Question 1

________ is the tendency to make assessments by starting from an initial value and then adjusting insufficiently away from that initial value.

Accepted Answer

A) Anchoring 
B) Availability 
C) Overconfidence 
D) Confirmation 
A) Anchoring 
B) Availability 
C) Overconfidence 
D) Confirmation

Question 2

When the auditor becomes aware of or suspects noncompliance with laws and regulations

Accepted Answer

A) the auditor should evaluate the effects of the noncompliance on other aspects of the audit. 
B) the auditor should discuss the matter with management at a level above those suspected of the noncompliance. 
C) the auditor should obtain additional information to evaluate the possible effects on the financial statements. 
D) all of the above 
A) the auditor should evaluate the effects of the noncompliance on other aspects of the audit. 
B) the auditor should discuss the matter with management at a level above those suspected of the noncompliance. 
C) the auditor should obtain additional information to evaluate the possible effects on the financial statements. 
D) all of the above

Question 3

Auditors generally use a financial statement cycle approach when performing a financial statement audit.Describe the transaction flow,using specific examples,from journals to financial statements that produce financial statements.

Accepted Answer

Transactions-sales,cash receipts,acquisi

Question 4

When an auditor has reduced assessed control risk based on tests of controls,he or she may then reduce the extent to which the accuracy of the financial statement information directly related to those controls must be supported through the accumulation of evidence using substantive tests.

Accepted Answer

A) True 
 B)False

Question 5

Management makes the following assertions about account balances:

Accepted Answer

A) existence,completeness,classification and cutoff. 
B) existence,accuracy,classification and rights and obligations. 
C) existence,completeness,valuation and allocation,and rights and obligations. 
D) existence,completeness,rights and obligations,and cutoff. 
A) existence,completeness,classification and cutoff. 
B) existence,accuracy,classification and rights and obligations. 
C) existence,completeness,valuation and allocation,and rights and obligations. 
D) existence,completeness,rights and obligations,and cutoff.

Question 6

The most important general ledger account included in and affecting several cycles is the

Accepted Answer

A) cash account. 
B) inventory account. 
C) income tax expense and liability accounts. 
D) retained earnings account. 
A) cash account. 
B) inventory account. 
C) income tax expense and liability accounts. 
D) retained earnings account.

Question 7

General transaction-related audit objectives vary from audit to audit,depending on the nature and characteristics of the client's business and industry.

Accepted Answer

A) True 
 B)False

Question 8

The presentation and disclosure-related audit objectives are identical to the management assertions for presentation and disclosure.

Accepted Answer

A) True 
 B)False

Question 9

During the professional judgment process,the analysis may identify only one appropriate response to the issue.

Accepted Answer

A) True 
 B)False

Question 10

Match between columns
                        Premises: an intentional misstatement of the financial statements
use of comparisons and relationships to assess whether account balances or other data appears reasonable
a set of six audit objectives the auditor must meet,including timing,posting and summarization,and accuracy
implied or expressed representations made by the client about classes of transactions,account balances and disclosures in the financial statements
audit procedures designed to test the effectiveness of control policies and procedures
audit procedures testing for monetary misstatements to determine whether the balance-related audit objectives have been satisfied for each significant account balance
a set of nine audit objectives the auditor must meet,including completeness,detail tie-in,and rights and obligations

Accepted Answer

The Answer of substantive tests of transactions and tests of is...

Question 11

The cutoff objective,"transactions near the balance sheet date are recorded in the proper period," is a balance-related audit objective.

Accepted Answer

A) True 
 B)False

Question 12

Why does the auditor divide the financial statements into smaller segments?

Accepted Answer

A) Using the cycle approach makes the audit more manageable. 
B) Most accounts have few relationships with others and so it is more efficient to break the financial statements into smaller pieces. 
C) The cycle approach is used because auditing standards require it. 
D) All of the above are correct. 
A) Using the cycle approach makes the audit more manageable. 
B) Most accounts have few relationships with others and so it is more efficient to break the financial statements into smaller pieces. 
C) The cycle approach is used because auditing standards require it. 
D) All of the above are correct.

Question 13

Which of the following assertions is described as "this assertion addresses whether all transactions that should be included in the financial statements are in fact included"?

Accepted Answer

A) occurrence 
B) completeness 
C) rights and obligations 
D) existence 
A) occurrence 
B) completeness 
C) rights and obligations 
D) existence

Question 14

The objective of the audit of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately represent the company's financial position and results of operations.

Accepted Answer

A) True 
 B)False

Question 15

Under the cycle approach,the only accounts that have two or more cycles associated with them are cash and accounts receivable.

Accepted Answer

A) True 
 B)False

Question 16

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 illegal acts that do not have a direct effect on the financial statements unless there is reason to believe they may exist.

Accepted Answer

A) True 
 B)False

Question 17

The auditor's best defense when material misstatements are not uncovered is to have conducted the audit

Accepted Answer

A) in accordance with generally accepted auditing standards. 
B) as effectively as reasonably possible. 
C) in a timely manner. 
D) only after an adequate investigation of the management team. 
A) in accordance with generally accepted auditing standards. 
B) as effectively as reasonably possible. 
C) in a timely manner. 
D) only after an adequate investigation of the management team.

Question 18

Auditors have found that generally the most efficient and effective way to conduct audits is to

Accepted Answer

A) obtain complete assurance about the correctness of each class of transactions affecting the account. 
B) obtain some combination of assurance for each class of transactions and for the ending balance in the related accounts. 
C) obtain assurance about the ending balance of the account only. 
D) verify each entry that was made into an account. 
A) obtain complete assurance about the correctness of each class of transactions affecting the account. 
B) obtain some combination of assurance for each class of transactions and for the ending balance in the related accounts. 
C) obtain assurance about the ending balance of the account only. 
D) verify each entry that was made into an account.

Question 19

A suspension of judgment is the recognition that people's motivations and perceptions can lead them to provide biased or misleading information.

Accepted Answer

A) True 
 B)False

Question 20

Auditors often convince themselves that they only accept clients they can trust and who have high integrity.

Accepted Answer

A) True 
 B)False

Exam 6: Audit Responsibilities and Objectives

________ is the tendency to make assessments by starting from an initial value and then adjusting insufficiently away from that initial value.

When the auditor becomes aware of or suspects noncompliance with laws and regulations

Auditors generally use a financial statement cycle approach when performing a financial statement audit.Describe the transaction flow,using specific examples,from journals to financial statements that produce financial statements.

When an auditor has reduced assessed control risk based on tests of controls,he or she may then reduce the extent to which the accuracy of the financial statement information directly related to those controls must be supported through the accumulation of evidence using substantive tests.

Management makes the following assertions about account balances:

The most important general ledger account included in and affecting several cycles is the

General transaction-related audit objectives vary from audit to audit,depending on the nature and characteristics of the client's business and industry.

The presentation and disclosure-related audit objectives are identical to the management assertions for presentation and disclosure.

During the professional judgment process,the analysis may identify only one appropriate response to the issue.

The cutoff objective,"transactions near the balance sheet date are recorded in the proper period," is a balance-related audit objective.

Why does the auditor divide the financial statements into smaller segments?

Which of the following assertions is described as "this assertion addresses whether all transactions that should be included in the financial statements are in fact included"?

The objective of the audit of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately represent the company's financial position and results of operations.

Under the cycle approach,the only accounts that have two or more cycles associated with them are cash and accounts receivable.

The auditor's best defense when material misstatements are not uncovered is to have conducted the audit

Auditors have found that generally the most efficient and effective way to conduct audits is to

A suspension of judgment is the recognition that people's motivations and perceptions can lead them to provide biased or misleading information.

Auditors often convince themselves that they only accept clients they can trust and who have high integrity.

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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