Question 1

Internal auditing is an independent activity designed to add value and improve an organization's operations.

Accepted Answer

A) True 
 B)False  True

Question 2

Value-for-money audits include testing of compliance with laws and regulations.

Accepted Answer

A) True 
 B)False  False

Question 3

What is information risk?

Accepted Answer

The risk that a set of financial statements will be materially false or misleading.

Question 4

What is the difference between the American Accounting Association's (AAA)definition of auditing and the Canadian Institute of Chartered Accountants' (CICA)objectives of financial statement auditing?

Accepted Answer

The AAA definition is broad and general-

Question 5

Why is three-party accountability an important distinguishing feature of auditing?

Accepted Answer

In three-party accountability,accountabi

Question 6

Discuss the conflict between the need for an audit firm to perform quality services and its desire to make a profit in the context of the investor's need for reliable information.

Accepted Answer

An audit firm needs to be able to pay it

Question 7

Discuss the underlying conditions affecting users' demand for accounting information.

Accepted Answer

There are three key conditions: complexi

Question 8

A material misstatement is one that would affect a user's decision making.

Accepted Answer

A) True 
 B)False

Question 9

The difference between what the public expects of auditors and what auditors can actually deliver is known as ________.

Accepted Answer

A) forensics 
B) an expectations gap 
C) a business risk 
D) an information risk 
A) forensics 
B) an expectations gap 
C) a business risk 
D) an information risk

Question 10

Discuss the nature of value-for-money audits and give three examples of its application.

Accepted Answer

Value-for-money audits involve studies o

Question 11

The assurance function involves the lending of credibility to financial information.

Accepted Answer

A) True 
 B)False

Question 12

The role of the auditor is to satisfy users' demand for reliable information.

Accepted Answer

A) True 
 B)False

Question 13

International harmonization is also known as ________.

Accepted Answer

A) convergence 
B) harmony 
C) independence 
D) critical thinking 
A) convergence 
B) harmony 
C) independence 
D) critical thinking

Question 14

Since financial decision makers usually obtain accounting information from companies wanting loans or selling stock,this creates a potential ________.

Accepted Answer

A) agency problem 
B) conflict of interest 
C) harmonization problem 
D) expectations gap 
A) agency problem 
B) conflict of interest 
C) harmonization problem 
D) expectations gap

Question 15

Reducing information risk means the same as ________.

Accepted Answer

A) serving the public interest 
B) monitoring economic activities 
C) improving the credibility of information 
D) ensuring generally accepted accounting principles are used to measure profit 
A) serving the public interest 
B) monitoring economic activities 
C) improving the credibility of information 
D) ensuring generally accepted accounting principles are used to measure profit

Question 16

The agency problem can be mitigated by ________.

Accepted Answer

A) greater transparency 
B) a higher degree of independence 
C) design of contracts 
D) internal auditing 
A) greater transparency 
B) a higher degree of independence 
C) design of contracts 
D) internal auditing

Question 17

Professional judgment is a widely used concept in accounting and auditing.How is it defined in the audit standards?

Accepted Answer

A) There is no definition of professional judgment in the auditing standards. 
B) Professional judgment includes consideration of key principles and concepts of disciplines underlying the professional standards,such as economics,psychology,law,finance,statistics and philosophy. 
C) Professional judgment means reaching a complex decision by incorporating auditing standards,accounting standards,and rules of professional ethics in a coherent manner. 
D) Professional judgment involves specialized concepts and language integrating several disciplines in order to provide appropriate justification for audit decisions. 
A) There is no definition of professional judgment in the auditing standards. 
B) Professional judgment includes consideration of key principles and concepts of disciplines underlying the professional standards,such as economics,psychology,law,finance,statistics and philosophy. 
C) Professional judgment means reaching a complex decision by incorporating auditing standards,accounting standards,and rules of professional ethics in a coherent manner. 
D) Professional judgment involves specialized concepts and language integrating several disciplines in order to provide appropriate justification for audit decisions.

Question 18

What is a direct reporting engagement?

Accepted Answer

A type of assurance engagement

Question 19

An attest engagement involves a public accountant affirming the validity of an assertion.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following best describes the main reason that independent auditors report on a company's financial statements?

Accepted Answer

A) Management fraud may exist within the company and it is likely that the independent auditors will detect it. 
B) Users of financial statements need confidence in the numbers they base their decisions on. 
C) Misstated account balances may be corrected as the result of the independent audit work. 
D) The accounting system from which the financial statements are derived may have a poorly designed system of internal control. 
A) Management fraud may exist within the company and it is likely that the independent auditors will detect it. 
B) Users of financial statements need confidence in the numbers they base their decisions on. 
C) Misstated account balances may be corrected as the result of the independent audit work. 
D) The accounting system from which the financial statements are derived may have a poorly designed system of internal control.

Exam 1: Introduction to Auditing

Internal auditing is an independent activity designed to add value and improve an organization's operations.

Value-for-money audits include testing of compliance with laws and regulations.

What is information risk?

What is the difference between the American Accounting Association's (AAA)definition of auditing and the Canadian Institute of Chartered Accountants' (CICA)objectives of financial statement auditing?

Why is three-party accountability an important distinguishing feature of auditing?

Discuss the conflict between the need for an audit firm to perform quality services and its desire to make a profit in the context of the investor's need for reliable information.

Discuss the underlying conditions affecting users' demand for accounting information.

A material misstatement is one that would affect a user's decision making.

The difference between what the public expects of auditors and what auditors can actually deliver is known as ________.

Discuss the nature of value-for-money audits and give three examples of its application.

The assurance function involves the lending of credibility to financial information.

The role of the auditor is to satisfy users' demand for reliable information.

International harmonization is also known as ________.

Since financial decision makers usually obtain accounting information from companies wanting loans or selling stock,this creates a potential ________.

Reducing information risk means the same as ________.

The agency problem can be mitigated by ________.

Professional judgment is a widely used concept in accounting and auditing.How is it defined in the audit standards?

What is a direct reporting engagement?

An attest engagement involves a public accountant affirming the validity of an assertion.

Which of the following best describes the main reason that independent auditors report on a company's financial statements?

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

hapter 15 Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters