closeness between a user and the organization. 
C) Complexity of the processing systems. 
D) Remoteness between a user and the organization.

A free market can only exist if there is sharing of perfectly reliable information.

Which one of the following is a potential problem with management's communication of financial information that causes third parties to desire the independent auditor's assessment of the financial statement presentation?

If the auditor has no reservations about management's financial statements then the auditor will issue a qualified opinion.

What can users of the audit report reasonably expect from the audited financial statements?

Who are the users of the financial statements?

The Sarbanes-Oxley Act sought to improve audit quality by removing the auditor independence requirements.

What must audit firms do to perform financial statement audits for public companies?

The need for assurance services arises because the interests of the users of information may be different from that of the interests of those responsible for providing information.

Being free from material errors is the same as being free from all errors.

According to the Financial Reporting Council (FRC),when is the culture of an audit firm likely to provide a positive contribution to audit quality?

What is the audit committee of the board of directors of a company is responsible for?

The SEC has authority to establish GAAP for all business enterprises.

The Public Company Accounting Oversight Board provides the criteria against which the auditor measures the fairness of financial statement presentation.

The SEC is the governmental body with the oversight responsibility for the efficient operation of capital markets in the United States.

Which of the following does the public expect of auditors?

What is the first phase in an audit?

What is the term used to describe a systematic process of objectively obtaining evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users?

What should internal controls be design to do?

Audit committees play an important role in promoting independence of both internal and external auditors.Which of the following is the most important limitation on the effectiveness of audit committees?

Which the following is not a reason for a public company to receive an audit?

The Risk of Fraud and Mechanisms to Address Fraud: Regulation,corporate Governance,and Audit Quality

Internal Control Over Financial Reporting: Managements Responsibilities and Importance to the External Auditors

Professional Liability and the Need for Quality Auditor Judgments and Ethical Decisions

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, use, impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters

Exam 1: Auditing: Integral to the Economy

A free market can only exist if there is sharing of perfectly reliable information.

Which one of the following is a potential problem with management's communication of financial information that causes third parties to desire the independent auditor's assessment of the financial statement presentation?

If the auditor has no reservations about management's financial statements then the auditor will issue a qualified opinion.

What can users of the audit report reasonably expect from the audited financial statements?

Who are the users of the financial statements?

The Sarbanes-Oxley Act sought to improve audit quality by removing the auditor independence requirements.

What must audit firms do to perform financial statement audits for public companies?

The need for assurance services arises because the interests of the users of information may be different from that of the interests of those responsible for providing information.

Being free from material errors is the same as being free from all errors.

According to the Financial Reporting Council (FRC),when is the culture of an audit firm likely to provide a positive contribution to audit quality?

What is the audit committee of the board of directors of a company is responsible for?

The SEC has authority to establish GAAP for all business enterprises.

The Public Company Accounting Oversight Board provides the criteria against which the auditor measures the fairness of financial statement presentation.

The SEC is the governmental body with the oversight responsibility for the efficient operation of capital markets in the United States.

Which of the following does the public expect of auditors?

What is the first phase in an audit?

What is the term used to describe a systematic process of objectively obtaining evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users?

What should internal controls be design to do?

Audit committees play an important role in promoting independence of both internal and external auditors.Which of the following is the most important limitation on the effectiveness of audit committees?

Which the following is not a reason for a public company to receive an audit?

The Risk of Fraud and Mechanisms to Address Fraud: Regulation,corporate Governance,and Audit Quality

Internal Control Over Financial Reporting: Managements Responsibilities and Importance to the External Auditors

Professional Liability and the Need for Quality Auditor Judgments and Ethical Decisions

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, use, impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters