Chapter 1: Auditing and Assurance Services

Classification

Analyzing repair and maintenance expenses to ensure they should not have been capitalized test for the assertion of proper ______.

Occurrence Existence

As a general rule the ______ assertion relates to events, transactions, presentations, and footnote disclosures and the ________ assertion relates to account balances.

electronic databases as well as printed reports.

Assurance services involve all of the following, except:

Cutoff

Accounting for transactions in the proper period is referred to as _______.

investors and creditors

High-quality information to make educated financial decisions is demanded by _______.

PCAOB (Public Company Accounting Oversight Board)

Responsibility for setting all audit standards to be followed on audit's of public companies rests with the _______.

False

(T or F) A specific error in a financial statement affects only one management assertion.

True

(T or F) Attestation is a form of providing assurance.

False

(T or F) Providing assurance is a form of attestation.

False. This is true for internal auditors

(T or F) When considering established criteria for effective communication, external auditors rely on financial and managerial models of efficiency and effectiveness.

Evidence

All types of information that guide auditors' decisions and relation to management assertions about economic actions and events is known as _________.

Attestation engagement

An audit is a specific type of _______.

Completeness.

An auditor selected items for test counts from the client's warehouse during the physical inventory observation. The auditor then traced these test counts into the detailed inventory listing that ultimately agreed to the financial statements. This procedure most likely provided evidence concerning management's assertion of:

has a logical staring point; proceeds along established guidelines; has a logical conclusion

Auditing ___________.

occurrence

Auditors complete procedures to ensure reported sales transactions were not created fraudulently inflate profits to in order to test the _________ assertion.

Understandability

Considering whether disclosures have been written in plain English tests the assertion of ________.

Complexity; Consequences

Environmental conditions that increase user demand for relevant and reliable information include _______, remoteness, time sensitivity, and _______.

Attestation; consulting

Financial Statement auditing and _________ services are both types of assurance, but _______ services are not.

conflict of interest

Financial statement frauds and potential ______ __ ______ between information providers and users leads to a natural skepticism on the part of users.

Account balances; Presentation and Disclosures; Transactions and Events

Financial statements contain management's assertions about ________.

context

For assurance services, improving the quality or _______ of information itself, but to how the information is used in decision making.

GAAP and IFRS

For independent auditors, established criteria essential for effective communication may be found in ______.

in the footnotes

Management assertions about financial statement presentation and disclosure are primarily found ________.

Rights and Obligations

Obtaining evidence about estimated liabilities relates to the _________ assertion.

Completeness

Obtaining evidence to determine that all inventory, accounts payable, notes payable, and expenses are included on the financial statements relates to the _______ assertion.

Attestation

Providing assurance for specific management assertions is referred to as _______.

The lending of credibility to information

Providing assurance is _______.

Correctness of financial statements; effective of internal controls for financial reporting

Sarbanes-Oxley require that upper management certify the _______.

Allocation Accuracy

The appropriate percentage of an asset or liability balance being recorded on the income statement in accordance with GAAP and IFRS is referred to as ________ and ________ refers to the appropriate recording of related transactions.

Assurance

The broadest set of information, including non financial information is covered by ________ services.

Business

The chance a company takes that customers will buy from competitors or product lines will become obsolete are examples of _______ risk.

Completeness

The confirmation of an account payable balance selected from the general ledger provides primary evidence regarding which management assertion?

education, the CPA Examination, experience, and a state certificate.

The four basic requirements for becoming a CPA in most states are:

Information

The probability that data circulated by a company will be false or misleading is ______ risk.

operational auditing.

The study of business operations for the purpose of making recommendations about the efficient use of resources, effective achievement of business objectives, and compliance with company policies is referred to as

timely; relevant; reliable

To minimize business risk and take advantage of opportunities, CEOs demand information that is ______.

Sustainability

Today activist shareholders are increasingly pressuring boards and upper management teams regarding social responsibility, the environment and other issues related to ________.

existence

Verifying accounts receivable and insurance policies with customers and is done to test the _______ assertion.

review

When a CPA performs a(n) _________, limited-evidence gathering work is done, but the scope is narrower than in an audit.

Auditing

When assertions are embodied in a company's financial statements, the attestation is referred to as ______.

Assertions

When audit procedures are specified, the evidence by each procedure must relate to one or more specific management _______.

Investor and creditor confidence is shaken

When audit quality is compromised:

Disclosures are fairly presented; Revenue transactions on the income statement occurred; Reported liabilities are complete; Inventory on the balance sheet exists.

When management provides an independent auditor with prepared financial statements, they are making assertions that __________.

assess external financial reporting reporting risks

When planning the audit engagement, auditors use management assertions to ________.

Which of your employees is a fraudster?

Which of the following questions would be inappropriate for an auditor to ask a client when exhibiting an appropriate level of professional skepticism while completing an audit procedure related to the internal control system?