Exam 6: Audit Responsibilities and Objectives

After the auditor has completed all audit procedures,it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented.This is a highly subjective process that relies heavily on:

The concept of professional skepticism has been a foundational element of auditing standards for year and continues to be difficult to implement in practice.Recent academic research on the topic of professional skepticism suggests that there are six characteristics to skepticism.List and briefly describe each of these characteristics.

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

Below are five audit procedures,all of which are tests of balances associated with the audit of accounts receivable.Also below are the eight general balance-related audit objectives and the four management assertions.For each audit procedure,indicate (1)its audit objective,and (2)the management assertion being tested. 1.Obtain an aged listing of accounts receivable.For a sample of individual customers on the listing,agree the customer's name,amount,and other information with the corresponding information in the accounts receivable master file. (1)________. (2)________. 2.Examine details of sales for five days before and five days after year-end to determine whether sales have been recorded in the proper period. (1)________. (2)________. 3.Assess the reasonableness of the balance in the allowance for doubtful accounts. (1)________. (2)________. 4.Inquire as to whether any accounts receivable have been factored or sold during the period. (1)________. (2)________. 5.Inquire as to whether there are any receivables from related parties. (1)________. (2)________.

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

Audits are expected to provide a higher degree of assurance for the detection of material frauds than is provided for an equally material error.

Balance-related audit objectives are usually applied to the ending balance in income statement accounts; transaction-related audit objectives are usually applied to transactions reflected in balance sheet accounts.

In testing for cutoff,the objective is to determine:

The classification balance-related audit objective:

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.

If several employees collude to falsify documents,the chance a normal audit would uncover such acts is:

The term audit objective refers to all of the following except for:

Which of the following statements is usually true?

The auditor's first course of action when an illegal act is uncovered should be to immediately notify the appropriate authorities,including but not limited to,law enforcement and the Securities and Exchange Commission.

The detail tie-in objective is not concerned that the details in the account balance:

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.

Auditors have a higher degree of responsibility for detecting illegal acts that have a direct effect on the financial statements than illegal acts that do not have a direct effect on the financial statements.

Which of the following statements is true regarding the distinction between general audit objectives and specific audit objectives for each class of transactions?

"The auditor should not assume that management is dishonest,but the possibility of dishonesty must be considered." This is an example of:

When the auditor identifies or suspects noncompliance with laws and regulations,the auditor: