Audit Exam 1 SB Review

This organization is a part of the U.S. Treasury Department and its auditors examine and audit the books and records of organizations and individuals to determine their federal tax liability a.) IRS b.) SEC c.) DHS d.) GAO

IRS

A significant aspect of most audit engagements is the use of a(n) ______ specialist a.)tax b.) IT c.) valuation d.) legal e.) environmental

IT

Factors that should be considered int he determination of staffing requirements for an audit include (multiple may apply) a.) engagement complexity b.) personnel availability c.) timing of the work d.) level of certainty e.) engagement size

engagement complexity, personnel availability, timing of the work, engagement size

The arrangements reached between the auditor and the entity are formalized in a(n) _______ _______

engagement letter

Overall responsibility for an audit engagement rests with the _______ a.) senior auditor b.) internal auditors c.) engagement partner d.) audit committee

engagement partner

The primary distinction between _______ and _______ is whether the misstatement was intentional or unintentional

errors and fraud

A system or code of conduct based on moral duties and obligations that indicate how we should behave is referred to as _______

ethics

A management statement that the inventory shown on the balance sheet was available for sale at the balance sheet date is an example of the _______ assertion

existence

Independent auditors are all called _______ auditors a.) internal b.) public 3.) external

external

Rapid advances in electronic technologies used by many businesses _______ a.) facilitates efficient corroboration of the reliability of data b.) can create automatic audit trails c.) eliminates many risks associated with the audit

facilitates efficient corroboration of the reliability of data and can create automatic audit trails

The extent of effort that goes into evaluating a new client is normally much less than the decision to continue with an existing client a.) true b.) false

false

Accounting firms that audit the financial statements of nonpublic entities in the United States are required to comply with the auditing standards established by the PCAOB a.) true b.) false

false. Nonpublic entities follow the standards set by the ASC. Public companies follow the standards set by the PCAOB

Reconstructing incomplete or damaged accounting records and probing money-laundering activities are examples of situations that often involve _______ auditors

forensic

The reliability of evidence obtained through external confirmations may be affected by the _______ (multiple may apply) a.) form of the confirmation b.) inspection of the evidence c.) prior experience with the entity d.) nature of the information being confirmed e.) observation of tangible assets f.) intended respondent

form of the confirmation, prior experience with the entity, nature of the information being confirmed, intended respondent

Professional standards require that public accounting firms establish policies and procedures for deciding _______ (multiple may apply) a.) if current clients should be retained b.) the number of auditors to use for an engagement c.) how to set their audit fees d.) whether to accept new clients

if current clients should be retained and whether to accept new clients

The Sarbanes-Oxley Act ______ (multiple may apply) a.) impacts the duties and practices of public companies b.) requires companies to rotate their Board of Directors every five years c.) requires public companies to obtain an integrated audit d.) prevents the SEC from imposing independence rules

impacts the duties and practices of public companies and requires public companies to obtain an integrated audit

CPA's have a traditional reputation of _______ (multiple may apply) a.) independence b.) risk taking c.) competence d.) financial illiteracy e.) objectivity

independence, competence, and objectivity

The process of _______ and _______ - _______ provides a trail from the financial statements to the individual audit documents that a reviewer can easily follow

indexing and cross-referencing

The susceptibility of an assertion in an account or disclosure to a misstatement due to error or fraud that could be material is known as _______ risk a.) business b.) inherent c.) control d.) detection

inherent

This is an important audit procedure that is used extensively throughout the audit and is often complementary to performing other audit procedures a.) Observation b.) Inquiry c.) Recalculation d.) Confirmation

inquiry

Counting cash on hand and examining inventory are examples of _______ of tangible assets

inspecting

When should the audit committee meet with external auditors to discuss the auditor's responsibilities and significant accounting policies? a.) Before the engagement starts b.) During the engagement c.) At the end of the engagement

before the engagement starts

Businesses obtain capital through _______ (multiple may apply) a.) borrowing b.) increasing sales c.) reducing expenditures d.) soliciting investments

borrowing and soliciting investments

The audit team is required to hold discussions, referred to as _______ _______, about the entity's financial statements' susceptibility to fraud

brainstorming sessions

Standards require extensive _______ of the auditor's risk assessment procedures and audit responses to identified risk

documentation

The auditor's independent execution of procedures or controls that were originally performed by company personnel is referred to as _______

reperformance

Because the objectives and work involved in performing audits of internal controls and financial statements are closely interrelated, auditing standards require a(n) _______ a.) financial statement audit only b.) integrated audit c.) internal control audit only d.) segregated audit

integrated audit

An independent, objective assurance and consulting activity designed to add value and improve an organization's operations is the definition of _______ auditing a.) internal b.) public c.) external d.) private

internal

There is a(n) ______ relationship between the sufficiency and appropriateness of audit evidence a.) indirect b.) inverse c.) material d.) direct

inverse

The responsibility to identify, control and mitigate business risks that may affect the entity's ability to achieve its objectives rests with the _______ a.) external auditors b.) management c.) board of directors d.) internal auditors

management

Who addresses business risks by implementing a risk assessment process? a.) Management b.) The audit committee c.) The board of directors d.) Auditors

management

When audit evidence supports _______ _______ , the auditor can issue an unqualified report

management's assertions

The amount by which a set of financial statements could be misstated without affecting the judgement of a reasonable person is referred to as _______

materiality

Materiality is a(n) _______ concept a.) absolute b.) relative c.) statistical d.) analytical

relative

Accounting professionals can perform various services that provide assurance about the _______ and _______ of information given by one party to another

reliability and revelance

Which of the following areas require documentation related to the auditor's risk assessment and response? (multiple may apply) a.) Discussion among the engagement team. b.) Communication about error and fraud made to management and others. c.) Nature, timing and extent of procedures performed to identify risks. d.) Evaluation of management's response to identified risk. e.) Auditor education and training related to risk assessment.

??? discussion among the engagement team, communication about error and fraud made to management and others, and evaluation of management's response to identified risk

The most important function of the _______ is the promulgation of rules and standards that guide audits and related services provided to nonpublic companies, governmental, and other entities a.) Financial Accounting Standards Board (FASB) b.) American Accounting Association (AAA) c.) American Institute of Certified Public Accountants (AICPA) d.) Public Company Accounting Oversight Board (PCAOB)

American Institute of Certified Public Accountants (AICPA)

The formula auditors use to determine the appropriate level of detection risk is _______ a.) AR = RMM x IR b.) DR = CR/AR c.) DR = AR/RMM d.) AR = DR x CR

DR = AR/RMM

Which group was established within the FASB to meet accountants' needs for timely guidance on accounting practices and methods? a.) American Institute of Certified Public Accountants (AICPA) b.) International Federation of Accountants (IFAC) c.) Emerging Issues Task Force (EITF) d.) Accounting Standards Codification (ASC)

Emerging Issues Task Force (EITF)

Which organization issues International Standards on Auditing (ISA) and is the predominantly recognized international auditing standards setter outside the United States? a.) International Emerging Issues Task Force (IEIFT) b.) International Auditing and Assurance Standards Board (IAASB) c.) International Accounting Standards Board (IASB) d.) International Institute of Accountants (IIA) e.) International Federation of Accountants (IFAC)

International Auditing and Assurance Standards Board (IAASB)

The IASB is responsible for the development and publication of _______ a.) International Financial Reporting Standards b.) Generally Accepted Auditing Standards c.) International Auditing Principles d.) Generally Accepted Accounting Principles

International Financial Reporting Standards

ASB and PCASOB standards use which of the following words to describe actions and procedures auditors have the repsponsibility to consider? (multiple may apply) a.) Shall b.) May c.) Should d.) Might e.) Could

May, might, and could

When a client has multiple locations, the auditor determines which locations or business units to audit and the extent of audit procedures to be performed during the _______ process a.) client acceptance b.) planning c.) fee setting d.) implementation

Planning

The Sarbanes Oxley-Act effectively transferred authority to set and enforce auditing standards for public company audits to the _______ a.) Financial Accounting Standards Board b.) Internal Revenue Service c.) Public Company Accounting Oversight Board d.) Securities and Exchanged Commission

Public Company Accounting Oversight Board

To deter possible recurrence of rule violations and to enhance the quality and reliability of future audits, the ______ can impose sanctions on registered firms a.) National Association of State Boards of Accounting (NASBA) b.) American Institute of Certified Public Accountants (AICPA) c.) Public Company Accounting Oversight Board (PCAOB) d.) American Accounting Association (AAA)

Public Company Accounting Oversight Board (PCAOB)

The PCAOB conducts a program of regular inspections to assess the degree of compliance of registered accounting firms with the rules and professional standards of the _______ (multiple may apply) a.) American Accounting Association (AAA) b.) Securities and Exchange Commission (SEC) c.) Public Company Accounting Oversight Board (PCAOB) d.) Sarbanes-Oxley Act of 2002 e.) American Institution of Certified Public Accountants (AICPA)

Securities and Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB), Sarbanes-Oxley Act of 2002

Which act regulates ongoing reporting by companies whose companies securities are listed and traded on a stock exchange or that possess assets greater than $10 million and its equity securities are held by 500 or more persons? a.) Securities Exchange Act of 1934 b.) Sarbanes-Oxley Act of 2002 c.) Securities Exchange Act of 1933 d.) Dodd-Frank Act of 2010

Securities exchange act of 1934

Which of the following statements are correct? (multiple may apply) a.) Tests of controls are concerned with monetary misstatements. b.) Tests of controls check the operating effectiveness of controls. c.) Substantive tests of transactions check the operating effectiveness of controls. d.) Dual-purpose tests can improve audit efficiency. e.) Substantive tests of transactions are concerned with monetary misstatements. f.) An audit procedure should either be a test of controls or a substantive test of transactions.

Tests of controls check the operating effectiveness of controls, dual-purpose tests can improve audit efficiency, and substantive tests of transactions are concerned with monetary misstatements

Which of the following statements regarding accounting firms and auditing standards is correct? a.) The PCAOB establishes standards for both nonpublic entities and SEC registrants. b.) The ASB establishes standards for both nonpublic entities and SEC registrants. c.) The ASB establishes standards for nonpublic entities and the PCAOB establishes standards for SEC registrants. d.) The PCAOB establishes standards for nonpublic entities and the ASB establishes standards for SEC registrants.

The ASB establishes standards for nonpublic entities and the PCAOB establishes standards for SEC registrants

Which of the following statements are correct? (multiple may apply) a.) The fraud discussion can be part of the discussion of understanding the entity and its environment. b.) All audit team members should be included in the fraud brainstorming session. c.) The engagement partner or manager should communicate the potential for misstatements from fraud to the audit team. d.) The audit team is encouraged to hold discussions about the entity's financial statements' susceptibility to fraud.

The fraud discussion can be part of the discussion of understanding the entity and its environment and the engagement partner or manager should communicate the potential for misstatements from fraud to the audit team.

Which of the following statements are correct? (multiple may apply) a.) Accounting principle choices can impact some ratios b.) Material misstatement may not significantly affect some ratios c.) Industry averages are always the best way to analyze an entity's financial ratios d.) Financial ratios should not be evaluated in isolation.

accounting principle choices can impact some ratios, material misstatement may not significantly affect some ratios, and financial ratios should not be evaluated in isolation

Checks, invoices, contracts, ledgers, worksheets and spreadsheets are all part of auditing evidence referred to as _______ _______

accounting records

How effectively the entity's assets are managed is indicated by _______ ratios

activity

If a misstatement is considered so material that it pervasively affects the interpretation of the financial statements, the auditor will issue a(n) _______ opinion, indicating that the financial statements are not fairly stated and should not be relied upon

adverse

Materiality is assessed in terms of potential effect of a misstatement on decisions made by ______ a.) any potential lender or creditor b.) all stockholders of the corporation c.) a reasonable user of financial statements d.) employees and suppliers

a reasonable user of financial statements

Auditors consider materiality from a reasonable user perspective and communicate to users that "the financial statements present fairly in _______ material respects a.) most b.) some c.) all d.) no

a;;

When business owners hire others to manage their business, the demand for auditing can be understood as the need for _______ a.) benchmarking b.) performance evaluation c.) accountability

accountability

Organizations design and implement _______ _______ systems to capture the details of transactions involved in each business process

accounting information

PCAOB standards require that audit documentation contain ________ a.) all documents that form the basis of the audit b.) all documents requested by the audit committee c.) only documents that the auditor feels are needed to support his or her conclusion d.) only documents that are consistent with the final conclusion of the audit team

all documents that form the basis of the audit

The auditor should develop expectation about plausible relationships that are expected to exist when performing preliminary _______ _______

analytical procedures

The audit documentation needs to be organized so that _______ can find the audit evidence that supports each financial statement account (multiple may apply) a.) any member of the audit team b.) reviewers c.) entity management d.) the Board of Directors

any member of the audit and reviewers

If the auditor determines that the work of the internal audit function (IAF) can be used for purposes of the audit, the auditor must evaluate the _______ (multiple may apply) a.) extent to which the IAF's status and policies support the financial objectives of the client b.) application by the IAF of a systematic and disciplined approach c.) quality control approach of the IAF d.) level of competence of the IAF

application by the IAF of a systematic and disciplined approach, quality control approach of the IAF, and level of competence of the IAF

Auditors assess the risk of material misstatement at the _______ level a.) materiality b.) financial statement c.) disclosure d.) assertion

assertion

Financial statement _______ are management's expressed or implied claims about information reflected in the financial statements

assertions

Learning auditing essentially helps to understand how to gather and assess evidence as you can evaluate _____________ (or claims) made by others

assertions

Independent professional services that improve the quality of information, or its context, for decision makers are called __________ services a.) assurance b.) auditing c.) attest

assurance

Assertions companies make about sustainability has led to promising new area of _______ services for auditors

attest

These occur when a practitioner is engaged to issue a report on subject matter that is the responsibility of another party a.) assurance services b.) attest services c.) accounting services

attest services

Auditors should perform audits to reduce _______ risk to a sufficiently low level before expressing an opinion on the financial statements a.) audit b.) control c.) business d.) inherent

audit

Whenever the auditor finds evidence of fraud that causes a material misstatement of the financial statements, it should be reported directly to the _______ a.) chief executive officer b.) audit committee c.) director of internal audit d.) SEC

audit committee

The underlying accounting data and any additional information available to the auditor, whether originating from the client or externally is the definition of _______ ________

audit evidence

The end product of an auditor's work is the _______ a.) engagement letter b.) materiality assessment c.) financial statements d.) audit opinion

audit opinion

Once the audit strategy has been established, the auditor develops a more detailed ________ ________

audit plan

The document that outlines the auditor's understanding of the entity and potential risks as well as the strategy to be followed by the auditor is called the _______ _______

audit plan

The audit procedures that will be conducted by the auditor are contained in the _______ ________

audit program

The auditor's assessments of _______ _______ and _______ influence the nature, timing, and extent of the audit evidence to be gathered

audit risk and materiality

Under current auditing standards, management assertions fall into categories of assertions about _______ (multiple may apply) a.) stock performance and market valuations for the period under audit b.) classes of transactions and events and related disclosures for the period audited c.) the internal control in place to prevent errors and fraud d.) account balances and related disclosures at the period end

classes of transactions and events and related disclosures for the period audited and account balances and related disclosures at the period end

Predictive audit data analysis _______ a.) combines firm, industry and market data to help auditors identify numbers that might be off b.) presents data to users in ways that match their various needs and interests c.) allows auditors to analyze and understand enormous sets of information

combines firm, industry and market data to help auditors identify numbers that might be off

During the documenting stage, the auditor _______ (multiple may apply) a.) complies his or her knowledge about the entity's business objectives and strategies b.) ensures that the identified risks have been addressed c.) records how the entity is managing its risks d.) decides upon the nature, timing and extend of audit tests

complies his or her knowledge about the entity's business objecties and strategies, ensures that the identified risks have been addressed, and records how the entity is managing its risks

During the documenting stage, the auditor _______ (multiple may apply) a.) decides upon the nature, timing and extend of audit tests b.) complies his or her knowledge about the entity's business objectives and strategies c.) ensures that the identified risks have been addressed d.) records how the entity is managing its risks

complies his or her knowledge about the entity's business objectives and strategies, ensures that the identified risks have been addressed, and records how the entity is managing its risks

For lower-risk, well controlled accounts, the assurance bucket may be filled entirely with tests of _______ and substantive analytical procedures

controls

In regards to applying the audit testing hierarchy, starting with tests of _______ is generally more effective and efficient than starting with tests of _______

controls, details

Audit documentation should _______ (multiple may apply) a.) demonstrate the underlying accounting records agreed with the financial statements b.) include an audit program for the engagement c.) support the auditor's conclusions for each material financial statement assertion d.) enable an ordinary person to understand the nature, timing, extent, results, evidence and conclusions reached

demonstrate the underlying accounting records agreed with the financial statements, include an audit program for the engagement, and support the auditor's conclusions for each material financial statement assertion

Auditors should consider laws and regulations that are generally recognized as having _______ effects on the determination of financial statement amounts a.) indirect and material b.) indirect and immaterial c.) direct and immaterial d.) direct and material

direct and material

If management chooses not to eliminate an identified material misstatement, appropriate audit opinions include ______. (multiple may apply) a.) modified b.) disclaimer of opinion c.) adverse d.) unqualified e.) qualified

modified, adverse, qualified

Evidence obtained from a source outside the entity is generally considered _______ evidence obtained solely from within the entity a.) more reliable than b.) less reliable than c.) equally reliable to

more reliable than

Looking at a process or procedure being performed by others is referred to as _______

observation

Auditor risk assessment procedures are used to _______ a.) obtain an understanding of the entity and its environment b.) determine the type of opinion to issue c.) set audit fees d.) determine whether or not to accept a client

obtain an understanding of the entity and its environment

Auditors can reduce audit risk to an acceptably low level by _______ a.) obtaining an understanding of the entity and its environment b.) consulting with top-level management c.) using the internal audit function as part of the audit team d.) increase the amount charged for performing the audit

obtaining an understanding of the entity and its environment

Because the entity's personnel might have incentives to record fictitious transactions, the _______ assertion is relevant for revenue transactions

occurence

Match the prescribed duties with the appropriate audit team member a.) partner b.) associate/staff c.) manager d.) senior/in-charge

parter: Responsible for ensuring that the audit is properly planned and conducted in accordance with applicable auditing standards. associate/staff: Responsible for preparing adequate and appropriate documentation of completed work. manager: Responsible for reviewing the working papers, financial statements and audit report. senior/in-charge: Responsible for assigning tasks of associates and directing the day-to-day performance of the audit.

Public accounting firms should _______ a.) periodically evaluate whether to continue their relationship with current clients b.) only evaluate continuing their relationship with current clients when conflicts arise c.) not continue their relationship with current clients with conflicts arise

periodically evaluate whether to continue their relationship with current clients

Financial statement level risks are _______ risks in that they apply to multiple components of the financial statements

pervasive

Auditors should attempt to identify all related parties during the _______ phase of the audit a.) planning b.) evaluation c.) client acceptance d.) testing

planning

The quality of an expectation is referred to as the _______ of the expectation

precision

Ensuring that members of the audit team meet independence requirements generally take place as part of _______ a.) client acceptance and continuance b.) preliminary engagement activities c.) audit strategy and planning d.) evaluating audit findings

preliminary engagement activities

An attitude that includes a questioning mind and a critical assessment of audit evidence is the definition of _______ _______

professional skepticism

The entity's success or failure for a given period is measured by _______ ratios

profitability

Identify the categories of financial ratios that are used by auditors as analytical procedures (multiple may apply) a.) Profitability b.) Solvency c.) Materiality d.) Earnings e.) Activity f.) Coverage g.) Short-term Liquidity

profitability, activity, coverage, short-term liquidity

The functions of audit documentation are to _______ (multiple may apply) a.) provide the basis for the review of the quality of work b.) provide justification for the fees charged for audit services rendered c.) provide principal support that the audit was conducted in accordance with GAAS d.) aid in the planning, performance and supervision of the audit e.) provide principal support that the audit was conducted in accordance with GAAP

provide the basis for the review of the quality of work; provide principal support that the audit was conducted in accordance with GAAS; aid in the planning, performance, and supervision of the audit

For a company, the impacts of purchasing the assurance provided by an audit include ________ (multiple may apply) a.) an overall increase in the cost of capital b.) providing assurance to thousands of potential investors c.) lower interest rates d.) the ability to sell stocks and bonds at more favorable prices

providing assurance to thousands of potential investors, lower interest rates, and the ablity to sell stocks and bonds at more favorable prices

The Sarbanes-Oxley Act prohibits external auditors from _______ a.) performing any type of compilation and review services b.) providing many types of consulting work for its auditing clients c.) providing tax preparation and management advisory services to nonaudit clients d.) auditing the same client more than two years in a row

providing many types of consulting work for its auditing clients

Short-term liquidity ratios include the _______ ratio (multiple may apply) a.) financing cash flow b.) quick c.) operating cash flow d.) debt to equity e.) current

quick, operating cash flow, current

Footing, crossfooting, reconciling subsidiary ledgers and testing postings are all examples of _______

recalculation

Auditors should establish an understanding with the entity about the terms of the engagement to _______ a.) increase the billable hours charged to the client b.) document the understanding in the working papers c.) reduce the risk of misinterpretation between the two parties d.) discuss the type of audit opinion expected

reduce the risk of misinterpretation between the two parties

Examples of tests of controls include _______ (multiple may apply) a.) reperformance of the application of the control b.) observation of the application of specific controls c.) copying prior year auditing working papers d.) inspecting documents, reports and electronic files e.) inquiries of management, supervisory and staff personnel

reperformance of the application of the control; observation of the application of specific controls; inspecting documents, reports and electronic files; inquiries of management, supervisory and staff personnel

Match the appropriate category of audit procedure with the purpose that it serves a.) Risk assessment procedures b.) test of controls c.) substantive procedures

risk assessment procedures: Used to obtain an understanding of the entity and its environment, including its internal control, to assess the risks of material misstatement at the financial statement and relevant assertion levels test of controls: Used to test the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the relevant assertion level substantive procedures: Used to detect material misstatements at the relevant assertion level

Analytical procedures can be used by auditors to accomplish _______ procedures (multiple may apply) a.) control assessment b.) risk assessment c.) detection assessment d.) final analytical e.) substantive analytical

risk assessment, final analytical, and substantive analytical

Searching for large and unusual items in the accounting records and reviewing transactions for errors are examples of _______

scanning

If an auditor assesses a larger level of materiality amount for an account, they will need a _______ sample than if materiality were a smaller amount a.) smaller b.) larger

smaller (inverse relationship)

Coverage ratios provide information on the long-term _______ of the entity

solvency

An auditor's independence would be considered impaired if the _______ (multiple may apply) a.) spouse of the auditor is an accounting supervisor for the entity b.) cousin of the auditor is a maintenance worker for the entity c.) client owes money to the auditor that has the characteristics of a loan d.) auditor received a casual lunch paid for by the client being audited

spouse of the auditor is an accounting supervisor for the entity and

An auditor's independence would be considered impaired if the _______ a.) spouse of the auditor is an accounting supervisor for the entity b.) cousin of the auditor is a maintenance worker for the entity c.) client owes money to the auditor that has the characteristics of a loan d.) auditor received a casual lunch paid for by the client being audited

spouse of the auditor is an accounting supervisor for the entity and client owes money to the auditor that has the characteristics of a loan

Assume an entity has 2,500 customers. If the audit mails confirmations to 25 of the largest customers and only 20 respond, the auditor must _______ a.) discard the sample and select a different set of 25 customers b.) still gather evidence of each of the 25 accounts c.) base the evaluation on the 20 accounts that responded

still gather sufficient evidence on each of the 25 accounts

The increased used of data analytics in auditing _______ (multiple may apply) a.) makes it less important for audit professionals to reason through challenging concepts b.) streamlines some tedious audit tasks c.) requires the ability to query, manipulate and interpret information d.) requires the auditor to be an expert in technology and computer programming

streamlines some tedious audit tasks and requires the ability to query, manipulate and interpret information

To detect material misstatements in a class of transactions, account balance and disclosure component of the financial statements, the auditor designs _______ _______

substantive procedures

The fact that there should be a well-planned and thorough approach for conducting hte audit is implied by the phrase ___________

systematic process

Operating effectiveness is checked using _______ a.) substantive tests only b.) neither tests of controls nor substantive tests c.) both tests of controls and substantive tests d.) tests of controls only

test of controls only

The body that is primarily responsible for management oversight in the U.S. corporations is _______ a.) the board of directors b.) the audit committee c.) external auditors d.) management

the board of directors

Which of the following have given rise to an explosion in the demand for the assurance provided by auditors? (multiple may apply) a.) a decrease in the number of sole proprietorships b.) the expanding world economy c.) the development of the corporate form of business d.) the development of limited Liability Companies

the expanding world economy and the development of the corporate form of business

Which of the follow is not an inquiry that a successor auditor should make to a predecessor auditor? a.) Information that might bear on the integrity of management b.) The predecessor auditor's fee charged for audit work c.) Communications to management and those charged with governance regarding significant deficiencies and material weaknesses in internal control d.) Communications to those charged with governance regarding fraud and noncompliance with laws or regulations by the entity e.) Disagreements with management about accounting policies, auditing procedures or other similarly significant matters.

the predecessors auditor's fee charged for audit work

The underlying ASB principles of auditing standards apply _______ a.) only to PSAOB audits b.) to audits under any auditing standards c.) only to ASB audits d.) only to audits in the United States

to audits under any auditing standards

Although the auditor owns the audit documents, they cannot be shown to outside parties without the entity's consent, except under certain circumstances a.) true b.) false

true

CPAs can offer a variety of services that provide assurance but are not considered auditing or attestation a.) true b.) false

true

The auditor's report, also known as the audit opinion, is the main product or output of the audit a.) true b.) false

true

The context provided by the entity's business is a primary aspect of the environment in which financial statement auditing is conducted a.) true b.) false

true

When the financial statements are free of material misstatement and the auditor does not find it necessary to specify any exceptions to a "clean" audit opinion, the audit report issued is _______

unqualified

Risk assessment, benchmarking and recommendations based on the assessment of business risk are all examples of _______-______ services

value-added

The reliability of inspection of records and documents depends primarily on _______ a.) when the record or document was prepared b.) the dollar amount involved in the record c.) who prepared the document d.) whether the document is internal or external

whether the document is internal or external