TEST BANK FOR AUDITING & ASSURANCE &.& &.& &.& &.& &.& &.&
SERVICES: A SYSTEMATIC APPROACH, 12TH &.& &.& &.& &.& &.&
EDITION BY WILLIAM MESSIER JR, STEVEN &.& &.& &.& &.& &.& &.&
GLOVER, VERIFIED CHAPTERS 1 - 21, &.& &.& &.& &.& &.& &.&
COMPLETE NEWEST VERSION &.& &.& &.&
1) Auditing focuses on rules, techniques, and computations required to prepare
&.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& and analyze financial information.
&.& &.& &.&
ANSWER: FALSE &.&
Difficulty: 1 Easy &.& &.&
Topic: The Importance for Studying Auditing
&.& &.& &.& &.& &.&
Learning Objective: 01-01 Understand why studying auditing can be valuable to
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
you whether or not you plan to become an auditor, and why it is different from
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& studying accounting. &.&
Bloom's: Remember AACSB: Communication
&.& &.& &.&
AICPA: BB Legal; FN Decision Making
&.& &.& &.& &.& &.&
2) Decision makers demand reliable information that is provided by
&.& &.& &.& &.& &.& &.& &.& &.& &.&
accountants.
ANSWER: TRUE &.&
Difficulty: 1 Easy &.& &.&
Topic: The Demand for Auditing and Assurance
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-02 Understand the demand for auditing and be able to
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
explain the desired characteristics of auditors and audit services through an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
analogy to a house inspector and a house inspection service.
&.& &.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Understand AACSB: Communication
&.& &.& &.&
AICPA: FN Decision Making; BB Industry
&.& &.& &.& &.& &.&
,3) Information asymmetry seldom occurs. &.& &.& &.&
ANSWER: FALSE &.&
Difficulty: 2 Medium &.& &.&
Topic: The Demand for Auditing and Assurance
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-02 Understand the demand for auditing and be able to
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
explain the desired characteristics of auditors and audit services through an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
analogy to a house inspector and a house inspection service.
&.& &.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Apply &.&
AACSB: Communication &.&
AICPA: BB Industry; FN Reporting
&.& &.& &.& &.&
&.&
4) Conflicts of interest often occur between absentee owners and managers.
&.& &.& &.& &.& &.& &.& &.& &.& &.&
ANSWER: TRUE &.&
Difficulty: 2 Medium &.& &.&
Topic: The Demand for Auditing and Assurance
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-02 Understand the demand for auditing and be able to
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
explain the desired characteristics of auditors and audit services through an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
analogy to a house inspector and a house inspection service.
&.& &.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Apply &.&
AACSB: Communication &.&
AICPA: BB Industry; FN Reporting
&.& &.& &.& &.&
5) Auditing services and attestation services are the same.
&.& &.& &.& &.& &.& &.& &.&
ANSWER: FALSE &.&
Difficulty: 1 Easy &.& &.&
Topic: Auditing, Attest, and Assurance Services Defined
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-03 Understand the relationships among auditing, attestation,
&.& &.& &.& &.& &.& &.& &.& &.&
&.& and assurance services.
&.& &.&
Bloom's: Understand AACSB: Communication
&.& &.& &.&
,AICPA: BB Industry; FN Reporting
&.& &.& &.& &.&
6) Auditing is a type of attest service. &.& &.& &.& &.& &.& &.&
ANSWER: TRUE &.&
Difficulty: 1 Easy &.& &.&
Topic: Auditing, Attest, and Assurance Services Defined
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-03 Understand the relationships among auditing, attestation,
&.& &.& &.& &.& &.& &.& &.& &.&
&.& and assurance services.; 01-04 Know the basic definition of a financial statement
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& audit.
Bloom's: Understand AACSB: Communication
&.& &.& &.&
AICPA: BB Industry; FN Reporting
&.& &.& &.& &.&
7) Testing all transactions that occurred during the period is cost prohibitive.
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
ANSWER: TRUE &.&
Difficulty: 2 Medium Topic: The Audit Process
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-06 Be able to explain why on most audit engagements an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& auditor tests only a sample of transactions that occurred.
&.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Apply &.&
AACSB: Communication &.&
AICPA: FN Decision Making; BB Critical Thinking
&.& &.& &.& &.& &.& &.&
&.&
8) Why do auditors generally use a sampling approach to evidence gathering?
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
A) Auditors are experts and do not need to look at much to know whether
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
the financial statements are correct or not.
&.& &.& &.& &.& &.& &.&
B) Auditors must balance the cost of the audit with the need for precision.
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
C) Auditors must limit their exposure to their auditee to maintain
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
independence.
D) The auditor's relationship with the auditee is generally adversarial, so the
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
auditor will not have access to all of the financial information of the company.
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
, ANSWER: B &.&
Difficulty: 1 Easy &.& &.&
Topic: The Audit Process
&.& &.& &.&
Learning Objective: 01-06 Be able to explain why on most audit engagements an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& auditor tests only a sample of transactions that occurred.
&.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Understand AACSB: Communication
&.& &.& &.&
AICPA: FN Decision Making; BB Industry
&.& &.& &.& &.& &.&
9) Which of the following statements best describes a relationship between
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
sample size and other elements of auditing?
&.& &.& &.& &.& &.& &.&
A) If materiality increases, so will the sample size.
&.& &.& &.& &.& &.& &.& &.&
B) If the desired level of assurance increases, sample sizes can be smaller.
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
C) If materiality decreases, sample size will need to increase.
&.& &.& &.& &.& &.& &.& &.& &.&
D) There is no relationship between sample size and materiality or the desired
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& level of assurance.
&.& &.&
ANSWER: C &.&
Difficulty: 2 Medium Topic: The Audit Process
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-06 Be able to explain why on most audit engagements an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& auditor tests only a sample of transactions that occurred.
&.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Apply &.&
AACSB: Analytical Thinking
&.& &.&
AICPA: BB Critical Thinking; FN Risk Analysis
&.& &.& &.& &.& &.& &.&
&.&
10) Which of the following statements about the study of auditing is NOT
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
true?
A) The study of auditing can be valuable to future accountants and business
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
decision makers whether or not they plan to become auditors.
&.& &.& &.& &.& &.& &.& &.& &.& &.&
B) The study of auditing focuses on learning the analytical and logical skills
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
necessary to evaluate the relevance and reliability of information.
&.& &.& &.& &.& &.& &.& &.& &.&
SERVICES: A SYSTEMATIC APPROACH, 12TH &.& &.& &.& &.& &.&
EDITION BY WILLIAM MESSIER JR, STEVEN &.& &.& &.& &.& &.& &.&
GLOVER, VERIFIED CHAPTERS 1 - 21, &.& &.& &.& &.& &.& &.&
COMPLETE NEWEST VERSION &.& &.& &.&
1) Auditing focuses on rules, techniques, and computations required to prepare
&.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& and analyze financial information.
&.& &.& &.&
ANSWER: FALSE &.&
Difficulty: 1 Easy &.& &.&
Topic: The Importance for Studying Auditing
&.& &.& &.& &.& &.&
Learning Objective: 01-01 Understand why studying auditing can be valuable to
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
you whether or not you plan to become an auditor, and why it is different from
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& studying accounting. &.&
Bloom's: Remember AACSB: Communication
&.& &.& &.&
AICPA: BB Legal; FN Decision Making
&.& &.& &.& &.& &.&
2) Decision makers demand reliable information that is provided by
&.& &.& &.& &.& &.& &.& &.& &.& &.&
accountants.
ANSWER: TRUE &.&
Difficulty: 1 Easy &.& &.&
Topic: The Demand for Auditing and Assurance
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-02 Understand the demand for auditing and be able to
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
explain the desired characteristics of auditors and audit services through an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
analogy to a house inspector and a house inspection service.
&.& &.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Understand AACSB: Communication
&.& &.& &.&
AICPA: FN Decision Making; BB Industry
&.& &.& &.& &.& &.&
,3) Information asymmetry seldom occurs. &.& &.& &.&
ANSWER: FALSE &.&
Difficulty: 2 Medium &.& &.&
Topic: The Demand for Auditing and Assurance
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-02 Understand the demand for auditing and be able to
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
explain the desired characteristics of auditors and audit services through an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
analogy to a house inspector and a house inspection service.
&.& &.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Apply &.&
AACSB: Communication &.&
AICPA: BB Industry; FN Reporting
&.& &.& &.& &.&
&.&
4) Conflicts of interest often occur between absentee owners and managers.
&.& &.& &.& &.& &.& &.& &.& &.& &.&
ANSWER: TRUE &.&
Difficulty: 2 Medium &.& &.&
Topic: The Demand for Auditing and Assurance
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-02 Understand the demand for auditing and be able to
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
explain the desired characteristics of auditors and audit services through an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
analogy to a house inspector and a house inspection service.
&.& &.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Apply &.&
AACSB: Communication &.&
AICPA: BB Industry; FN Reporting
&.& &.& &.& &.&
5) Auditing services and attestation services are the same.
&.& &.& &.& &.& &.& &.& &.&
ANSWER: FALSE &.&
Difficulty: 1 Easy &.& &.&
Topic: Auditing, Attest, and Assurance Services Defined
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-03 Understand the relationships among auditing, attestation,
&.& &.& &.& &.& &.& &.& &.& &.&
&.& and assurance services.
&.& &.&
Bloom's: Understand AACSB: Communication
&.& &.& &.&
,AICPA: BB Industry; FN Reporting
&.& &.& &.& &.&
6) Auditing is a type of attest service. &.& &.& &.& &.& &.& &.&
ANSWER: TRUE &.&
Difficulty: 1 Easy &.& &.&
Topic: Auditing, Attest, and Assurance Services Defined
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-03 Understand the relationships among auditing, attestation,
&.& &.& &.& &.& &.& &.& &.& &.&
&.& and assurance services.; 01-04 Know the basic definition of a financial statement
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& audit.
Bloom's: Understand AACSB: Communication
&.& &.& &.&
AICPA: BB Industry; FN Reporting
&.& &.& &.& &.&
7) Testing all transactions that occurred during the period is cost prohibitive.
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
ANSWER: TRUE &.&
Difficulty: 2 Medium Topic: The Audit Process
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-06 Be able to explain why on most audit engagements an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& auditor tests only a sample of transactions that occurred.
&.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Apply &.&
AACSB: Communication &.&
AICPA: FN Decision Making; BB Critical Thinking
&.& &.& &.& &.& &.& &.&
&.&
8) Why do auditors generally use a sampling approach to evidence gathering?
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
A) Auditors are experts and do not need to look at much to know whether
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
the financial statements are correct or not.
&.& &.& &.& &.& &.& &.&
B) Auditors must balance the cost of the audit with the need for precision.
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
C) Auditors must limit their exposure to their auditee to maintain
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
independence.
D) The auditor's relationship with the auditee is generally adversarial, so the
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
auditor will not have access to all of the financial information of the company.
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
, ANSWER: B &.&
Difficulty: 1 Easy &.& &.&
Topic: The Audit Process
&.& &.& &.&
Learning Objective: 01-06 Be able to explain why on most audit engagements an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& auditor tests only a sample of transactions that occurred.
&.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Understand AACSB: Communication
&.& &.& &.&
AICPA: FN Decision Making; BB Industry
&.& &.& &.& &.& &.&
9) Which of the following statements best describes a relationship between
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
sample size and other elements of auditing?
&.& &.& &.& &.& &.& &.&
A) If materiality increases, so will the sample size.
&.& &.& &.& &.& &.& &.& &.&
B) If the desired level of assurance increases, sample sizes can be smaller.
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
C) If materiality decreases, sample size will need to increase.
&.& &.& &.& &.& &.& &.& &.& &.&
D) There is no relationship between sample size and materiality or the desired
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& level of assurance.
&.& &.&
ANSWER: C &.&
Difficulty: 2 Medium Topic: The Audit Process
&.& &.& &.& &.& &.& &.&
Learning Objective: 01-06 Be able to explain why on most audit engagements an
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
&.& auditor tests only a sample of transactions that occurred.
&.& &.& &.& &.& &.& &.& &.& &.&
Bloom's: Apply &.&
AACSB: Analytical Thinking
&.& &.&
AICPA: BB Critical Thinking; FN Risk Analysis
&.& &.& &.& &.& &.& &.&
&.&
10) Which of the following statements about the study of auditing is NOT
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
true?
A) The study of auditing can be valuable to future accountants and business
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
decision makers whether or not they plan to become auditors.
&.& &.& &.& &.& &.& &.& &.& &.& &.&
B) The study of auditing focuses on learning the analytical and logical skills
&.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.& &.&
necessary to evaluate the relevance and reliability of information.
&.& &.& &.& &.& &.& &.& &.& &.&
