Question 1

When readers are cautioned that the financial statements may not be appropriate for their purposes,the non-assurance service is called a(n)

Accepted Answer

A) SysTrust. 
B) compilation. 
C) review. 
D) audit.

Question 2

The independent auditor's report is the

Accepted Answer

A) communication of the outcome of auditor's evaluation to the users. 
B) set of audited financial statements. 
C) invoice of the auditor detailing the work they have performed. 
D) report presented to management about the possible improvements.

Question 3

Two types of services provided by public accounting firms are audits and reviews.Discuss the similarities and differences between these two types of services.Which type provides the most assurance?

Accepted Answer

The answer of Two types of services provided by public...

Question 4

Information risk can be reduced through any one of the following except

Accepted Answer

A) having the user verify the information. 
B) having the chief financial officer certify and sign-off on the financial statements. 
C) having the user share information risk with management. 
D) providing audited financial statements to users.

Question 5

Joe is recording sales transactions in the accounting system so that they can be summarized in a logical manner for the purpose of providing financial information for decision-making.Joe is performing

Accepted Answer

A) accounting. 
B) auditing. 
C) review. 
D) management consulting.

Question 6

We discuss four types of auditors: public accountants,government auditors,Canada Revenue Agency auditors,and internal auditors.Briefly describe the work and responsibilities of each type of auditor.

Accepted Answer

The answer of We discuss four types of auditors: public...

Question 7

Which of the following terms best describes the increased likelihood that unreliable information will be provided to decision makers?

Accepted Answer

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

Question 8

In Canada,publicly traded companies are

Accepted Answer

A) required to have audits. 
B) strongly encouraged to have audits. 
C) not required to have an audit if they have a review. 
D) not required to have an audit.

Question 9

Which of the following is an advantage of a review engagement as compared to an audit engagement?

Accepted Answer

A) For the review engagement,information risk is reduced more than for an audit. 
B) For the review engagement,the documentation to be provided by the client is greater. 
C) For the review engagement,the financial statements assessed will have more detail. 
D) The review engagement requires considerably less work,so is less costly.

Question 10

A large PA firm has assessed evidence collected during an engagement.Criteria used to assess the financial statements were International Financial Reporting Standards (IFRS).A high level of assurance was obtained.The type of engagement conducted was

Accepted Answer

A) an audit. 
B) a review. 
C) management consulting. 
D) a compilation.

Question 11

The reasoning behind the requirements of the Sarbanes-Oxley Act's section 404 (attestation on internal control over financial reporting)is that

Accepted Answer

A) effective controls result in greater profits to organizations,reducing business failures. 
B) effective controls reduce the likelihood of future misstatements in the financial statements. 
C) better internal controls can be implemented at lower cost,improving product quality. 
D) automated controls improve customer service,resulting in higher product sales.

Question 12

What type of information is available from www.sedar.com (System for Electronic Document Analysis and Retrieval)?

Accepted Answer

A) minutes of shareholders and directors meetings 
B) transaction reports from major credit card companies 
C) annual reports and management discussion and analysis 
D) listings of all of the shareholders on record

Question 13

In the audit of a corporate tax return,the CRA auditor should demonstrate competence in the use of

Accepted Answer

A) external databases that contain economic statistics. 
B) standard personal and corporate tax preparation software. 
C) the Income Tax Act and accompanying regulations. 
D) database management software for the use of client based research.

Question 14

In the audit of a corporate tax return,the report provided by the Canada Revenue Agency auditor would describe

Accepted Answer

A) an opinion on the likelihood of tax return error. 
B) the likely accounting errors that could contribute to tax errors. 
C) management issues with respect to accurately reporting taxes. 
D) that the corporate income tax return is in compliance with the Income Tax Act.

Question 15

The need to implement philosophies and practices commonly referred to as "improved business practices" comes from

Accepted Answer

A) increased competition resulting in public accounting firms being concerned about keeping clients and maintaining a reasonable profit. 
B) a CAS pronouncement. 
C) an IFRA pronouncement. 
D) a need to increase profitability on assurance type mandates.

Question 16

Auditors General are responsible for auditing which types of organizations?

Accepted Answer

A) public companies with shares issued to investors 
B) private companies that have loans outstanding to banks or other creditors 
C) ministries,departments,agencies that report to Government 
D) any organization that submits tax returns to the tax authorities

Question 17

Which of the following services provides a moderate level of assurance about the client's financial statements?

Accepted Answer

A) forecasts and projections 
B) compliance 
C) review 
D) audit

Question 18

A reason for a not-for-profit organization to be audited is to

Accepted Answer

A) comply with the laws requiring them to be audited. 
B) meet requirements of lenders or funding sources. 
C) have a professional accountant perform their bookkeeping. 
D) ensure that their financial statements do not contain errors.

Question 19

In the audit of an individual's tax return,the criteria used would be

Accepted Answer

A) an accounting framework. 
B) the Income Tax Act. 
C) the client's policies for taxable income. 
D) the auditor's judgment.

Question 20

There is an increasing demand for assurance about computer controls surrounding financial information transacted electronically and the security of the information related to the transaction.This is in large part due to

Accepted Answer

A) the increasing presence of Internet sales in many businesses. 
B) the use of computer-assisted auditing tools. 
C) the large volume of transactions and information shared online and in real-time by companies. 
D) client's uncertainty about the proper functioning of their computer systems.

Exam 1: The Demand for Audit and Other Assurance Services