Midterm!!!

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The probability that data circulated by a company will be false or misleading is ___________

information risk

The risk of material misstatement is a combination of ___________ risk and _______ risk

inherent and control

An independent, objective assurance and consulting activity designed to add value and improve an organization's operations is the definition of _________________ auditing

internal

The objective of _________________ auditing is to help an organization' accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes

internal

Policies and procedures implemented to prevent or detect material accounting frauds and errors and provide for timely correction is the definition of ___________

internal control

Which of the following should an auditor do when control risk assessed at the maximum level? (A) Document the assessment (B) Perform fewer substantive tests of details (C) Document the control structure more extensively (D) Perform more tests of controls

(A) Document the assessment

An auditor has identified the controller's review of the bank reconciliation as a control to test. In connection with this test, the auditor interviews the controller to understand the specific data reviewed on the reconciliation. In addition, the auditor verifies that the bank reconciliation is properly prepared by the accountant and reviewed by the controller as evidenced by their respective sign-offs. Which of the following types of audit procedures do these actions illustrate? (A) Inquiry and inspection of records. (B) Analytical procedures and reperformance. (C) Confirmation and reporformance (D) Observation and inspection of records.

(A) Inquiry and inspection of records.

Which of the following statements best describes why an auditor would use only substantive procedures to evaluate specific relevant assertions and risks? (A) Testing the operating effectiveness of the relevant controls would not be efficient. (B) The internal auditor already has tested the relevant controls and found them effective. (C) The cost of substantive procedures will exceed the cost of testing the relevant controls. (D) The relevant internal control components are not well documented.

(A) Testing the operating effectiveness of the relevant controls would not be efficient.

This year, Blakeney Enterprise engaged a new auditor who must: (A) attempt to communicate with the predecessor auditor before accepting the engagement. (B) reject the engagement if the change in auditors resulted from a dispute with the predecessor. (C) seek the SEC's permission to accept the engagement if Blakeney is publicly owned. (D) review the predecessor's audit documentation if the audit is to be in accordance with GAAS.

(A) attempt to communicate with the predecessor auditor before accepting the engagement.

The existence of audit risk is recognized by the statement in the auditor's standard report that the: (A) auditor obtains reasonable assurance about whether the financial statements are free of material misstatement (B) auditor is responsible for expressing an opinion on the financial statements, which are the responsibility of management. (C) audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements (D) financial statements are presented fairly, in all material respects, in conformity with applicable financial reporting framework

(A) auditor obtains reasonable assurance about whether the financial statements are free of material misstatement

Management fraud generally refers to: (A) intentional distortions of financial statements (B) violations of GAAS. (C) noncompliance (D) unintentional mistakes

(A) intentional distortions of financial statements

The role of the Public Company Accounting Oversight Board in the standard-settting process is to develop: (A) Governmental Auditing Standards for the audits of governmental entities (B) Auditing Standards for the audits of public entities (C) International Standards on Auditing for the audits of foreign entities. (D) Statements on Auditing Standards for the audits of nonpublic entities.

(B) Auditing Standards for the audits of public entities

An entity with a large volume of customer remittances by mail could most likely reduce the risk of employee misappropriation of cash by using: (A) independently prepared mailroom prelists. (B) a bank lockbox system. (C) daily check summaries. (D) employee fidelity bonds.

(B) a bank lockbox system

The appropriate separation of duties does not include: (A) recording of transactions (B) data preparation (C) authorization to execute transactions (D) custody of assets involved in the transactions

(B) data preparation

During the initial planning phase of an audit, a CPA most likely would: (A) test specific internal control activities that are likely to prevent fraud. (B) discuss the timing of the audit procedures with the client's management. (C) inquire of the client's attorney as to whether any unrecorded claims are probable of assertion. (D) evaluate the reasonableness of the client's accounting estimates of inventory obsolescence.

(B) discuss the timing of the audit procedures with the client's management.

Comparing data on separate files can be accomplished by using computer-assisted audit techniques (CAATs) to determine whether comparable information is in agreement. Examples of such comparisons would not include: (A) current and prior inventory to details of purchases and sales. (B) observation of inventory accounts (C) payroll details with personnel records (D) paid vouchers to disbursements.

(B) observation of inventory accounts

Assume that application of analytical procedures revealed significant unexplained differences between recorded amounts and the expectations (estimates) developed by the auditor. If management is unable to provide an acceptable explanation, the auditor should: (A) intensify the audit with the expectation of detecting management fund (B) perform additional audit procedures to investigate the matter further. (C) consider the matter a scope limitation (D) withdraw from the engagement.

(B) perform additional audit procedures to investigate the matter further.

An auditor is considering whether the omission of the confirmation of investments impairs the auditor's ability to support a previously expressed unmodified opinion. The auditor need not perform this omitted procedure if: (A) the auditor's assessed level of detection risk is low. (B) the results of alternative procedures that were performed compensate for the omission. (C) the omission is documented in a communication with the audit committee. (D) no individual investment is material to the financial statements taken as a whole.

(B) the results of alternative procedures that were performed compensate for the omission.

Inquiries of warehouse personnel concerning possible obsolete or slow moving inventory items provide assurance about the ASB balance assertion of: (A) existence (B) valuation (C) completeness (D) presentation (E) rights and obligations

(B) valuation

The type of financial analysis that expresses balances sheet accounts as percentages of total assets is known as: (A) net worth analysis (B) vertical analysis (C) horizontal analysis (D) expenditure analysis

(B) vertical analysis

When fraud risk is significant, and management cooperation is unsatisfactory, the auditors will most likely: (A) consult with fraud examiners (B) withdraw from the engagement (C) report directly to the SEC within one day (D) perform extended audit procedures

(B) withdraw from the engagement

In considering overall materiality for planning purposes, an auditor believes that misstatements aggregating $10,000 would have a material effect on an entity's income statement but that misstatements would have to aggregate $20,000 to materially affect the balance sheet. Ordinarily, it would be appropriate to design audit procedures that would be expected to detect misstatements aggregating: (A) $15,000 (B) $30,000 (C) $10,000 (D) $20,000

Which of the following most likely would give the most assurance concerning the valuation assertion of accounts receivable? (A) Comparing receivable turnover rates to industry statistics for reasonableness. (B) Inquiring about receivables pledged under loan agreements. (C) Assessing the allowance for uncollectible accounts for reasonableness. (D) Tracing amounts in the subsidiary ledger to details on shipping documents.

Which of the following procedures would a CPA most likely perform in the planning phase of a financial statement audit? (A) Perform cutoff tests of cash receipts and disbursements (B) Make inquiries of the client's lawyer concerning pending litigation. (C) Compare financial information with nonfinancial operating data. (D) Recalculate the prior year's accurals and deferrals

Jones, CPA, is auditing the financial statements of XYZ Retailing Inc. What assurance does Jones provide that direct effect noncompliance that is material to XYZ's financial statements, and noncompliance that has a material, but indirect effect on the financial statements will be detected? (A) Direct effect noncompliance: Reasonable; Indirect effect noncompliance: Reasonable. (B) Direct effect noncompliance: Limited; Indirect effective noncompliance: Reasonable (C) Direct effect noncompliance: Reasonable; Indirect effect noncompliance: None (D) Direct effect noncompliance: Limited; Indirect effect noncompliance: None

Which of the following outcomes is a likely benefit of information technology used for internal control? (A) Recording of unauthorized transactions. (B) Processing of unusual or nonrecurring transactions (C) Enhanced timeliness of information (D) Potential loss of data

Which of the following actions should a CPA firm take to comply with the AICPA's quality control standards? (A) Establish procedures that comply with the standards of the Sarbanes-Oxley Act. (B) Consider inherent risk and control risk before determining selection risk. (C) Establish policies to ensure that the audit work meets applicable professional standards. (D) Use attributes sampling techniques in testing internal controls

Which of the following statements is true with respect to the quality of audit evidence? (A) Evidence is considered of higher quality when gathered prior to year-end than following year-end (B) In evaluating quality, sufficiency of evidence is of greater importance than appropriateness of evidence (C) Evidence obtained under environments of stronger internal control is of higher quality than evidence obtained under environments of weaker internal control (D) Quality is related to the relevance of evidence, but not the reliability of evidence.

(C) Evidence obtained under environments of stronger internal control is of higher quality than evidence obtained under environments of weaker internal control

At the end of each business day, Safe Company sends its bank a listing of all checks written during the day including the check number, payee, and amount. When a check is sent to the bank for payment the bank compares the payee and the amount with the listing provided by Safe Company. This system is called: (A) Pay-As-You-Go (B) PayChex (C) Positive Pay (D) Pay Master

Which of the following provides the best method of obtaining an understanding of a continuing client's business for planning an audit? (A) Reading specialized industry journals (B) Reevaluating the client's internal control environment (C) Reviewing prior year audit documentation and the permanent file for the client (D) Performing tests of details of transactions and balances.

Which of the following is a definition of control risk? (A) The susceptibility of material misstatement assuming there are no related internal controls, policies, or procedures. (B) The risk that the auditor's assessment of internal controls will be at less than the maximum level. (C) The risk that a material misstatement will not be prevented or detected on a timely basis by the client's internal controls. (D) The risk that the auditor will not detect a material misstatement

(C) The risk that a material misstatement will not be prevented or detected on a timely basis by the client's internal controls.

Which of the following types of auditors' reports does not require an additional paragraph to support the opinion? (A) Adverse opinion (B) Disclaimer of opinion (C) Unmodified opinion (D) Qualified opinion

Control activities intended to ensure that transactions are recorded in the right period are designed to achieve the ASB assertion of: (A) occurence (B) valuation or allocation (C) cutoff (D) accuracy

When an auditor becomes aware of possible noncompliance by a client, the auditor should obtain an understanding of the nature of the act to: (A) recommend remedial actions to the audit committee (B) consider whether other similar acts may have occurred (C) evaluate the effect on the financial statements (D) determine the reliability of mangement's representations

Assessing control risk at below maximum level most likely would involve: (A) reducing inherent risk for most of the assertions relevant to significant account balances. (B) performing more extensive substantive tests with larger sample sizes than originally planned. (C) identifying specific internal control activities that are relevant to specific financial statement assertions. (D) changing the timing of substantive tests by omitting interim-date testing and performing the tests at year end.

The major emphasis in GAAS related to consideration of fraud in a financial statement audit (AU 240) is on: (A) employee misappropriation of assets (B) employee embezzlement (C) management fund (D) client fraud on customers

When counting cash on hand the auditor must exercise simultaneous control over all cash and other negotiable assets to prevent: (A) irregular endorsement (B) theft (C) replacement or substitution of stolen assets (D) deposits in transit

Most fraud investigators utilize the fraud triangle theory. A new theory called the fraud diamond has been proposed. Which of the following is an element of the fraud diamond and is not an element of the fraud triangle? (A) Motive (B) Liquidity (C) Opportunity (D) Capability

(D) Capability

The audit objective that all transactions are recorded in the proper account is related most closely to which one of the ASB transaction assertions? (A) Occurence (B) Accuracy (C) Completeness (D) Classification

(D) Classification

A vendor's invoice received and held by the client would be considered what type of evidence? (A) Written representation (B) External (C) Internal (D) External-Internal

(D) External-Internal

Inherent risk and control risk differ from detection risk in which of the following ways? (A) Inherent risk and control risk exist as a result of the auditor's judgment about materiality (B) Inherent risk and control risk are controlled by the auditor (C) Inherent risk and control risk are calculated by the client (D) Inherent risk and control risk exist independently of the audit

(D) Inherent risk and control risk exist independently of the audit

Which of the following accounts tends to be most predictable for purposes of analytical procedures? (A) Accounts receivable (B) Income Taxes payable (C) Travel and entertainment expense (D) Interest expense

(D) Interest expense

An auditor would most likely use word processing software for what purpose? (A) Obtaining a sample selection (B) Preparing a trial balance (C) Performing analytical procedures (D) Preparing an audit plan

(D) Preparing an audit plan

The audit objective that footnotes in the financial statements should be clear and expressed such that the information is easily conveyed to the readers of the financial statements is related most closely with which of the ASB presentation and disclosure assertions? (A) Occurrence (B) Rights and obligations (C) Comprehensibility (D) Understandability

(D) Understandability

A proof of cash: (A) always detects lapping. (B) is most helpful when control risk for cash is low (C) is required by GAAS. (D) can be used to test the transactions process.

(D) can be used to test the transaction process

An auditor selected items from the client's detailed inventory listing (that agreed to the financial statements). During the physical inventory observation, the auditor then found each item selected and counted the number of units on hand. Assuming that the amount on hand was the same as the amount in the client's detailed inventory listing, this procedure most likely would provide evidence concerning management's assertion of: (A) presentation and disclosure (B) rights and obligations (C) valuation (D) existence (E) completeness

(D) existence

An auditor selected items for test counts from a client's inventory listing before observing the client's physical inventory at the warehouse. The auditor then found the items selected at the warehouse and counted them. This procedure most likely obtained evidence concerning management's assertion of: (A) completeness (B) rights and obligations (C) valuation (D) existence or occurence

(D) existence or occurence

The mail which includes payments should be opened by two people. This control is called: (A) anti-collusion (B) lapping (C) separation of duties (D) joint custody

(D) joint custody

3. During an audit of an entity's stockholders' equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements or state law. This audit procedure most likely is intended to verify management's assertion of (A) existence or occurrence. (B) completeness. (C) valuation or allocation. (D) presentation and disclosure.

(D) presentation and disclosure.

An auditor who uses 7 percent of income before taxes as a basis for overal materiality would be basing judgment on: (A) cummulative effects (B) absolute size (C) nature of the item (D) relative size

(D) relative size

An audit plan of substantive procedures for cash would not include: (A) prepare a schedule of interbank transfers for a period of ten business days before and after year-end date. (B) obtain a written client representation concerning compensating balance agreements (C) request client to prepare bank reconciliations (D) request a cutoff bank statement be mailed to the client.

(D) request a cutoff bank statement be mailed to the client

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the: (A) factors that raise doubts about the auditability of the financial statements. (B) operating effectiveness of internal control policies and procedures. (C) possibility that the nature and extent of substantive tests may be reduced (D) risk that material misstatements exist in the financial statements

(D) risk that material misstatements exist in the financial statements

Tracing bills of lading to sales invoices provides evidence that: (A) shipments to customers were recorded as sales. (B) invoiced sales were recorded as sales (C) recorded sales were shipped (D) shipments to customers were invoiced

(D) shipments to customers were invoiced

Regardless of the assessed level of control risk, an auditor of a non-public company would perform some: (A) dual purpose tests to evaluate both the risk of monetary misstatement and preliminary control risk (B) analytical procedures to verify the design of internal control activities (C) tests of controls to determine the effectiveness of internal control policies. (D) substantive tests to restrict detection risk for significant transaction classes.

(D) substantive tests to restrict detection risk for significant transaction classes.

Auditors are auditing the warehouse of Huge Lots Corporation. The auditors performed the audit procedures listed 1-5. For each audit procedure select the ASB balance assertion that is most likely being tested. a.Existence b. Rights and obligations c. Completeness d. Accuracy e. Valuation 1. the auditors walked through the warehouse looking for obsolete inventory 2. the auditors compared inoices received from suppliers with the cost of inventory listed in the inventory accounts 3. the auditors reviewed purchase orders to determine if any inventory was on consignment 4. the auditors reviewed vendor invoices to determine if freight costs, taxes, tariffs or other costs had been included in inventory costs. 5. the auditors selected items from the inventory and reviewed inventory records to ensure these items were included in those records

1. E 2. D 3. B 4. E 5. C

As the year 2020 approaches, most states require students to take _________ semester hours of college before receiving a CPA certificate but some states allow students to take the CPA exam after only _________ semester hours of college

150, 120

Analyzing repair and maintenance expenses to ensure they should not have been capitalized test for the assertion of proper A. classification B. cutoff C. rights and obligations D. allocation

Audit reports refer to an audit being conducted in accordance with _________ of the public company accounting oversight board A. standards B. Procedures

The primary purpose of assessing the risk of material misstatement is to help auditors determine the _______, ______ and ______ of further audit procedures needed to gather evidence about the fairness of the entity's financial statements

nature, timing, extent

PCAOB Auditing Standards apply to A. public entities only B. non public entities only C. both public and nonpublic entities

PCAOB inspections are conducted on an annual basis for: A. firms performing audits of more than 100 public entities B. firms performing audits of less than 100 public entities C. firms that have had substandard work identified in previous inspections D. all firms that audit public entities

Rapid changes in the business world has led to the need for entry level auditing professionals to have proficiency in A. Data analytics and technology B. Complex IRS rules and regulations C. generally accepted accounting principles

Reasonable assurance is: A. a high, but not absolute level of assurance B. absolute level of assurance C. based on what a typical investor would consider to be resonable

Sarbanes- Oxley requires that _________ must certify the correctness of financial statements and the effectives of the internal control system A. upper management B. internal auditors C. the board of directors

The fundamental principle of _______ requires that the auditor obtains resonable assurance about whether the financial statements as a whole are free from material misstatement whether due to fraud or error a. performance b. reporting c. responsibilities

The incentive for company management to provide overly optimistic information results in a potential ___________ between information provides and users A. conflict of interest B. audit risk C. information risk D. natural skepticism

The ownership assertion A. includes capitalized lease property B. Extends to accounts liabilities the company is not yet obligate to pay C. only includes assets for which the company holds the title D. does not apply to intangible assets

The probability that data circulated by a company will be false or misleading is ____________ risk A. information B. consequence C. Business D. Reliability

When auditing large entities, a sample of transactions is examined when drawing conclusions. The number of transaction evaluated relates to the issue of: A. sufficiency B. relevance C. reliability D. appropriateness

Which of the following is not related to the responsibilities principle? A. Specific auditing procedures designed to determine the effectiveness of the entity's internal control over financial reporting B. Continuing professional education to ensure that professionals' knowledge keeps pace with changes in the accounting and auditing profession C. The auditors' use of professional judgment throughout the examination D. Firm-wide policies to evaluate the financial and professional relationships of its professionals

Which of the following presumptions does not relate to the reliability of audit evidence? A. The auditors' opinion, to be economically useful, is formed within reasonable time and based on evidence obtained at a reasonable cost. B. Evidence obtained from independent sources outside the entity is more reliable than evidence secured solely within the entity. C. The independent auditors' direct personal knowledge, obtained through observation and inspection, is of higher quality than information obtained indirectly. D. The more effective the client's internal control, the more assurance it provides about the accounting data and financial statements.

Which of the following presumptions is correct about the reliability of audit evidence? A. An effective system of internal control provides more assurance about the reliability of audit evidence. B. Reliability of audit evidence refers to the amount of corroborative evidence obtained. C. Information obtained indirectly from outside sources is the most reliable form of audit evidence. D. To be reliable, audit evidence should be convincing rather than persuasive.

Which of the following statements is correct A. some public accounting firms describe their organizations as a professional service firms B. a public accounting firm is required to designate itself as a CPA firm

Which of the following types or services relate to a board set of information, including non financial information A. assurance B. attestation C. auditing

A company's internal auditing function should not be considered when assessing the effectiveness of internal controls. a. True b. False

Auditors compete procedures to ensure reported sales transactions were created to fraudulently inflate profits to in ore to test the ________ assertion

occurrence

A material weakness in internal control is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. a. True b. False

A practitioner is engaged to express an opinion on management's assertion that the square footage of a warehouse offered for sale is 150,000 square feet. The practitioner should refer to which of the following sources for professional guidance? a. Statement of Auditing standards. b. Statements on Standards for Attestation Engagements c. Statements on Standards for Accounting and Review Services d. Statements on Standards for Consulting Services.

In the audit report, an audit opinion: Check all that apply A. is expressed in accordance with the applicable financial reporting framework B. must always be expressed even if the auditor is inable to complete the audit C. states if the financial statements are presented fairly in al material respect.

A, B

The obligation assertion (check all that apply) A. includes ensuring proper footnote disclosure B. only includes accounting liabilities the company is legally obligated to currently pay C. includes an estimate for product warranty

A, C

When making a decision to accept a new client engagement or continuing to perform an engagement for an existing client, the most important issues that firms should focus on are A. firms ability to comply with legal and ethical requirements related to the engagements B. Clients ability to pay for an engagement that will meet all legal, ethical and professional requirements C. integrity and business reputation of the client D. firms ability to adequately perform the engagement

A, C,D

AICPA statements on Auditing Procedures: Check all that apply A. were developed in response of an auditing scandal B. served as the basis for audits of public and nonpublic companies C. are still being issued by the american standards board

A,B

Reasonable assurance A. requires auditors to consider various material misstatement risks B. Recognizes a GAAS audit may not detect all material misstatements C. Requires audit procedures to limit the overall risk to a moderate level D. Recognizes auditors cannot provide a high level of assurance regarding their work

A,B

The Public Company Accounting Oversight Board (PCAOB) A. provides independent oversight over the audits of public entities B. establishes and enforces standards for audit engagements C.inspects the quality of audits conducted by all public accounting firms

A,B

The completeness assertion. Check all that apply A. requires the auditor to obtain persuasive evidence B. includes determining if all expenses are recorded C. may be verified by management representation only

A,B

Which of the following statements are correct? Check all that apply A. assurance services involve lending credibility to both financial and non financial information B. Financial statement auditing is the dominant assurance service provided by CPA firms C. the AICPA does not support non-auditing assurance services D. CPAs who provide auditing services are prohibited from providing other types of assurance services

A,B

A system of quality control provides reasonable assurance that an audit firm: Check all that apply A. complies with professional standards B. issues appropriate reports C. complies with regulatory and legal requirements D. only allows experienced, licensed CPAs to work with their audit clients

A,B,C

Auditing: check all that apply A. has a logical conclusion B. has a logical starting point C. proceeds along established guidelines D. is unplanned and unstructured

A,B,C

Designations for accountants within public accounting other than a CPA include. check all that apply A. certified fraud examiner (CFE) B. certified forensic accountant (CFA) C. certified internal auditor (CIA) D. certified management accountant (CMA)

A,B,C

For quality control standards to be effective it is important that firm management A. demonstrates its commitment to quality control B. devotes sufficient resources to quality control policies and procedures C. ensures that financial considerations do not override work quality D. does not base personal decision on the quality or work performed

A,B,C

Internal auditors A. perform auditors of financial reports for limited external distribution B. review internal control systems to ensure compliance with company policies C. Review the effectiveness of achieving results compared to established objectives D. examine evidence and issue an opinion on the fairness of financial statements

A,B,C

The U.S. Government Accountability office (GAO). Check all that apply A. is organizationally independent of the agencies it audits B. auditors may be considered the highest level of internal auditors for the federal government C. Is headed by the U.S. comptroller General D. is an agency of the united states federal judicial branch

A,B,C

When making a decision to accept a new client engagement or continuing to perform an engagement for an existing client, the most important issues that firms should focus on are. Check all that apply A. integrity and business reputation of the client B. firms ability to comply with legal and ethical requirements related to the engagement C. firms ability to adequately perform with engagement D. clients ability to pay for an engagement that will meet all legal, ethical and performance requirements

A,B,C

Assurance services include. check all that apply A. regulatory compliance B. internal audit outsourcing C. cyber risk assessment D. customer satisfaction surveys E. consulting services

A,B,C,D

Services that public accounting firms are prohibited from providing to audit clients under Sarbanes- Oxley include: Check all that apply A. investment services B. legal and expert services C. actuarial services D. internal audit outsourcing E. corporate tax return preparation services

A,B,C,D

Elements of the performance principle include A. reasonable assurance B. materiality C. audit evidence D. planning and supervision E. risk assessment F. understandable reporting

A,B,C,D,E

To obtain reasonable assurance the auditor must: Check all that apply A. identify and assess risks of material misstatements B. obtain sufficient appropriate audit evidence C. apply appropriate materiality levels throughout the audit D. issue a modified opinion at the conclusion of the audit E. plan to work and supervise assistants

A,B,C,E

When management provides an independent auditor with prepared financial statements, they are making assertions that Check all that apply A. revenue transactions on the income statements occurred B. disclosures are fairly presented C. reported liabilities are complete D. Financial statements are error- free E. inventory on the balance sheet exists

A,B,C,E

When management provides an independent auditor with prepared financial statements, they are making assertions that: check all that apply A. disclosures are fairly presented B. reported liabilities are complete C. inventory on the balance sheet exists D. financial statements are error- free E. revenue transactions on the income statement occurred

A,B,C,E

Generally Accepted Auditing Standards (GAAS) Check all that apply A. guide the conduct of audit examinations B. identify necessary qualifications and characteristics of auditors C. only include pronouncements issued by the PCAOB D. have a purpose to meet the objective of audit emainations

A,B,D

Knowledge of the clients business and industry helps auditors. Check all that apply A. make judgments about the clients accounting principal choices B. evaluate the reasonableness of management estimates C. write an audit report that is appropriate for the industry D. identify areas for special attention

A,B,D

interpretive publications: check all that apply A. must be followed unless an auditor can justify any departures B. are part of auditing standards C. are as authoritative and binding as the guidance in SAS and auditing standards D. provide guidance on the application of GAASin specific circumstances

A,B,D

Materiality: Check all that apply A. is part of the objective of the audit B. recognizes auditors should focus on matters important to financial statment users C. Recognizes auditors do no expect account balances to be accuate to the penny D. is commonly established based on dollar amounts of key financial statement subtotals

A,B.C

Prior to the year 2002, which of the following is correct. Check all that apply A. the accounting profession was self regulated B. the institute of certified Auditors was responsible for auditing regulations C. standards governing audits were established by members of the accounting profession

A,C

Sarbanes- Oxley require that upper management certify the: Check all that apply A. correctness of financial statements B. education of internal auditors C. effective of internal controls for financial reporting D. qualifications of the external audit team

A,C

The objectives of an audit are to: check of all that apply A. issue a report on the financial statements B. obtain absolute assurance that the financial statements do no contain material misstatements due to error C. obtain reasonable assurance about whether the financial statements as a whole are free of material misstatements due to fraud

A,C

The obligation assertion. Check all that apply A. Includes ensuring proper footnote disclosure B. only includes accounting liabilities the company is legally obligated to currently pay C. includes an estimate for product warranty

A,C

To ensure personal assigned to engagements are independent in both fact and appearance firms should. Check all that apply A. identify threats to independence and take actions to eliminate or reduce them to an acceptable level B. obtain verbal confirmation from all firm personnel with respect to their compliance with independence requirements C. communicate independence requirements to personnel

A,C

The PCAOB prohibits an accounting firm from providing auditing services to a public company if the accounting firm. Check all that apply A. provides tax services for key company executives B. provides normal tax advance to the company C. accepts fees that are based on tax outcomes D. consults on "listed transaction tax strategies

A,C,D

When exercising professional skepticism auditors A. consider the reliability of information obtained from the audit committee B. assume management is dishonest when providing information C. evaluates the reliability of documentary evidence D. evaluate and consider contradictory evidence

A,C,D

For independent auditors, established criteria essential for effective communication may be found in. Check all that apply A. GAAP B. IRS code C. Regulatory agency rules D. IRFS

A,D

Reasonable assurance: A. requires auditors to consider various material misstatement risks B. requires audit procedures to limit the overall to a moderate level C. recognizes auditors cannot provide a high level of assurance regarding their work D. recognizes a GAAS audit may not detect all material misstatement

A,D

It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that a. A potential conflict of interest always exists between the auditor and the management of the enterprise under audit. b. The professional status of the independent auditor imposes commensurate professional obligations. c. In audits of financial statements, the auditor acts exclusively in the capacity of an auditor. d. Financial statements and financial data are verifiable.

A. The management team is generally trying to put its "best foot forward" when reporting their financial statement information. The auditor must make sure that the management team does not violate the accounting rules when doing so. In essence, this statement characterizes why professional skepticism is required to be exercised by auditors.

According to auditing standards, external auditor's responsibilities for indirect noncompliance do not include a. Designing audit procedures to detect noncompliance in the absence of specific information brought to the auditors attention. b. Performing audit procedures when specific information indicates that possible noncompliance may have a material indirect effect on financial statements c. Considering the qualitative materiality of known and suspected noncompliance. d. Obtaining written management representations concerning the absence of violations of laws and regulations.

According to the AICPA, the purpose of an audit of financial statements is to a. Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the financial accounting standards board. b. Enhance the degree of confidence that intended users can place in the financial statements. c. Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the U.S. Securities and Exchange commission. d. Obtain systematic and objective evidence about financial assertions and report the results to interested users.

According to the American Accounting Association, the definition of auditing includes the following statement. a. a process of reducing to a socially acceptable level the information risk to users of financial statements. b. an independent appraisal function established within an organization to examine and evaluate its activities c. A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events. d. an expression of opinion on the fairness of financial statements.

When an auditor concludes that the financial statements are not presented fairly in conformity with GAAP, a(n _________ opinion will be issued

Adverse

All assets, liabilities, and equity interests that should have been recorded were recorded a. Valuation and allocation b. cutoff c. Rights and obligations d. Accuracy e. Existence f. Classification and understandability g. Occurrence h. Completeness

Amounts and other data were recorded appropriately a. Valuation and allocation b. cutoff c. Rights and obligations d. Accuracy e. Existence f. Classification and understandability g. Occurrence h. Completeness

An audit of the financial statements of Camden Corporation is being conducted by external auditors. The external auditors are expected to. a. Certify the correctness of Camden's financial statements b. make a complete examination of Camden's records and verify all of Camden's transactions c. Give an opinion on the fair presentation of Camden's financial statements in conformity with the applicable financial reporting framework (e.d., GAAP, IFRS) d. Give an opinion on the attractiveness of Camden for investment purposes and critique the wisdom and legality of its business decisions.

An auditor needs to understand a company's internal controls in order to anticipate the types of material misstatements that may occur a. True b. False

An engagement letter is used primarily to a. Ensure a clear contractual understanding of the services to be provided by the CPA b. Express an opinion on the financial statements. c. Provide management representations to be included in the audit evidence. d. Disclaim liability.

An organization's commitment to integrity is demonstrated through the tone set by the board and management. a. True b. False

An organization's control environment is established and maintained by the internal auditing department. a. True b. False

Assets, liabilities, and equity interest are included at appropriate amounts, and adjustments are appropriately recorded a. Valuation and allocation b. cutoff c. Rights and obligations d. Accuracy e. Existence f. Classification and understandability g. Occurrence h. Completeness

Assets, liabilities, and equity interests are bona fide a. Valuation and allocation b. cutoff c. Rights and obligations d. Accuracy e. Existence f. Classification and understandability g. Occurrence h. Completeness

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

Attestation

Sustainability is a prominent type of __________ engagement

Attestation

When a practitioner is engaged to issue a report on a subject matter or an assertion about subject matter that is the responsibility of another party is a(n) ___________________

Attestation engagement

A practitioner is engaged to express an opinion on management's assertion that the square footage of a warehouse offered for sale is 150,000 square feet. The practitioner should refer to which of the following sources for professional guidance? A. statements on standards for accounting and review services B. statements on standards for attestation engagements C. statements on standards for consulting services D. statement of auditing standards

An audit is a specific type of: A. assertion B. assertion engagement C. internal control D. explicit representation

Auditors are expected to be unbiased and impartial with respect to information they audit which is referred to as independence in A. appearance B. Fact C. actions

CPA certificates and licenses to practice are issued by: A. The AICPA B. state boards

Comparing vendor invoices to inventory prices, obtaining lower of cost or market data and recalculating depreciation schedules relate to the _________ assertion A. presentation and disclosure B. valuation and allocation C. occurence D. rights and obligations

Explicit representations A. must be developed by all types of auditors B. are provided to external auditors but ofter not to internal auditors C. are provided to internal auditors but often not to external auditors D. are provided to all types of auditors

High- quality information to make educated financial decisions is demanded by: A. informational professionals B. investors and creditors C. auditors

Obtaining evidence about estimated liabilities relates to the ______ assertion A. valuation and allocation B. rights and obligations C. presentation and disclosure D. occurrence

Providing assurance is A. performing a complication B. lending credibility to information C. opining on specific management assertions D. Supplying an opinion as to the fairness of financial statements

Satisfactory internal control _______ the probability of errors or frauds in the accounts A. eliminates B. reduces C. has no impact on

The PCAOB argues that auditor independence would be impaired if the firm: A. prepares the company's corporate tax return B. Provides tax services to key executives C. Provides any type of tax advice to the company

The auditor jargon, the cutoff date generally refers to the A. date the audit engagement begins B. clients year-end balance sheet date C. date the audit opinion is issued D. evidence collection end date

The engineering department at Omni Company built a piece of equipment in the company's own shop for use in the company's operations. When looking at the ending balance for the fixed asset account the auditor examined all work orders, purchased materials, labor cost reports, and applied overhead that were capitalized as part of the equipment costs. Which of the following is the ASB balance assertion most closely related to the auditor's testing? A. rights and obligations B. valuation C. Existence D. Completness

The fundamental principal of _______ requires that the auditors obtain reasonable assurance about whether the financial statement as a whole are free from material misstatement, whether due to fraud or error. A. reporting B. performance C. responsibilities

The most reliable evidence is. A. internal evidence B. direct personal knowledge C. external evidence

The performance principle would include all of the following except: A. the auditors' determination of materiality levels B. the auditors' evaluation of independence with respect to their clients. C. the auditors' evaluation of the risk of material misstatement. D. the auditors' determination of the nature, timing, and extent of further audit procedures.

The probability that data circulated by a company will be false or misleading is _____ risk A. consequence B. Information C. Business D. Reliability

The purpose of monitoring is to A. review significant judgements made by audit teams and the conclusions reached in formulating the report B. provide the firm reasonable assurance that quality control policies and procedures are operating effectively and complied with in practice C. ensure the firm will pass all PCAOB inspections D. hire the most qualified auditing personal

When planning the audit engagement, auditors use management assertions to: A. develop an opinion on the fairness of financial statements B. Assess external financial reporting risks C. render an opinion on the effectiveness of internal controls

Which of the following refers to the nature of information provided by the audit evidence A. Appropriateness B. Relevance C. Reliability D. Sufficiency

in the audit report the term "financial statements" A. only includes the four basic financial statements B. includes all footnote disclosures and additional information required by GAAp C. can exclude footnotes disclosures and additional information if stated in the audit report

Reasonable assurance. Check all that apply A. requires audit procedures to limit the overall risk to a moderate level B. Recognizes a GAAS audit may not detect all material misstatements C.requires auditors to consider varios material misstatement risks D. recognizes auditors cannot provide a high level of assurance regarding their work

B,C

Substantive procedures are: check all that apply A. unnecessary when the risk of material misstatement is low B. used to obtain evidence about account balances C. reflected in the determination of detection risk

B,C

The Public Company Accounting Oversight board (PCAOB). Check all that apply A. provides external, independent oversight to audits of public and private entities B. is responsible for registering public accounting firms C. was created by Sarbanes- Oxley

B,C

The probability that either an error or fraud will result in a material misstatement is A. control risk B. risk of material misstatment C. inherent risk

B,C

The public company accounting oversight boards (PCAOB) A. Provides external, independet oversight to audits of public and private entities B. Was created by Sarbanes- Oxley C. Is responsible for registering public accounting firm

B,C

The risk assessment process requires an understanding of: Check all that apply A. the client but not the clients industry B. internal controls in the accounting information system C. the clients operation environment

B,C

reasonable assurance A. recognizes auditors cannot provide a high level of assurance regarding their work B. recognizes a GAAS audit may not detect all material misstatements C. requires auditors to consider various material misstatement risks D. requires audit procedures to limit the overall risk to a moderate level

B,C

Auditing: Check all that apply A. is unplanned and unstructured B. has a logical starting point C. has a logical conclusion D. proceeds along established guidelines

B,C,D

Auditors are responsible for: A. exercising professional judgement in the reporting stage of the audit only B. having appropriate competence and capabilities to perform the audit C. maintaining professional skepticism through audit planning and performance D. complying with relevant ehtical requirements

B,C,D

Conditions that present challenges to an auditor's professional skepticism include: Check all that apply A. contradictory audit evidence obtained through different procedures B. financial incentives and pressures C. time deadlines for completing the audit D. personal relationships developed with clients

B,C,D

Cutoff procedures provide evidence about: check all that apply A. Rights and obligations B. Valuation C. existence D. completeness

B,C,D

Cuttoff procedures provide evidence about A. rights and obligations B. valuation C. completeness D. existence

B,C,D

Due Care: A. expects auditors to be infallible B. relates to auditor competence and capabilities C. requires an appropraite level of professional skepticism D. Reflects a resonable level of performance

B,C,D

Operational audits are: A. often provided by external auditors to their public audit clients as part of the annual audit B. a type of assurance service provided by public accounting firms C. intergral to internal auditing D. performed by both internal and external auditors

B,C,D

Professional judgment: Check all that apply A. is a state of mind characterized by appropriate questioning and a critical assessment of audit evidence B. is particularly important when evaluating management estimates used in financial statements C. relates to evidence obtained and conclusions reached D. must be demonstrated throughout the entire audit process

B,C,D

The U.S. Government Accountability Office (GAO): Check all that apply A. performs attestation engagements but not financial audits B. provides a wide range of performance audits C. emphasizes the accountability of public officials in regards to public funds and other resources D. provides a compliance audit function with respect to laws and regulations

B,C,D

Services that public accounting firms prohibited from providing to audit clients under Sarbanes- Oxley include. Check all that apply A. Tax return preparation advice B. financial information system design and implementation C. bookkeeping and related services D. management or human resource services E. appraisal or valuation services

B,C,D,E

An audit plan is a: Check all that apply A. only required if assistants will be used during the audit B. stated in enough detail to understand about the work to be done C. only required for the audit of public companies D. A list of the audit procedures auditors need to perform

B,D

The public company accounting oversight board (PCAOB). Check all that apply A. passed the Sarbanes- Oxley Act in 2002 B. inspects audit firms' quality control processes C. performs inspections of completed audit work D. performs inspections of completed audit work E. Sets all audit standards for audits of public companies

B,D

Which of the following statements are correct? Check all that apply A. Auditors want to present a company's financial condition in the best possible light B. Auditors must not accept management assertions without corroboration C. Conflicts of interest between auditors and company management only exist in first year audits D. Documentary evidence is required to prove each management assertion

B,D

Before accepting an engagement to audit a new client, an auditor is required to a. Make inquiries of the predecessor auditor after obtaining the consent of the prospective client. b. Obtain the prospective client's signature to the engagement letter c. prepare a memorandum setting forth the staffing requirements and documenting the preliminary audit plan. d. Discuss the management representation letter with the prospective client's audit committee.

The chance that customers will buy from competitors or product lines will become obsolete are examples of ________________ risk.

Business Risk

The possibility that an entity will fail to meet its objectives is ________________

Business risk

PCAOB auditing standards are subject to the formal approval of the A. Audition standards board B. IRS C. Sec D. AICPA

Preparing financial statements from a clients books and records without performing any evidence gathering work is a(n) A. review B. attestation C. Compilation D. assurance service

Responsibility for setting all audit standards to be followed on audit's of public companies rates with the A. GASB B. ASB C. PCAOB D. FASB

The fundamental GAAS principal that defines objectivity and the role it plays in the audit is the ________ principal A. performance B. Reporting C. responsibilities

The probability that a material misstatement caused by error or fraud will not be prevented or detected on a timely basis of the entities internal control is A. inherit risk B. risk of material misstatement C. control risk

The probability that either an error or fraud will result in a material misstatement is A. risk of material misstatement B. Control risk C. inherit risk

The two general types of relationships that are are believed to compromise independence are: A. financial and friendship B. financial and family C. financial and managerial D. managerial and family

This Act was passed in 2002 as a direct response to several statement frauds A. Public company accounting oversight B. foreign corrupt practices C. sarbanes- oxley D. Dodd - Frank

To be proficient as an auditor, a person must first be able to accomplish which of these tasks in a decision-making process? A. Evaluate the evidence produced by the performance of procedures and decide whether management's assertions conform to generally accepted accounting principles and reality. B. Formulate evidence-gathering procedures (audit plan) designed to obtain sufficient, competent evidence about assertions management makes in financial statements and notes. c. Recognize the financial assertions made in management's financial statements and footnotes. d. Identify audit evidence relevant to the verification of assertions management makes in its unaudited financial statements and notes.

When auditors confirm accounts receivables with customers , evidence is provided about the legitimacy of the sales, but does not provide evidence the accounts collectible. This addresses the issue of. A. Sufficiency B. Reliability C. Relevance D. Appropriateness

When auditors confirm accounts receivables with customers, evidence is provided about the legitimacy of the sales, but does not provide evidence that accounts are collectible. This addresses the issue of: A. sufficiency B. appropriateness C. relevance D. reliability

Which of the following is not a recommendation usually made following the completion of an operational audit? A. Compliance with company policies B. effective achievement of business objectives C. attesting to the fairness of the financial statements D. economic and efficient use of resources

Which of the following situations would most likely be in conflict with the responsibilities principle? A. Auditors obtain expertise in their client's industry as they are conducting the audit examination. B. Auditors fail to document their assessment of control risk following their study of internal control. C. Auditors are directly involved with a client manager in a strategic decision-making capacity. D. Auditors perform the engagement with the performance level expected of prudent auditors, but not expert auditors.

The application of relevant training knowledge and experience in making informed decisions during the audit engagement is _________

professional judgment

Sarbanes- oxley prohibits public accounting firms from performing Check all that apply A. any type of consulting services to public companies B. consulting services for companies they do not audit C. services that would result in a firm auditing its own work D. consulting services that require auditors to make managerial decisions

C,D

Which of the following statements are correct. Check all that apply A. Larger CPA firms usually provide more non audit and attestation services for their clients that smaller firms B. The level of auditing activity provided increases as the size of the public accounting firm decreases C. Auditing and assurance services are the largest source of revenue for most of the big 4 accounting firms D. Traditional financial statement audits are the most frequent assurance engagement requested by most non public companies

C,D

Which of the following statements are correct? A. for assurance services, improving the context of information refers to the information itself B. objectivity is not important when performing assurance services C. An assurance engagement is a type of professional service D. The consumers of assurance services may be either a very small or very large targeted group

C,D

When auditing an investment in another company, an auditor most likely would seek to conduct which audit procedure to help satisfy the valuation assertion? a. Inspect the stock certificates evidencing the investment. b. Review the broker's advice or canceled check for the investment's acquisition. c. Obtain market quotations from The Wall Street Journal or another independent source. d. Examine the audited financial statements of the investee company.

C. Always remember that management is more likely to overstate assets. As a result, when auditing an asset balance like investments, a relevant assertion is likely to be valuation. In this situation, to answer the question of what the investment should be valued at in the balance sheet, an auditor would first seek to obtain a market quotation from an independent source like the Wall Street Journal.

According to the AICPA, the purpose of an audit of financial statements is to a. Obtain systematic and objective evidence about financial assertions and report the results to interested users. b. Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the Financial Accounting Standards Board. c. Enhance the degree of confidence that intended users can place in the financial statements. d. Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the U.S. Securities and Exchange Commission.

C. According to the AICPA definition found in AU 200 (paragraph 11) and in your book, "the purpose of an audit is to enhance the degree of confidence that intended users can place in the financial statements. This is achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework. As a result, this is the correct response.

Bankers who are processing loan applications from companies seeking large loans will probably ask for financial statements audited by an independent CPA because a. Financial statements are too complex for the bankers to analyze themselves. b. The consequences of making a bad loan are very undesirable. c. They generally see a potential conflict of interest between company managers who want to get loans and the bank's needs for reliable financial statements. d. They are too far away from company headquarters to perform accounting and auditing themselves.

C. The potential conflict of interest between management and the bank is far and away the biggest factor driving the demand for audited financial statements. Consider for example a company that was desperate for cash in order to survive. Would it be possible that the management team would present unreliable financial statements to the bank in order to get a desperation loan? Because of this possibility, a financial statement audit is needed to add credibility to the financial statements

Certain conditions and circumstances are often present when management fraud occurs. Which of the following is not such a condition or circumstance? a. Unfavorable industry conditions b. lack of working capital c. High liquidity d. Slow customer collections

A, D

Choose (option 1, option2) Agreed-upon procedures Option 1 a. Independence required b. Independence not required Option 2 a. No assurance provided b. limited assurance provided c. Positive assurance provided d. Neither positive nor limited assurance provided, but results of procedures provided.

A, C

Choose (option 1, option2) Audit Option 1 a. Independence required b. Independence not required Option 2 a. No assurance provided b. limited assurance provided c. Positive assurance provided d. Neither positive nor limited assurance provided, but results of procedures provided.

B, A

Choose (option 1, option2) Compilation Option 1 a. Independence required b. Independence not required Option 2 a. No assurance provided b. limited assurance provided c. Positive assurance provided d. Neither positive nor limited assurance provided, but results of procedures provided.

B, A

Choose (option 1, option2) Preparation Option 1 a. Independence required b. Independence not required Option 2 a. No assurance provided b. limited assurance provided c. Positive assurance provided d. Neither positive nor limited assurance provided, but results of procedures provided.

A, B

Choose (option 1, option2) Review Option 1 a. Independence required b. Independence not required Option 2 a. No assurance provided b. limited assurance provided c. Positive assurance provided d. Neither positive nor limited assurance provided, but results of procedures provided.

Pressures to keep audit fees low and the desire to achieve high levels of client satisfaction present challenges for auditors maintaining appropriate levels of ____________

professional skepticism

The most common attestation engagement are ________ and _______

Compilations, reviews

Environment conditions that increase user demand for relevant and reliable information include _____________, remoteness time sensitivity and ______________

Complexity, consequences

For Assurance Services, improving the quality or ________ of information refers not to the information itself, but to how the information is used in decision making

Context

For assurance services, improving the quality or _________ of information refers not to the information itself, but to how the information is used in decision making

Context

Control activities are the component of internal control that includes control actions that have been established by policies and procedures a. True b. False

Control activities implemented to mitigate transaction processing risk that typically affect only certain processes, transactions, accounts, and assertions are referred as transaction or application controls. a. True b. False

Controls to monitor results of operations are considered to be transaction controls a. True b. False

Due to multiple and sometimes conflicting standards, auditors and regulators have much interest in _______ which is making the standards coordinated or uniform throughout the world

Convergence

Cutoff tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year provide assurance about management's assertion of a. Presentation and disclosure b. Completeness c. Rights and obligations d. Existence

A(n) ________ opinion contains the words "except for" A. unqualified B. adverse C. disclaimer of D. qualified

All of the following are examples of procedures a firm can use to monitor its system of quality control except: A. assessing compliance with independence policies and procedures. B. discussions with firm personnel. C. conducting reviews of engagement documentation. D. devoting sufficient resources to developing a system of quality control.

An engagement quality control review. A. ensures the firm will pass all PCAOB inspections B. provides the firm reasonable assurance hat quality control policies and procedures are are operating effectively and complied with in practice C. is designed to ensure that upper management is committed to quality control D. evaluates significant audit team judgements and the conclusions reached in formulating the report

Audit evidence is usually considered sufficient when A. it has the qualities of being relevant, objective, and free from unknown bias. B. it is reliable C. it has been obtained through random selection methods. D. there is enough quantity to afford a reasonable basis for an opinion on financial statements.

Auditing is: A. opining on specific assertions made by management B. Performing a compilation C. Lending credibility to information D. supplying an opinion as to the financial statements

Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of: A. objective judgment B. impartial conservatism C. independent integrity D. Professional skepticism

IRS agents and state and federal bank examiners are examples of _____________ auditors a. internal B. public C. External D. Regulatory

In auditing the long-term debt account, an auditor's procedures most likely would focus primarily on management's assertion of: A. allocation B. existence C. rights and obligations D. Completeness

Ineffective Internal Controls A. decreases control risk but not the necessary effectiveness of further audit procedures B. increases control risk but not the necessary effectiveness of further audit procedures C. has no effect on control risk or the necessary effectiveness of further audit procedures D. increases control risk and the necessary effectiveness of further audit procedures E. decreases control risk and the necessary effectiveness of further audit procedures

Management assertions about financial statement presentation and disclosure are primarily found: A. on the statement of comprehensive income B. on the income statement C. on the balance sheet D. in the footnotes

Procedures performed to ensure recorded sales transactions actually happened are done to test the ______ assertion A. valuation and allocation B. existence C. presentation and disclosure D. occurrence

The audit objective that all transactions are recorded in the proper period is related most closely to which of the Audit Standards Board (ASB) transaction assertions? A. accuracy B. Completness C. occurrence D. Cutoff

The chance that the audit team's substantive procedures will fail to uncover a material misstatement is called _________ risk A. appropriate B. reliablity c. Suffciency D. detection

The fundamental principles developed by the Auditing Standards Board are best described as: A. standards that apply only to audits of public entities. B. industry-specific guidance on how audit procedures should be conducted. C. ten basic standards underlying an audit. D. guidelines for the general conduct of audit engagements.

The study of business activities for the purpose of making recommendations about the efficient and effective use of resources, effective achievement of business objectives and compliance with company policies is ______________ auditing A. regulatory B. governmental C. Internal D. operational

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 A. environmental auditing B. financial auditing C. compliance auditing D. Operational auditing

Verifying accounts receivable balances with customers and counting physical inventories are done to test the __________ assertion A. occurrence B. presentation and disclosure C. valuation and allocation D. existence

Which of the following is least related to the concept of independence in appearance? A. The ownership of a financial interest in a client by the auditor B. The employment of the auditor's family member in an important position with the client C. The perceptions of individuals who rely on the financial statements and auditors' opinion on the financial statements D. The auditors' objectivity and ability to act impartially toward the client

The Sarbanes-Oxley Act of 2002 generally prohibits public accounting firms from a. Acting in a managerial decision-making role for an audit client. b. Auditing the firm's own work on an audit client. c. Providing tax consulting to an audit client without audit committee approval. d. All of the above

In auditing the accrued liabilities account on the Balance Sheet, an auditor's procedures most likely would focus primarily on management's assertion of a. Valuation or allocation. b. Existence or occurrence. c. Presentation and disclosure. d. Completeness.

D. Management is more likely to understate liabilities. As a result, when auditing the accrued liabilities account, the most relevant assertion is likely to be completeness.

A company that offers registered securities for sale to the general population is called a(n) _________

public entity

Which of the following best describes the relationship between auditing and attestation engagements? a. Attestation is a subset of auditing that provides lower assurance than that provided by an audit engagement. b. Auditing is a subset of attestation engagements that focuses on providing clients with advice and decision support. c. Attestation is a subset of auditing that improves the quality of information or its context for decision makers. d. Auditing is a subset of attestation engagements that focuses on the certification of financial statements.

D. Auditing is a subset of attestation engagements that focuses on the certification of financial statements. The subject matter is the set of financial statements from management and the criteria is GAAP in the United States.

The primary objective of compliance auditing is to a. Develop a basis for a report on internal control. b. Perform a study of effective and efficient use of resources. c. Give an opinion on financial statements. d. Determine whether client personnel are following laws, rules, regulations, and policies.

D. A compliance audit refers to procedures that are designed to ascertain that the company's personnel are following laws, rules, regulations, and policies.

Independent auditors of financial statements perform audits that reduce a. Business risks faced by investors. b. Complexity of financial statements. c. Timeliness of financial statements. d. Information risk faced by investors.

D. After completing a financial statement audit, information risk has been reduced for investors.

The risk to investors that a company's financial statements may be materially misleading is called a. Client acceptance risk. b. Business risk. c. Moral hazard. d. Information risk.

D. By definitinon, information risk is the probability that the information circulated by a company will be false or misleading.

During an audit of a company's cash balance on a company with operations in only one country, the auditor is most concerned with which management assertion? a. Rights and Obligations. b. Valuation or Allocation. c. Occurrence d. Existence.

D. Management is more likely to overstate assets and understate liabilities. As a result, when auditing an asset balance, the most relevant assertions are likely to be either existence or valuation. In this situation, because of the nature of cash and the fact that is no foreign currency translation calculation, the existence assertion is clearly the most important assertion.

Jones, CPA, is planning the audit of Rhonda's Company. Rhonda verbally asserts to Jones that all expenses for the year have been recorded in the accounts. Rhonda's representation in this regard a. Should be disregarded because it is not in writing. b. Can enable Jones to minimize the work on the gathering of evidence to support Rhonda's completeness assertion. c. Is sufficient evidence for Jones to conclude that the completeness assertion is supported for expenses. d. Is not considered a sufficient basis for Jones to conclude that all expenses have been recorded.

D. Rhonda's assertions are nice. However, to be considered as sufficient to conclude that all expenses have been recorded, they will need corroboration with documentary evidence.

The Sarbanes-Oxley Act of 2002 prohibits public accounting firms from providing which of the following services to an audit client? a. Bookkeeping services. b. Internal audit services. c. Valuation services. d. All of the above.

D. Sarbanes-Oxley prohibits the provision of bookkeeping, valuation, and internal audit services; therefore "all of the above" is the best response.

Substantial equivalency refers to a. Providing consulting work for another firm's audit client in exchange for the other firm's providing consulting services to one of your clients. b. The waiving of certification exam parts for an individual holding an equivalent certification from another professional organization. c. An auditor's tendency not to believe management's assertions without sufficient corroboration. d. Permitting a CPA to practice in another state without having to obtain a license in that state.

D. Substantial equivalency relates to the practice of public accountancy in states other than a CPA's state of licensure. Under the concept of substantial equivalency, as long as the licensing (home) state requires (1) 150 hours of education, (2) successful completion of the CPA exam, and (3) one year of experience, a CPA can practice (either in person or electronically) in another substantial equivalency state without having to obtain a license in that state.

The organization primarily responsible for ensuring that public officials are using public funds efficiently, economically, and effectively is the a. Governmental Internal Audit Agency (GIAA). b. Central Internal Auditors (CIA). c. Securities and Exchange Commission (SEC). d. Government Accountability Office (GAO).

D. The mission of the U.S. Government Accountability Office is to ensure that public officials are using public funds efficiently, effectively, and economically.

When auditing merchandise inventory at year-end, the auditor performs audit procedures to ensure that all goods purchased before year-end are received before the physical inventory count. This audit procedure provides assurance about which management assertion? a. Rights and obligations. b. Valuation and allocation. c. Existence. d. Cutoff. e. Occurrence.

D. This is clearly a test of the completeness as the assertion always includes any issues of transaction cutoff, which means that the recording of all revenue, expense, and other transactions must be included in the proper period in accordance with GAAP.

Which of the following audit procedures probably would provide the most reliable evidence related to the entity's assertion of rights and obligations for the inventory account? a. Select the last few shipping advices used before the physical count and determine whether the shipments were recorded as sales. b. Inspect the open PO file for significant commitments to consider for disclosure. c. Trace test counts noted during physical count to the summarization of quantities. d. Inspect agreements for evidence of inventory held on consignment.

D. This is clearly a test related to rights and obligations as the question that must be answered with evidence is to establish that the inventory reported as assets really is owned by the company. Goods on consignment, by definition, are not owned by the company. Thus, there is a risk that the company is recording assets that they do not own on their balance sheet.

The primary difference between operational auditing and financial auditing is that in operational auditing a. The operational auditor is not concerned with whether the audited activity is generating information in compliance with financial accounting standards. b. The operational auditor can use analytical skills and tools that are not necessary in financial auditing. c. The operational auditor starts with the financial statements of an activity being audited and works backward to the basic processes involved in producing them. d. The operational auditor is seeking to help management use resources in the most effective manner possible.

D. This statement exactly characterizes the goal of an operational audit. In addition, the statement is part of the basic definition of operational auditing.

The fact that a small misstatement (in absolute terms) is likely to influence investment decisions referred to as ____________ factors

qualitative materiality

During an audit of an entity's stockholders' equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify management's assertion of a. Existence or occurrence b. Completeness c. valuation or allocation d. presentation and disclosure

During the initial planning phase of an audit, a CPA most likely would a. Test specific internal control activities that are likely to prevent fraud b. Evaluate the reasonableness of the client's accounting estimates of inventory obsolescence c. Discuss the timing of the audit procedures with the client's management d. Inquire of the client's attorney as to whether any unrecorded claims are probable of assertion.

Which of the following would be considered an assurance engagement ? a. Giving an opinion on a prize promoter's claims about the amount of sweepstakes prizes awarded in the past. b. Giving an opinion on the conformity of the financial statements of a university with generally accepted accounting principles. c. Giving an opinion on the fair presentation of a newspaper's circulation data. d. Giving assurance about the average drive length achieved by golfers with a client's golf balls. e. All of the above.

E. Because attestation and audit engagements are subsets of assurance engagements, all of the responses are examples of assurance engagements.

Effective control not only identifies risk but also responds to these risks appropriately a. True b. False

The information auditors use to arrive at conclusions and form the audit opinion is called _______

Evidence

Evidential matter consists of assertions about economic actions and events. a. True b. False

External auditors are responsible a. for authenticating documents b. for reporting immaterial frauds to a level of management at least one level above the people involved c. for finding all intentional misstatements concealed by collusion d. for reporting all frauds to outside agencies or parties

True or False: A specific error in a financial statement affects only one management assertion

False

True or False: Providing assurance is a form of attestation

False

True or False: The competence and capabilities required to become an auditor are developed and maintained strictly through the auditors college education and CPE ( continuing professional education)

False

True or false: when considering established criteria for effective communication, external auditors rely on financial and managerial models of efficiency and effectiveness

False

Financial decision makers demand reliable information that is provided by accountants a. True b. False

Financial decision makers obtain their accounting information from lenders of funds. a. True b. False

Financial information is appropriately presented and described, and disclosures are clearly expressed. a. Valuation and allocation b. cutoff c. Rights and obligations d. Accuracy e. Existence f. Classification and understandability g. Occurrence h. Completeness

GAAP, IFRS and special purpose (cash or tax bases) are examples of ___________ frameworks

Financial reporting

Generally accepted auditing standards are a. Specific actions performed by auditors during an examination b. Standards that guide the conduct of an audit examination c. legal requirements auditors must observe during the audits of public entities d. standards used by entities in deciding whether to engage or retain the services of auditors

Generally, highly regulated entities have more complex control activities than less-regulated entities. a. True b. False

In an attestation engagement, a CPA practitioner is engaged to a. Give expert testimony in court on particular facts in a corporate income tax controversy. b. Prepare a written report Containing a conclusion about the reliability of a management assertion. c. Compile a company's financial forecast based on management's assumptions without expressing any form of assurance. d. Prepare a tax return using information the CPA has not audited or reviewed.

In some cases, the auditor could apply one audit procedure to test more than one assertion a. Unconditional requirement b. Presumptively mandatory requirement c. Requirement to consider

Independence is not required for this service a. Attestation b. Assurance c. Consulting

Independent auditors are employees of the client a. True b. False

Internal auditors perform only operational audits. a. True b. False

Internal control is a process designed to guarantee the achievement of the objectives of reliable financial reporting, compliance with laws and regulations and ineffective and inefficient operations a. True b. False

Internal control is a process, effected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance. a. True b. False

Internal evidence a. is obtained directly from third parties independent of the client b. originates outside of the client's system but has been received and processed by the client c. Consists of documents that are produced, used, and stored within the client's information system. d. Consists of representations made by the client's officers, directors, owners, employees.

Auditing standards include ___________ which include AICPA Audit and Accounting Guides and AICPA Auditing Statements of Position

Interpretive Publications

It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that a. Financial statements and financial data are verifiable b. The professional status of the independent auditor imposes commensurate professional obligations. c. A potential conflict of interest always exists between the auditor and the management of the enterprise under audit. d. In audits of financial statements, the auditor acts exclusively in the capacity of an auditor.

Monitoring of the internal controls involves assessment by appropriate personnel of the design and operation of controls on a timely basis and taking necessary actions. a. True b. False

The concept of __________ recognizes that auditors are not "insures" or "guarantors" regarding the fairness of the entity's financial statements

reasonable assurance

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

Occurrence, Existence

One objective of internal auditing is to ultimately assist members of an organization to perform their work more effectively and efficiently a. True b. False

The concept of ________________ recognizes that auditors are not insures or guarantors regarding the fairness on the entity financial statements

reasonable assurance

Auditors are required to plan the work and "obtain and evaluate evidence" as part of the GAAS ________ principal

Performance

General quality criteria for conducting an audit is set forth in the fundamental principal of _____________

Performance

General quality for conducting an audit is set for in the fundamental principal of _______________

Performance

Physical controls are necessary to protect and safeguard assets from accidental or intentional destruction and theft. a. True b. False

Preventive controls are designed to prevent the occurrence of a misstatement. a. True b. False

A state of mind characterized by appropriate questioning and a critical assessment of audit evidence is ___________

Professional skepticism

Having an attitude that "includes a questioning mind and a critical assessment of evidence" is the definition of _______________________

Professional skepticism

Professional skepticism is an auditor's tendency not to believe anyone a. True b. False

Recorded transactions and events actually took place a. Valuation and allocation b. cutoff c. Rights and obligations d. Accuracy e. Existence f. Classification and understandability g. Occurrence h. Completeness

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

Review

Audit procedures used to obtain evidence with respect to the fairness of an account balance are referred to as _________ procedures

Substantive

According to the American Accounting Association, auditing is a(n) _______________________ of objectively obtaining and evaluating evidence

Systematic process

The ASB balance audit objective related to valuation or accuracy is to determine whether proper values have been assigned to assets, liabilities, equities, revenues, and expenses. a. True b. False

The PCAOB audit objective related to the completeness assertion is to establish evidence that assets, liabilities, and equities actually exist. a. True b. False

The audit objective that all transactions and accounts should be presented in the financial statements are in fact included is related to which of the PCAOB assertions? a. Existence b. Rights and obligations c. Completeness d. Valuation

The audit objective that all transactions and accounts that should be presented in the financial statements are in fact included is related to which of the PCAOB assertions? a. Existence b. Rights and obligations c. Completeness d. Valuation

The auditor may make suggestions about the form or content of the financial statements. a. Unconditional requirement b. Presumptively mandatory requirement c. Requirement to consider

The auditor must be independent a. Unconditional requirement b. Presumptively mandatory requirement c. Requirement to consider

The auditor must follow GAAS in an audit of a non-issuer a. Unconditional requirement b. Presumptively mandatory requirement c. Requirement to consider

The auditor should document the evidence obtained in the audit a. Unconditional requirement b. Presumptively mandatory requirement c. Requirement to consider

The auditor should obtain sufficient appropriate evidence to support the opinion. a. Unconditional requirement b. Presumptively mandatory requirement c. Requirement to consider

The auditor should test management's assertions relating to the financial statements a. Unconditional requirement b. Presumptively mandatory requirement c. Requirement to consider

The better the quality of the internal controls, the more an auditor can rely on the controls. a. True b. False

The concept of "professional skepticism" requires that auditors assume that management is honest and should be trusted a. True b. False

The concept of ____________ recognizes that a GAAS audit may fail to detect all material misstatements a. absolute assurance b. due care c. reasonable assurance d. Risk of material misstatement

The entity owns the assets, and liabilities are its obligations a. Valuation and allocation b. cutoff c. Rights and obligations d. Accuracy e. Existence f. Classification and understandability g. Occurrence h. Completeness

The five major components of an organization's internal control are: The control environment, risk assessment, control activities, information and communication, and monitoring. a. True b. False

The major emphasis in GAAS related to consideration of fraud in a financial statement audit is on a. Employee misappropriation of assets b. management fraud c. client fraud on customers d. employee embezzlement

The primary difference between operational auditing and financial auditing is that in operational auditing a. The operational auditor starts with the financial statements of an activity being audited and works backward to the basic processes involved in producing them. b. The operational auditor is seeking to help management use resources in the most effective manner possible. c. The operational auditor can use analytical skills and tools that are not necessary in financial auditing d. The operational auditor is not concerned with whether the audited activity is generating information in compliance with the financial accounting standards.

The purpose of obtaining and evaluating evidence is to ascertain the degree of correspondence between the assertions and established criteria a. True b. False

The quality of an organization's internal control will affect both he audit approach and the amount of testing needed for an engagement. a. True b. False

The three fundamental principals underlying GAAS include all of the following except a. general principle b. performance principle c. Reporting principle d. Responsibilities principle

Guidance for "communicating the results" are covered under the GAAS __________ principal

reporting

This service improves the quality of information, or its context, for decision makers a. Attestation b. Assurance c. Consulting

This service provides for a level of assurance based on an examination a. Attestation b. Assurance c. Consulting

This service provides recommendations based on the objectives of the engagement a. Attestation b. Assurance c. Consulting

This service results in a written conclusion about subject matter a. Attestation b. Assurance c. Consulting

This year, Blakeney Enterprises engaged a new auditor who must a. attempt to communicate with he predecessor auditor before accepting the engagement. b. Review the predecessor's audit documentation if the audit is to be in accordance with GAAS c. Seek the SEC's permission to accept the engagement if Blakeney is publicly owned. d. Reject the engagement if the change in auditors resulted from a dispute with the predecessor.

The fundamental principal of _________ relates to auditors integrity and professional qualifications

responsibilities

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

review

Transactions and events were recorded in the proper period a. Valuation and allocation b. cutoff c. Rights and obligations d. Accuracy e. Existence f. Classification and understandability g. Occurrence h. Completeness

True of false: Any information that permits auditors to reach valid logical conclusions can be considered evidence

True

True or False: Auditing is critical to help ensure the liability of the worlds capital markets

True

True or False: Human resources is an important aspect of a system of quality control

True

True or False: Understanding management assertions is a key component of planning an audit

True

True or False: any information that permits auditors to reach valid logical conclusions can be considered evidence

True

True or False: auditors can read business periodicals and textbooks to help obtain an understanding of a clients business

True

Under generally accepted auditing standards, which of the following relates to the responsibilities principal? a. The initial planning of the audit engagement b. The confirmation of accounts receivable c. The completion of an internal control questionnaire d. maintaining professional skepticism and exercising professional judgement

What type of evidence would provide the highest level of assurance in an attestation engagement? a. Evidence secured solely from within the entity b. Evidence obtained from independent sources. c. Evidence obtained indirectly d. Evidence obtained from multiple internal inquiries

When applying analytical procedures during an audit, which of the following is the best approach for developing expectations? a. Considering unaudited account balances and ratios to calculate what adjusted balances should be b. Identifying reasonable explanations for unexpected differences before talking to client management c. Considering the pattern of several unusual changes without trying to explain what caused them d. Comparing client data with client determined expected results to reduce detailed tests of account balances

Which of the following auditor concerns most likely could be so serious that the auditor would conclude that a financial statement audit cannot be conducted? a. The entity has no formal written code of conduct b. The integrity of entity's management is suspect c. Procedures requiring separation of duties are subject to management override d. Management fails to modify prescribed controls for changes in conditions

Which of the following best demonstrates teh concept of professional skepticism? a. Focusing on items that have a more significant quantitative effect on the entity's financial statements b. Relying more extensively on external evidence rather than internal evidence. c. Evaluating potential financial interests held by auditors in the client. d. Critically assessing verbal evidence received from the entity's management.

Which of the following is an underlying condition that in part creates the demand by users for reliable information? a. Economic transactions that are numerous and complex b. Decisions are time-sensitive c. Users separate from accounting records by distance and time d. Financial decisions that are important to investors and users. e. All of these

Which of the following is not a major element of assurance services? a. Improving profitability of the client. b. Improving the quality of information c. Independence d. Improving the context of information.

Which of the following is not related to ethical requirements of auditors? a. Due Care b. Professional judgement c. Independence in appearance d. Independence in fact.

Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance? a. The entity has rights to the inventory b. Inventory is properly valued c. Inventory is properly presented in the financial statements d. Inventory is complete

Which of the following matters does an auditor usually include in the engagement letter? a. Arrangements regarding fees and billing b. Analytical procedures that the auditor plans to perform. c. Indications of negative cash flows from operating activities. d. Identification of working capital deficiencies.

Which of the following presumptions does not relate to the reliability of audit evidence? a. The more effective the client's internal control, the more assurance it provides about the accounting data and financial statements b. The auditors' opinion, to be economically useful, is formed within reasonable time and based evidence obtained at a reasonable cost. c. Evidence obtained from independent sources outside the entity is more reliable than evidence secured solely within the entity. d. The independent auditors' direct personal knowledge, obtained through observation and inspection, is of higher quality than information obtained indirectly.

Which of the following procedures would a CPA most likely perform in the planning phase of a financial statement audit? a. Make inquiries of the client's lawyer concerning pending litigation. b. Perform cutoff tests of cash receipts and disbursements. c. Compare financial information with non financial operating data. d. Recalculate the prior year's accruals and deferrals.

Which of the following statements is most accurate regarding sufficient and appropriate documentation? a. Accounting estimates are not considered sufficient and appropriate documentation b. sufficient and appropriate documentation should include evidence that the audit working papers have been review c. If additional evidence is required to document significant findings or issues d. Audit documentation is the property of the client, and sufficient and appropriate copies should be retained by the auditor for at least five years.

Which of the following would be considered an assurance engagement a. Giving an opinion on a prize promoter's claims about the amount of sweepstakes prizes awarded in the past. b. Giving an opinion on the conformity of the financial statements of a university with generally accepted accounting principles. c. Giving an opinion on the fair presentation of a newspaper's circulation data. d. Giving assurance about the average drive length achieved by golfers with a client's golf balls. e. All of the above

While performing an audit on the financial statements of a company for the year ended December 31, year 1, the auditor notes that the company's sales increased substantially in December, year 1, with a corresponding decrease in January, year 2. In assessing the risk of fraudulent financial reporting or misappropriation of assets, what should be the auditor's initial indication about the potential for fraud in sales revenue? a. There is a broad indication of misappropriation of assets. b. There is an indication of theft of the entity's assets. c. There is an indication of embezzling receipts. d. There is a broad indication of financial reporting fraud.

While performing interim audit procedures of accounts receivable, numerous unexpected errors are found resulting in a change of risk assessment. Which of the following audit responses would be most appropriate? a. Move detailed analytical procedures from year end to interim b. Increase the dollar threshold of vouching customer invoices. c. Send negative accounts receivable confirmations instead of positive accounts receivable confirmations d. Use more experienced audit team members to perform year-end testing.

To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is: (A) prenumbered and accounted for. (B) approved for authorized purchases. (C) stamped "paid" by the check signer. (D) supported by a vender invoice.

stamped "paid" by the check signer.

When an auditor concludes that the financial statements are not presented fairly in conformity with GAAP, an __________ opinion will be issued

adverse

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

allocation, accuracy

Evidence must be trustworthy (reliable) and provide the audit team with information of interest (relevant) in order to be considered _________

appropriate

To be considered _________, evidence must be reliable and relevant

appropriate

To be considered __________ evidence must be reliable and relevant

appropriate

Regarding evidence __________ refers to evidence quality and ___________ relates to evidence quantity

appropriateness, sufficiency

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

assertions

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

assurance

Financial statement auditing and _________ services are both types of assurance services but ________ services are not

attestation, consulting

Generally accepted government auditing standards define and describe three board types of audits that may be performed: financial audits, ____________ engagements and _______________ audits

attestation, performance

A list of the procedures auditors need to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statements is a(n) _________

audit plan

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

auditing

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

sustainability

The chance that customers will buy from competitors or product lines will become obsolete are examples of

business risk

Considering whether disclosures have been written in plain english tests the assertion of A. existence B. completeness C. understandability D. presentation

Perceptions of auditors' independence is the focus of indepence in: A. fact B. Actions C. Apperance

Finance statement frauds and potential _______________ of __________________ between information provides and users leads to a natural Skepticism on the part of users

conflict, interest

The likelihood that an error or fraud will exist in the financial statements prior to be considering the auditors work is the risk of ___________

material misstatement

The likelihood that an error or fraud will exist in the financial statements prior to considering the auditors work is the risk of ____________________

material misstatement

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

evidence

The information auditors use to arrive at conclusions and form the audit opinion is called _________

evidence

The information auditors use to arrive at conclusions and form the audit opinion is called _____________

evidence

The assertions about the actually of each balance sheet and income statement balance is ________, while ___________ asserts that each event and transaction actually happened

existence, occurrence

Providing balance sheets, income statements, and statements of shareholders equity, comprehensive income and cash flows is the function of _______________________.

financial reporting

When an auditor concludes that the financial statements are presented fairly in all material respects a(n) _________ opinion will be issued

unmodified

When an auditor concludes that the financial statements are presented fairly in all material respects, a(n) ___________ option will be issued

unmodified

When an auditor is perceived to by others to be unbiased, the possesses _________ in ________

indepence, appearance

When an auditors state of mind leaves him or her unbiassed and impartial with respect to information being audited, the auditor is said to possess ________ in _______

independence, fact

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