Chat with AIExam 3: The Building Blocks of Auditing
Choose a local company or a well-known national company. For each type of management assertions about accounts (existence, rights and obligations, completeness, valuation and allocation), give a specific example.
(43) 
VerifiedAnswers will obviously vary. The instructor may want to choose a specific company for students to address.
Identify and explain the three broad types of risk of paramount interest to the auditor.
(34) Verified Although auditors deal with many forms of risk during the course of an engagement, three broad types of risk are of paramount interest to the auditor: client business risk, engagement risk, and audit risk.
i) Client business risk reflects the possibility that an organization will experience adverse outcomes as a result of economic conditions, events, circumstances, or management action/inaction.
ii) Engagement risk refers to the risk the audit firm is exposed to due to loss or injury from litigation, adverse publicity, or other events arising in connection with the audited financial statements
iii) Audit risk is defined as the likelihood that an auditor will render an incorrect opinion on the financial statements in spite of the effort expended to conduct the audit effectively.
Describe the three reports an auditor issues when reporting on the financial statements of any public company registered with the SEC in the United States,
(42) VerifiedThe auditor of any public company registered with the SEC in the United States must design the audit to provide a basis for issuing three reports: (1) the auditor's report on the financial statements, (2) the auditor's report on management's assessment of the effectiveness of internal controls over financial reporting, and (3) the auditor's own assessment of the effectiveness of internal controls over financial reporting.
Describe the auditor's responsibility if an error or fraudulent misstatement is detected during the course of the audit.
(40) Choose a local company or a well-known national company. Give specific examples of management assertions about presentation and disclosure (occurrence and rights and obligations, completeness, classification and understandability, accuracy and valuation).
(39) How will the auditor's work differ if the goal of the audit is the detection of all fraud?
(27) Describe the auditor's responsibility with regard to the going concern concept.
(42) What are the auditors' responsibilities for detecting illegal acts that have been committed by client personnel?
(37) Describe the responsibilities of management and auditors related to the production and release of audited financial statements.
(39) Compare the auditor's focus in an audit with the public's general expectation.
(40) Choose a local company or a well-known national company. For each type of management assertions about transactions (occurrence, completeness, accuracy, cutoff, classification), give a specific example.
(39) The notion of reasonable assurance comprises three concepts that are pervasive to the conduct of an audit: risk, materiality, and evidence. Define them as concisely as possible.
(48) How are the three concepts of risk, evidence and materiality interrelated?
(32) Describe the auditor's responsibility to plan an audit when sufficient risk factors are present to indicate a higher than average risk of material misstatement due to errors and fraudulent misstatements.
(30) Describe four different types of tests applicable to accounting information.
(37) What is the auditor's responsibility with respect to management's assertions about the financial statements?
(35) 
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