Question 1

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

Accepted Answer

A)  bankruptcies could no longer occur. 
B)  bankruptcies would be reduced to a very small number. 
C)  audits would be much easier to complete. 
D)  audits would not be economically practical. 
A)  bankruptcies could no longer occur. 
B)  bankruptcies would be reduced to a very small number. 
C)  audits would be much easier to complete. 
D)  audits would not be economically practical.

Question 2

The transaction-related audit objective that deals with whether recorded transactions have actually occurred is the completeness objective.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements?

Accepted Answer

A)  The auditor commonly examines a sample, rather than the entire population of transactions. 
B)  Accounting presentations contain complex estimates which involve uncertainty. 
C)  Fraudulently prepared financial statements are often difficult to detect. 
D)  Auditors believe that reasonable assurance is sufficient in the vast majority of cases. 
A)  The auditor commonly examines a sample, rather than the entire population of transactions. 
B)  Accounting presentations contain complex estimates which involve uncertainty. 
C)  Fraudulently prepared financial statements are often difficult to detect. 
D)  Auditors believe that reasonable assurance is sufficient in the vast majority of cases.

Question 5

The transaction-related audit objective of timing is related to the assertion of cutoff.

Accepted Answer

A) True 
 B)False

Question 6

If the auditor has obtained a reasonable level of assurance about the fair presentation of the financial statements through understanding internal control,assessing control risk,testing controls,and analytical procedures,then the auditor:

Accepted Answer

A)  can issue an unqualified opinion. 
B)  can significantly reduce other substantive tests. 
C)  can write the engagement letter. 
D)  needs to perform additional tests of controls so that the assurance level can be increased. 
A)  can issue an unqualified opinion. 
B)  can significantly reduce other substantive tests. 
C)  can write the engagement letter. 
D)  needs to perform additional tests of controls so that the assurance level can be increased.

Question 7

Which of the following statements is true of a public company's financial statements?

Accepted Answer

A)  Sarbanes-Oxley requires the CEO only to certify the financial statements. 
B)  Sarbanes-Oxley requires the CFO only to certify the financial statements. 
C)  Sarbanes-Oxley requires the CEO and CFO to certify the financial statements. 
D)  Sarbanes-Oxley requires neither the CEO nor the CFO to certify the financial statements. 
A)  Sarbanes-Oxley requires the CEO only to certify the financial statements. 
B)  Sarbanes-Oxley requires the CFO only to certify the financial statements. 
C)  Sarbanes-Oxley requires the CEO and CFO to certify the financial statements. 
D)  Sarbanes-Oxley requires neither the CEO nor the CFO to certify the financial statements.

Question 8

Although auditors need to consider the interrelationships between cycles,they typically treat cycles independently to the extent practical to manage complex audits effectively.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The annual reports of many public companies include a statement about management's responsibilities and relationship with the CPA firm.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

•Most audit evidence results from testin

Question 12

Asking the right questions and probing further until the auditor is satisfied with the responses can help the auditor to detect a material misstatement in the financial statements.

Accepted Answer

A) True 
 B)False

Question 13

The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to:

Accepted Answer

A)  the auditor. 
B)  management. 
C)  both management and the auditor equally. 
D)  management for the statements and the auditor for the notes. 
A)  the auditor. 
B)  management. 
C)  both management and the auditor equally. 
D)  management for the statements and the auditor for the notes.

Question 14

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.

Accepted Answer

Auditing standards make no distinction b

Question 15

Two overriding considerations affect the many ways an auditor can accumulate evidence:
1)Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility.
2)Cost of accumulating evidence should be minimized.
In evaluating these considerations:

Accepted Answer

A)  the first is more important than the second. 
B)  the second is more important than the first. 
C)  they are equally important. 
D)  it is impossible to prioritize them. 
A)  the first is more important than the second. 
B)  the second is more important than the first. 
C)  they are equally important. 
D)  it is impossible to prioritize them.

Question 16

Which of the following statements is not correct?

Accepted Answer

A)  There are many ways an auditor can accumulate evidence to meet overall audit objectives. 
B)  Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 
C)  It is appropriate to minimize the cost of accumulating evidence. 
D)  Gathering evidence and minimizing costs are equally important considerations that affect the approach the auditor selects. 
A)  There are many ways an auditor can accumulate evidence to meet overall audit objectives. 
B)  Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 
C)  It is appropriate to minimize the cost of accumulating evidence. 
D)  Gathering evidence and minimizing costs are equally important considerations that affect the approach the auditor selects.

Question 17

Which of the following statements is the most correct regarding errors and fraud?

Accepted Answer

A)  An error is unintentional, whereas fraud is intentional. 
B)  Frauds occur more often than errors in financial statements. 
C)  Errors are always fraud and frauds are always errors. 
D)  Auditors have more responsibility for finding fraud than errors. 
A)  An error is unintentional, whereas fraud is intentional. 
B)  Frauds occur more often than errors in financial statements. 
C)  Errors are always fraud and frauds are always errors. 
D)  Auditors have more responsibility for finding fraud than errors.

Question 18

Which of the following statements is true about the completeness and occurrence assertions?

Accepted Answer

A)  Both assertions are relevant to classes of transactions and events and account balances. 
B)  If management asserts that recorded sales transactions represent exchanges of goods or services that actually took place, they are asserting to completeness. 
C)  Violations of the occurrence assertion relate to account overstatements. 
D)  The failure to record a sale that did occur is a violation of the occurrence assertion. 
A)  Both assertions are relevant to classes of transactions and events and account balances. 
B)  If management asserts that recorded sales transactions represent exchanges of goods or services that actually took place, they are asserting to completeness. 
C)  Violations of the occurrence assertion relate to account overstatements. 
D)  The failure to record a sale that did occur is a violation of the occurrence assertion.

Question 19

Which of the following statements is not true?

Accepted Answer

A)  Balance-related audit objectives are applied to ending account balances. 
B)  Transaction-related audit objectives are applied to classes of transactions. 
C)  Balance-related audit objectives are applied to the ending balance in balance sheet accounts. 
D)  Balance-related audit objectives are applied to both beginning and ending balances in balance sheet accounts. 
A)  Balance-related audit objectives are applied to ending account balances. 
B)  Transaction-related audit objectives are applied to classes of transactions. 
C)  Balance-related audit objectives are applied to the ending balance in balance sheet accounts. 
D)  Balance-related audit objectives are applied to both beginning and ending balances in balance sheet accounts.

Question 20

The auditor has considerable responsibility for notifying users as to whether or not the statements are properly stated.This imposes upon the auditor a duty to:

Accepted Answer

A)  provide reasonable assurance that material misstatements will be detected. 
B)  be a guarantor of the fairness in the statements. 
C)  be equally responsible with management for the preparation of the financial statements. 
D)  be an insurer of the fairness in the statements. 
A)  provide reasonable assurance that material misstatements will be detected. 
B)  be a guarantor of the fairness in the statements. 
C)  be equally responsible with management for the preparation of the financial statements. 
D)  be an insurer of the fairness in the statements.

Exam 6: Audit Responsibilities and Objectives

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

The transaction-related audit objective that deals with whether recorded transactions have actually occurred is the completeness objective.

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

Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements?

The transaction-related audit objective of timing is related to the assertion of cutoff.

If the auditor has obtained a reasonable level of assurance about the fair presentation of the financial statements through understanding internal control,assessing control risk,testing controls,and analytical procedures,then the auditor:

Which of the following statements is true of a public company's financial statements?

Although auditors need to consider the interrelationships between cycles,they typically treat cycles independently to the extent practical to manage complex audits effectively.

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

The annual reports of many public companies include a statement about management's responsibilities and relationship with the CPA firm.

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

Asking the right questions and probing further until the auditor is satisfied with the responses can help the auditor to detect a material misstatement in the financial statements.

The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to:

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.

Two overriding considerations affect the many ways an auditor can accumulate evidence: 1)Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 2)Cost of accumulating evidence should be minimized. In evaluating these considerations:

Which of the following statements is not correct?

Which of the following statements is the most correct regarding errors and fraud?

Which of the following statements is true about the completeness and occurrence assertions?

Which of the following statements is not true?

The auditor has considerable responsibility for notifying users as to whether or not the statements are properly stated.This imposes upon the auditor a duty to:

The Assurance Services Market

The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Nature and Type of Audit Evidence

Audit Planning

Considering Materiality and Audit Risk

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Audit Completion

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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