Exam 6: Audit Responsibilities and Objectives

Briefly explain each management assertion related to presentation and disclosure.

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

It is generally impractical for the auditor to obtain complete assurance about the correctness of each class of transactions.

Which of the following is not one of the steps used to develop audit objectives?

If management insists on financial statement disclosures that the auditor finds unacceptable, the auditor can withdraw from the engagement or

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

Briefly explain each management assertion related to classes of transactions and events for the period under audit.

An audit must be performed with an attitude of professional skepticism. Professional skepticism consists of two primary components: a questioning mind and

The audit objective of posting and summarization is associated with the management assertion of accuracy.

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

Management is not responsible for which of the following?

Listed below are several accounts listed from a company's trial balance. Next to each account put the letter corresponding to the transaction cycle used to audit the account. S = Sales and collection cycle I = Inventory and warehousing cycle A = Acquisition and payment cycle C = Capital acquisition and repayment cycle P = Payroll and personnel cycle 1. ________ Sales returns and allowances 5. ________ Salaries and commissions 2. ________ Capital stock 6. ________ Cost of goods sold 3. ________ Buildings 7. ________ Trade accounts receivable 4. ________ Notes payable 8. ________ Rent

The auditor's audit objectives follow and are closely related to management assertions.

Statistical sampling is an example of a specially designed auditing approach taken by the auditor designed to provide absolute assurance that the financial statements are free of material misstatements.

Discuss the differences in the auditor's responsibilities for discovering (1) material errors, (2) material fraud, (3) illegal acts having a direct effect on the financial statements, and (4) illegal acts that do not have a direct effect on the financial statements.

The objective of an audit of the financial statements is an expression of an opinion on

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.

In the context of the audit of sales, distinguish between the occurrence and completeness transaction-related audit objectives. State the effect on the sales account (overstatement or understatement) of a violation of each objective.

The auditor knows more about an audit client's transactions than management does.

For a private company audit, tests of controls are normally performed only on those internal controls the auditor believes have not been operating effectively during the period under audit.