Question 1

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 2

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 3

Forensic accounting does not include fraud auditing.

Accepted Answer

A) True 
 B)False

Question 4

When does an agency problem occur?

Accepted Answer

The answer of When does an agency problem occur?...

Question 5

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

Accepted Answer

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

Question 6

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 7

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 8

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 9

The three underlying conditions affecting users' demand for accounting information are complexity,reliability,and completeness.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

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

Question 11

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 12

There are no restrictions on the type of business advisory services a PA firm can provide to a nonaudit client.

Accepted Answer

A) True 
 B)False

Question 13

What is operational auditing and who performs it?

Accepted Answer

The answer of What is operational auditing and who performs...

Question 14

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) risk assessment

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 17

What is an attest engagement?

Accepted Answer

The answer of What is an attest engagement?...

Question 18

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

Exam 1: Introduction to Auditing

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 ________.

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

Forensic accounting does not include fraud auditing.

When does an agency problem occur?

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

An example of a forensic accounting assignment might be ________.

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

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

The three underlying conditions affecting users' demand for accounting information are complexity,reliability,and completeness.

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

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

There are no restrictions on the type of business advisory services a PA firm can provide to a nonaudit client.

What is operational auditing and who performs it?

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

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

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

What is an attest engagement?

The auditee is the person or company ________.