Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The auditee is the person or company ________.

Accepted Answer

A) who will use the audited information 
B) who performs an audit 
C) who pays the audit fee 
D) whose information is being audited 
A) who will use the audited information 
B) who performs an audit 
C) who pays the audit fee 
D) whose information is being audited

Question 3

The idea of recognizing auditing as playing a bigger part of social control is known as _____.

Accepted Answer

A) Professional responsibility 
B) An accountability relationship 
C) The effective auditor concept 
D) The audit society concept 
A) Professional responsibility 
B) An accountability relationship 
C) The effective auditor concept 
D) The audit society concept

Question 4

What is a direct reporting engagement? Provide an example of such an engagement.

Accepted Answer

A type of assurance engagement in which

Question 5

The risk that financial statements may be materially false and misleading is called ________.

Accepted Answer

A) business risk 
B) information risk 
C) client risk 
D) audit risk 
A) business risk 
B) information risk 
C) client risk 
D) audit risk

Question 6

Forensic accounting does not include fraud auditing.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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.

Question 9

An example of a forensic accounting assignment might be ________.

Accepted Answer

A) to ensure compliance with specific legislation 
B) to provide an opinion about the effectiveness of a government program 
C) to provide assurance about the fairness of prospective financial information included in an initial public offering document 
D) to estimate the value of inventory lost in a warehouse fire 
A) to ensure compliance with specific legislation 
B) to provide an opinion about the effectiveness of a government program 
C) to provide assurance about the fairness of prospective financial information included in an initial public offering document 
D) to estimate the value of inventory lost in a warehouse fire

Question 10

The underlying conditions that create demand by users for reliable financial information include the fact that ________.

Accepted Answer

A) more reliable information will allow investors to calculate the rate of return on their investment 
B) users are separated from accounting records by distance and time 
C) governments rely on such information to create tax policies 
D) there is a need for the expression of an opinion as to the fairness of financial statements 
A) more reliable information will allow investors to calculate the rate of return on their investment 
B) users are separated from accounting records by distance and time 
C) governments rely on such information to create tax policies 
D) there is a need for the expression of an opinion as to the fairness of financial statements

Question 11

Business risk is the risk that the financial statements do not reflect the economic substance of business activities.

Accepted Answer

A) True 
 B)False

Question 12

All audits are both an assurance and attestation engagement.

Accepted Answer

A) True 
 B)False

Question 13

What is an attest engagement?

Accepted Answer

When a public accountant is hi

Question 14

What is the difference between the American Accounting Association's (AAA)definition of auditing and the Chartered Professional Accountants of Canada (CPA Canada)objectives of financial statement auditing?

Accepted Answer

The AAA definition is broad and general-

Question 15

What is operational auditing and who performs it?

Accepted Answer

Operational auditing is the study of an

Question 16

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

Accepted Answer

In three-party accountability,accountabi

Question 17

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

Accepted Answer

There are three key conditions: complexi

Question 18

An engagement to advise management on how to better align its compensation plans with strategic objectives,would be considered an assurance engagement.

Accepted Answer

A) True 
 B)False

Question 19

When does an agency problem occur?

Accepted Answer

An agency problem occurs when three cond

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 1: Introduction to Auditing

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

The auditee is the person or company ________.

The idea of recognizing auditing as playing a bigger part of social control is known as _____.

What is a direct reporting engagement? Provide an example of such an engagement.

The risk that financial statements may be materially false and misleading is called ________.

Forensic accounting does not include fraud auditing.

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

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

An example of a forensic accounting assignment might be ________.

The underlying conditions that create demand by users for reliable financial information include the fact that ________.

Business risk is the risk that the financial statements do not reflect the economic substance of business activities.

All audits are both an assurance and attestation engagement.

What is an attest engagement?

What is the difference between the American Accounting Association's (AAA)definition of auditing and the Chartered Professional Accountants of Canada (CPA Canada)objectives of financial statement auditing?

What is operational auditing and who performs it?

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

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

An engagement to advise management on how to better align its compensation plans with strategic objectives,would be considered an assurance engagement.

When does an agency problem occur?

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

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

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

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