Question 1

Three-party accountability is a special case of which economic theory problem?

Accepted Answer

A)   independence
B)   agency
C)   business risk
D)   forensics B

Question 2

What is an attest engagement?

Accepted Answer

When a public accountant is hired to perform procedures and issue a report resulting from those procedures that affirms the validity of an assertion, this is known as an attest engagement.

Question 3

What is information risk?

Accepted Answer

Information risk is the risk that a set of financial statements will be materially False or misleading. As a result, information risk includes failure to properly disclose business risk.

Question 4

The difference between what the public expects of auditors and what auditors can actually deliver is known as ________.

Accepted Answer

A)   forensics
B)   an expectations gap
C)   a business risk
D)   an information risk

Question 5

In addition to the audit of financial statements, comprehensive governmental auditing may also include audits of efficiency, effectiveness, and ________.

Accepted Answer

A)   fraud
B)   accuracy
C)   economy
D)   adequacy

Question 6

What is the primary role and responsibility of independent external auditors?

Accepted Answer

A)   to prepare a company's annual financial statements and notes.
B)   to perform an audit and provide an opinion on the financial statements of a company.
C)   to provide business consulting advice to audit clients.
D)   to obtain an understanding of a client's internal control system and prepare a report for management about control weaknesses.

Question 7

Accounting risk is the part of information risk that is due to incorrectly predicting future events.

Accepted Answer

A) True 
 B)False

Question 8

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

Question 9

The agency problem can be mitigated by ________.

Accepted Answer

A)   greater transparency
B)   a higher degree of independence
C)   design of contracts
D)   internal auditing

Question 10

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

Accepted Answer

The answer of Why is three-party accountability an important distinguishing...

Question 11

What is a direct reporting engagement?

Accepted Answer

The answer of What is a direct reporting engagement?...

Question 12

Auditors on staff in the Office of the Auditor General of Canada (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 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

The answer of Discuss the underlying conditions affecting users' demand...

Question 15

Professional judgment is a widely used concept in accounting and auditing. How is it defined in the audit standards?

Accepted Answer

A)   There is no definition of professional judgment in the auditing standards.
B)   Professional judgment includes consideration of key principles and concepts of disciplines underlying the professional standards, such as economics, psychology, law, finance, statistics and philosophy.
C)   Professional judgment means reaching a complex decision by incorporating auditing standards, accounting standards, and rules of professional ethics in a coherent manner.
D)   Professional judgment involves specialized concepts and language integrating several disciplines in order to provide appropriate justification for audit decisions.

Question 16

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 17

In operational auditing, the auditor studies business operations and makes recommendations about all of the following EXCEPT ________.

Accepted Answer

A)   economic and efficient use of resources
B)   effective achievement of business objectives
C)   the fairness of the financial statements
D)   compliance with company policies

Question 18

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 19

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

Question 20

Discuss the nature of value-for-money (VFM) audits and give three examples of its application.

Accepted Answer

The answer of Discuss the nature of value-for-money (VFM) audits...

Exam 1: Introduction to Auditing

Three-party accountability is a special case of which economic theory problem?

What is an attest engagement?

What is information risk?

The difference between what the public expects of auditors and what auditors can actually deliver is known as ________.

In addition to the audit of financial statements, comprehensive governmental auditing may also include audits of efficiency, effectiveness, and ________.

What is the primary role and responsibility of independent external auditors?

Accounting risk is the part of information risk that is due to incorrectly predicting future events.

An example of a forensic accounting assignment might be ________.

The agency problem can be mitigated by ________.

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

What is a direct reporting engagement?

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

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

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

Professional judgment is a widely used concept in accounting and auditing. How is it defined in the audit standards?

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

In operational auditing, the auditor studies business operations and makes recommendations about all of the following EXCEPT ________.

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

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

Discuss the nature of value-for-money (VFM) audits and give three examples of its application.