Exam 1: The Demand for Audit and Other Assurance Services

Discuss the similarities and differences between the roles of independent auditors, GAO auditors, internal revenue agents, and internal auditors.

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Question 1

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The roles of all four types of auditors are similar in that they involve the accumulation and evaluation of evidence about information to ascertain and report on the degree of correspondence between the information and established criteria. The differences in their roles center around the information audited and the criteria used to evaluate that information. Independent auditors primarily audit companies' financial statements. GAO auditors' primary responsibility is to perform the audit function for Congress. IRS auditors are responsible for the enforcement of federal tax laws. Internal auditors primarily perform operational and compliance audits for their employing company.

To do an audit, it is necessary for information to be in a verifiable form and some criteria by which the auditor can evaluate the information. Detail the information and criteria that would be used for: (A) an independent CPA firm audits a company's historical financial statements. (B) an Internal Revenue Service auditor who audits that same company's tax return. (C) an internal auditor use when performing an operational audit to evaluate whether the company's computerized payroll processing system is operating efficiently and effectively.

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Question 2

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(A) The information used by a CPA firm in a financial statement audit is the financial information in the company's financial statements. The most commonly used criteria are applicable U.S. generally accepted accounting standards or International Financial Reporting Standards (IFRS).
(B) The information used by an IRS auditor is the financial information in the company's federal tax return. The criteria are the internal revenue code and interpretations.
(C) The information used by an internal auditor when performing an operational audit of the payroll system could include various items such as the number of errors made, costs incurred by the payroll department, and number of payroll records processed each month. The criteria would consist of company standards for departmental efficiency and effectiveness.

Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:

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Question 3

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The criteria by which an auditor evaluates the information under audit may vary with the information being audited.

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Question 4

Which of the following are required to have a written report regarding the assertion of another party?

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Question 5

________ risk reflects the possibility that the information upon which the business decision was made was inaccurate.

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Question 6

In the audit of historical financial statements, what accounting criteria is most common?

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Question 7

Which department provides quantitative information in order for management and others to make decisions?

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Question 8

The primary role of the United States General Accounting Office is the enforcement of the federal tax laws as defined by Congress and interpreted by the courts.

(True/False)

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Question 9

An audit of historical financial statements is most often performed to determine whether the:

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Question 10

Which of the following audits can be regarded as generally being a compliance audit?

(Multiple Choice)

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Question 11

The Sarbanes-Oxley Act applies to which of the following companies?

(Multiple Choice)

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Question 12

Only companies that file annual statements with the Securities and Exchange Commission are required to have an annual external audit.

(True/False)

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Question 13

The Sarbanes-Oxley Act establishes standards related to the audits of privately held companies.

(True/False)

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Question 14

The criteria used by an external auditor to evaluate published financial statements are known as generally accepted auditing standards.

(True/False)

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Question 15

An examination of part of an organization's procedures and methods for the purpose of evaluating efficiency and effectiveness is what type of audit?

(Multiple Choice)

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Question 16

Which one of the following is more difficult to evaluate objectively?

(Multiple Choice)

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Question 17

CPA firms are never allowed to provide bookkeeping services for clients.

(True/False)

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Question 18

Explain what is meant by information risk, and list the four causes of this risk.

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Question 19

Three common types of attestation services are:

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Question 20

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Exam 1: The Demand for Audit and Other Assurance Services

Discuss the similarities and differences between the roles of independent auditors, GAO auditors, internal revenue agents, and internal auditors.

Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:

The criteria by which an auditor evaluates the information under audit may vary with the information being audited.

Which of the following are required to have a written report regarding the assertion of another party?

________ risk reflects the possibility that the information upon which the business decision was made was inaccurate.

In the audit of historical financial statements, what accounting criteria is most common?

Which department provides quantitative information in order for management and others to make decisions?

The primary role of the United States General Accounting Office is the enforcement of the federal tax laws as defined by Congress and interpreted by the courts.

An audit of historical financial statements is most often performed to determine whether the:

Which of the following audits can be regarded as generally being a compliance audit?

The Sarbanes-Oxley Act applies to which of the following companies?

Only companies that file annual statements with the Securities and Exchange Commission are required to have an annual external audit.

The Sarbanes-Oxley Act establishes standards related to the audits of privately held companies.

The criteria used by an external auditor to evaluate published financial statements are known as generally accepted auditing standards.

An examination of part of an organization's procedures and methods for the purpose of evaluating efficiency and effectiveness is what type of audit?

Which one of the following is more difficult to evaluate objectively?

CPA firms are never allowed to provide bookkeeping services for clients.

Explain what is meant by information risk, and list the four causes of this risk.

Three common types of attestation services are:

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

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 and Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls and Substantive Tests of Transactions, and Accounts Payable

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

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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