Exam 6: Audit Responsibilities and Objectives

After the general transaction related-audit objectives are understood, specific transaction-related audit objectives for each material class of transactions can be developed.Which of the following statements is true?

One of the characteristics of professional skepticism is_______, which is a desire to investigate beyond the obvious.

Discuss the differences between errors, frauds, and illegal acts.Give an example of each.

Below are five audit procedures, all of which are tests of transactions associated with the audit of the acquisition and payment cycle.Also below are the six general transaction-related audit objectives and the five management assertions.For each audit procedure, indicate (1)its audit objective, and (2)the management assertion being tested. 1.Foot the purchases journal and trace the totals to the related general ledger accounts. (1)________. (2)________. 2.Recompute the cash discounts taken by the client. (1)________. (2)________. 3.Compare dates on cancelled checks with the bank cancellation date. (1)________. (2)________. 4.Trace from a sample of cancelled checks to the cash disbursements journal. (1)________. (2)________. 5.Examine supporting documentation for a sample of transactions for authorized payee and amount and to determine services or goods were received. (1)________. (2)________.

Obtaining an understanding of the entity and its environment is part of the analytical procedures phase of the audit.

The auditor has no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by errors or fraud, that are not ________ are detected.

In comparing management fraud with employee fraud, the auditor's risk of failing to discover the fraud is:

Auditors have found that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing tests of ending account balances.

Discuss the actions an auditor should take when an illegal act is identified or suspected.

Auditors accumulate evidence to:

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 believes that an illegal act may have occurred, the first step he or she should take is to gather additional evidence to determine the extent of the illegality and if there is a direct impact on the financial statements.

Under the cycle approach to segmenting an audit, transactions recorded in different journals should never be combined with the general ledger balances that result from those transactions.

Which of the following would most likely be deemed a direct-effect illegal act?

If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the:

The auditor is determining that the the correct selling price was used for billing and that the quantity of goods shipped was the same as the quantity billed.She is gathering evidence about which transaction related audit objective?

Relevant assertions have a meaningful bearing on whether the account is fairly stated and are used to assess the risk of material misstatement and the design and performance of audit procedures.

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

When an auditor is determining what information to include in the notes to the financial statements relating to bonds payable, he is concerned with the transaction-related audit objectives.

If the auditor were responsible for making certain that all of management's assertions in the financial statements were absolutely correct: