Exam 1: An Introduction to Assurance and Financial Statement Auditing

Which of the following best describes why publicly-traded corporations follow the practice of having the external auditor appointed by the board of directors or elected by the stockholders?

Which of the following statements about the study of auditing is NOT true?

When obtaining an understanding of the entity and its environment, the auditor should obtain an understanding of internal controls primarily to:

A standard, unqualified auditor's report for a public company contains three sections. Provide a brief (one or two sentences)description for each section.

For publicly-held companies, which of the following is integrated into the audit of financial statements?

Explain the relationship between audit, attest and assurance services.

You are a new employee at the accounting firm Murray & Murray, CPAs. Before you are assigned to your first audit, your supervisor tests your knowledge and asks you to explain the term "scope" in the context of a financial statement audit. Required: A. Provide a definition of scope. B. Describe what influences an auditor's determination of scope.

Assurance services may improve all of the following except:

Preliminary engagement activities include:

On a high level, the accounting processes of a business consist of internal controls, individual transactions, and account balances. Required: A. Describe the relationship between internal controls, individual transactions, and account balances. B. Discuss how evidence regarding each of these three areas can help an auditor determine if the financial statements are fairly stated.

Auditing is a type of attest service.

You are a new staff auditor and you are auditing a company's inventory account. Briefly describe one way you might obtain direct evidence and one way you might obtain indirect evidence that the inventory account balance is fairly stated.

Why do auditors generally use a sampling approach to evidence gathering?

Evidence is reliable if it:

Explain the relationship between sample size, materiality, and desired level of assurance.

Conflicts of interest often occur between absentee owners and managers.

Auditing services and attestation services are the same.

Which of the following would best be described as an assurance service?

Why must an auditor assess materiality?

An investor is reading the financial statements of the Stankey Corporation and observes that the statements are accompanied by an auditor's unqualified report. From this, the investor may conclude that: