PRINCIPLES OF AUDITING AND OTHER
ASSURANCE SERVICES MASTER REVIEW SET
2026
◉ Explain the concept of professional skepticism and identify its two
elements.
Auditing standards
______________that the audit be planned and performed with an
attitude of professional skepticism in___________ aspects of the
engagement, recognizing the possibility that
_________________________________ could exist_________________ of the
auditor's prior experience with the integrity and honesty of client
management and those charged with governance.. Answer: -requires
-all
-a material misstatement
-regardless
◉ Identify the two elements of professional skepticism.. Answer: (1)
A questioning mind and (2) A critical assessment of audit evidence
,◉ Describe what is meant by the cycle approach to auditing..
Answer: The cycle approach is a method of dividing the audit such
that closely related types of transactions and account balances are
included in the same cycle.
◉ What are the advantages of dividing the audit into different
cycles?. Answer: 1. To divide the audit into more manageable parts.
2. To assign tasks to different members of the audit team.
3.To keep closely related parts of the audit together.
◉ State the objective of the audit of financial statements. In general
terms, how do auditors meet that objective?
The auditor's objective of the audit of the financial statements is the
_____________ ______________________________ of the financial position,
results of operations, and cash flows in conformity with applicable
accounting standards. The auditor meets that objective by
______________________________________
_________________________________________
whether management's _____________________ regarding the financial
statements are fairly stated.. Answer: 1. expression of an opinion on
the fairness
2. accumulating sufficient appropriate evidence to determine
3. assertions
,◉ Describe management's responsibility for the financial
statements.. Answer: Management's responsibility is to adopt sound
accounting policies, maintain adequate internal control, and make
fair representations in the financial statements.
◉ Do you believe the CEO and CFO of a public company perceive an
even greater responsibility as a result of the Sarbanes-Oxley Act
requirement to certify the financial statements submitted to the
SEC?
Requiring the CEO and CFO of a public company to personally certify
and provide assurance on the financial statements and internal
controls is likely to result in ________________________
______________________________________________________________________________
______.
The Sarbanes-Oxley Act ______
______________________________________________________________________________
______
for anyone who knowingly falsely certifies those statements..
Answer: 1. them taking their responsibility more seriously and
taking additional precautions to gain comfort with the fairness of the
representations.
2. can impose criminal penalties, including significant monetary
fines or imprisonment for up to 20 years
, ◉ Distinguish between the terms errors and fraud. What is the
auditor's responsibility for finding each?. Answer: An error is an
unintentional misstatement of the financial statements. Fraud
represents an intentional misstatement. The auditor is responsible
for obtaining reasonable assurance that material misstatements in
the financial statements are detected, whether those misstatements
are due to errors or fraud.
◉ Explain the auditor's responsibility to consider compliance with
laws and regulations. How does this responsibility differ for laws
and regulations that have a direct effect on the financial statements
compared to other laws and regulations that do not have a direct
effect?. Answer: The auditor should obtain sufficient appropriate
evidence regarding material amounts and disclosures that are
directly affected by laws and regulations. For example, the auditor
should perform tests to identify if there have been any material
violations of federal or state tax laws. However, the auditor should
inquire of management and inspect correspondence with relevant
licensing and regulatory agencies to identify noncompliance that
may have a material effect on the financial statements.
◉ What are the six elements of professional skepticism?. Answer:
(1) Questioning mindset;
(2) Suspension of judgment;
(3) Search for knowledge;
4) Interpersonal understanding; (5) Autonomy; and
(6) Self-esteem
ASSURANCE SERVICES MASTER REVIEW SET
2026
◉ Explain the concept of professional skepticism and identify its two
elements.
Auditing standards
______________that the audit be planned and performed with an
attitude of professional skepticism in___________ aspects of the
engagement, recognizing the possibility that
_________________________________ could exist_________________ of the
auditor's prior experience with the integrity and honesty of client
management and those charged with governance.. Answer: -requires
-all
-a material misstatement
-regardless
◉ Identify the two elements of professional skepticism.. Answer: (1)
A questioning mind and (2) A critical assessment of audit evidence
,◉ Describe what is meant by the cycle approach to auditing..
Answer: The cycle approach is a method of dividing the audit such
that closely related types of transactions and account balances are
included in the same cycle.
◉ What are the advantages of dividing the audit into different
cycles?. Answer: 1. To divide the audit into more manageable parts.
2. To assign tasks to different members of the audit team.
3.To keep closely related parts of the audit together.
◉ State the objective of the audit of financial statements. In general
terms, how do auditors meet that objective?
The auditor's objective of the audit of the financial statements is the
_____________ ______________________________ of the financial position,
results of operations, and cash flows in conformity with applicable
accounting standards. The auditor meets that objective by
______________________________________
_________________________________________
whether management's _____________________ regarding the financial
statements are fairly stated.. Answer: 1. expression of an opinion on
the fairness
2. accumulating sufficient appropriate evidence to determine
3. assertions
,◉ Describe management's responsibility for the financial
statements.. Answer: Management's responsibility is to adopt sound
accounting policies, maintain adequate internal control, and make
fair representations in the financial statements.
◉ Do you believe the CEO and CFO of a public company perceive an
even greater responsibility as a result of the Sarbanes-Oxley Act
requirement to certify the financial statements submitted to the
SEC?
Requiring the CEO and CFO of a public company to personally certify
and provide assurance on the financial statements and internal
controls is likely to result in ________________________
______________________________________________________________________________
______.
The Sarbanes-Oxley Act ______
______________________________________________________________________________
______
for anyone who knowingly falsely certifies those statements..
Answer: 1. them taking their responsibility more seriously and
taking additional precautions to gain comfort with the fairness of the
representations.
2. can impose criminal penalties, including significant monetary
fines or imprisonment for up to 20 years
, ◉ Distinguish between the terms errors and fraud. What is the
auditor's responsibility for finding each?. Answer: An error is an
unintentional misstatement of the financial statements. Fraud
represents an intentional misstatement. The auditor is responsible
for obtaining reasonable assurance that material misstatements in
the financial statements are detected, whether those misstatements
are due to errors or fraud.
◉ Explain the auditor's responsibility to consider compliance with
laws and regulations. How does this responsibility differ for laws
and regulations that have a direct effect on the financial statements
compared to other laws and regulations that do not have a direct
effect?. Answer: The auditor should obtain sufficient appropriate
evidence regarding material amounts and disclosures that are
directly affected by laws and regulations. For example, the auditor
should perform tests to identify if there have been any material
violations of federal or state tax laws. However, the auditor should
inquire of management and inspect correspondence with relevant
licensing and regulatory agencies to identify noncompliance that
may have a material effect on the financial statements.
◉ What are the six elements of professional skepticism?. Answer:
(1) Questioning mindset;
(2) Suspension of judgment;
(3) Search for knowledge;
4) Interpersonal understanding; (5) Autonomy; and
(6) Self-esteem
