Audit Chapter 5
.32 Which of the following accounts would not be included in the Acquisition and Payment for Long-Lived Assets Cycle?
A. revenue
.29 Which of the following statements is true about the audit opinion formulation process presented in this chapter?
B. The audit opinion formulation process is based on the premise that management has responsibility to prepare the financial statements and maintain internal control over financial reporting
The audit opinion formulation process is described as consisting of five phases
True
Within a particular cycle, the auditor focuses on the flow of transactions within that cycle, including how transactions are initiated, authorized, recorded, and reported
true
Auditors are encouraged, but nor required, to prepare audit documentation
False
The auditor is expected to perform substantive procedures for each relevant assertion of each significant account and disclosure
True
The auditor's selection of audit procedures depends on the accounts and assertions being tested
True
Within each cycle, the audit is designed to test management assertions
True
.39 Which of the following is a precondition for an audit?
A. Management has used an acceptable financial reporting framework
.25 Which of the following statements is correct regarding the setting of auditing standards in the United States?
A. The AICPA is responsible for setting auditing standards for audits of nonpublic entities B. The PCAOB is responsible for setting auditing standards for audit of public companies Both A and B are correct
.36 Which of the following is a true statement regarding audit evidence and audit procedures?
A. The auditor has a responsibility to design and perform audit procedures to obtain sufficient appropriate audit evidence
.41 Which of the following statements is correct regarding the design of controls related to credit limits?
A. The effectiveness of the control design is contingent on the credit manager's process for establishing and reviewing credit limits
.28 Which of the following is included as part of the AICPA's principles governing an audit?
B. An audit has inherit limitations such that the auditor cannot provide absolute assurance about whether the financial statements are free of misstatement
.35 Audit procedures fall into three categories. Which of the following is not a category of audit procedures?
B. Tests of risks
.30 Which of the following activities is not part of the activities within the audit opinion formulation process?
B. The auditor determines the appropriate non audit consulting services to provide to the client
.38 Which of the following statements is false regarding audit documentation?
B. The only purpose of audit documentation is to provide evidence that the audit was planned and performed in accordance with auditing standards
.40 Which of the following statements is true regarding client acceptance and continuance decisions?
C. A precondition of accepting a client is that management acknowledges and understands its responsibilities related to the preparation of the company's financial statements
.26 Which of the following is not required as part of the fieldwork standards?
D. All of the above are required by the fieldwork standards
.37 Which of the following information should be included in audit documentation?
D. All of the above should be included
.34 Which management assertion addresses whether the components of the financial statements are properly classified, described, and disclosed?
D. Presentation and Disclosure
.42 Which of the following test of controls would not typically be used in assessing control design effectiveness?
D. Reperformance
.33 Which of the following is not a management assertion?
E. They are all management assertions
During risk assessment, the auditor focuses on understanding the risks of all misstatements in the financial statements and related disclosures
False
If the auditor issues an opinion on the client's internal controls and the client's financial statements, the auditor is required to issue two separate reports
False
Once the auditor completes the substantive procedures in Phase IV, the auditor is in a position to issue the audit opinion
False
Risk assessment procedure alone provide sufficient appropriate audit evidence on which to base an audit opinion
False
The auditor assesses the risk of material misstatement at only the assertion level
False
The auditor is expected to obtain evidence about the operating effectiveness of internal control on all audits
False
The completeness assertion is typically the more relevant assertion for assets
False
The ten standards underlying the PCAOB's auditing standards fall within four different categories
False
There is not much commonality among the auditing standards set by PCAOB, AICPA, and IAASB
False
When testing controls, the auditor tests only transaction controls
False
.31 Which of the following is a reason that the auditor uses an accounting cycle approach when performing an audit?
The accounting cycles provide a convenient way to break the audit up into manageable pieces
An important aspect of the audit opinion formulation process is the client's responsibilities for internal control over financial reporting and the financial statements
True
Audit checklists and audit programs are examples of audit documentation
True
Auditors are not required to perform audits for any organizations that asks
True
Auditors of U.S. public companies should follow the PCAOB's auditing standards
True
For an audit firm to accept a client, management needs to agree to provide the auditor with access to all relevant information, such as records, documentation, and so on, and unrestricted access to persons within the organization
True
Substantive procedures include substantive analytical procedures and test of details
True
The cycle approach to auditing provides a way for breaking the audit up into manageable components
True
The purpose of an audit is to enhance the degree confidence that users can place on the financial statements
True
