Question 1

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 2

One of the main impacts on auditors of the Sarbanes-Oxley Act is to decrease the responsibilities of the audit committee in an organization.

Accepted Answer

A) True 
 B)False

Question 3

The concept of three-party accountability means that the auditor is expected to act in the interests of the party paying the audit fee.

Accepted Answer

A) True 
 B)False

Question 4

A prospectus is the information, including financial information, about a firm that accompanies any new issuance of shares in a regulated securities market.

Accepted Answer

A) True 
 B)False

Question 5

What is information risk?

Accepted Answer

The answer of What is information risk?...

Question 6

On which of the following reasons do many people blame for the profession's problems in the post-Enron world?

Accepted Answer

A) Inadequate training of professional accountants. 
B) The lack of focus on fraud investigation by external auditors. 
C) A lack of independence between audit services and non-audit services provided to the same client. 
D) New stock trading technology causing major swings in the capital markets.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Auditors on staff in the Office of the Auditor General (OAG) are considered to be external auditors with respect to the government agencies they audit because the OAG is

Accepted Answer

A) Organizationally independent. 
B) The accounting and auditing agency of the Canadian Senate. 
C) Funded by the federal government. 
D) Guided by standards similar to GAAS.

Question 9

SOX's has had consequences for many areas of corporate activities, including the following impact on the work of the auditor:

Accepted Answer

A) The auditor is now required to report all fraudulent activities it uncovers directly to the 
B) The auditor is specifically required to evaluate the internal controls used by management to prepare financial information. 
C) The auditor is must monitor how well management is carrying out its financial reporting responsibilities. 
D) The auditor must prepare a report verifying the information in the financial statements.

Question 10

What is one of the factors mentioned that is driving the international harmonization of auditing standards?

Accepted Answer

A) Increased ownership of Canadian companies by companies outside North America. 
B) Increased overseas investment by Canadians. 
C) Improved living standards throughout the world. 
D) Technological change permitting world wide trading in financial securities.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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.

Question 13

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

Accepted Answer

A) True 
 B)False

Exam 1: Introduction to Auditing

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

One of the main impacts on auditors of the Sarbanes-Oxley Act is to decrease the responsibilities of the audit committee in an organization.

The concept of three-party accountability means that the auditor is expected to act in the interests of the party paying the audit fee.

A prospectus is the information, including financial information, about a firm that accompanies any new issuance of shares in a regulated securities market.

What is information risk?

On which of the following reasons do many people blame for the profession's problems in the post-Enron world?

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

Auditors on staff in the Office of the Auditor General (OAG) are considered to be external auditors with respect to the government agencies they audit because the OAG is

SOX's has had consequences for many areas of corporate activities, including the following impact on the work of the auditor:

What is one of the factors mentioned that is driving the international harmonization of auditing standards?

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

Reducing information risk means the same as:

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