Exam 4: Audit Responsibilities and Objectives

There are eight general balance- related audit objectives. One is the existence objective, which deals with whether the amounts included in the financial statements should actually be included. Identify and discuss each of the remaining eight general balance- related audit objectives.

If a long- term note receivable is included on an accounts receivable listing, there is a violation of the:

For the most part, auditors treat each transaction cycle:

The audit can be divided into transaction cycles. Which of the following is NOT one of the transaction cycles?

There are several reasons why the auditor is responsible for reasonable but not absolute assurance. One of them is that:

Auditors have a higher degree of responsibility for detecting direct- effect illegal acts than indirect- effect illegal acts.

Which of the following statements is NOT correct?

Professional skepticism is an attitude that includes a critical assessment of audit evidence, and should be applied when planning and performing all aspects of the engagement.

Tests of details of balances only involve the use of comparisons and relationships to assess the overall reasonableness of account balances.

Which of the following 'general transaction- related audit objectives' is NOT part of the valuation or allocation assertion?

Auditors have found that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing minimal or no tests of ending account balances.

The objective of issuing an audit opinion on the financial report, includes an opinion on:

Discuss the actions an auditor should take when the auditor discovers an illegal act.

To which audit objective does the assertion 'recorded sales are for the amount of goods shipped and are correctly billed and recorded' relate?

When preparing the financial statements, it is acceptable for the auditor to prepare:

Discuss three reasons why auditors are responsible for 'reasonable' but not 'absolute' assurance.

After the auditor has completed all the procedures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented. This is a highly subjective process that relies heavily on:

Responsibility for the fair presentation of financial statements rests with the client's management, not with the auditor.

Which one of the following statements is true?

Other than inquiring of management about policies they have established to prevent illegal acts and whether management knows of any laws or regulations that the company has violated, the auditor should NOT search for indirect- effect illegal acts unless there is reason to believe they may exist.