[TEST BANK]
b
AUDITING AND b
ASSURANCE
b
SERVICES, 16TH
b b
EDITION BY ARENS,
b b b
ELDER,
b
BEASLEY,HOGAN
b b
,Auditing and Assurance Services, (Arens)
b b b
Chapter 1 The Demand for Audit and Other Assurance Services
b b b b b b b b b b
Learning Objective 1-1 b b
1) The Sarbanes-Oxley Act applies to which of the following companies?
b b b b b b b b b
A) All companies b
B) Privately held companies b b
C) Public companies b
D) All public companies and privately held companies with assets greater than $500 million
b b b b b b b b b b b b
Answer: C
b b
Terms: Sarbanes-Oxley Act
b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills b b b
Topic: SOX
b b
2) Which of the following is considered audit evidence?
b b b b b b b
A)
b
Oral statements b Written Auditor
made by management
b b Communications
b Observation b b
Y N N
B)
Oral statements b Written Auditor
b made by management
b b Communications
b Observation
b
N Y Y
C)
Oral statements b Written Auditor
b made by management
b b Communications
b Observation
b
Y Y Y
D)
Oral statements b Written Auditor
b made by management
b b Communications
b Observation
b
N N Y
Answer: C b
Terms: Audit evidence b b
Diff: Moderate
b b
Objective: LO 1-1
b b b
AACSB: Reflective thinking skills b b b
1
,3) Evidence is paramount to audit and attestation engagements. List the four basic types of audit
b b b b b b b b b b b b b b
evidence.
b
Answer: The four types of audit and attestation evidence include:
b b b b b b b b b
1. Electronic and documentary data about transactions
b b b b b
2. Written and electronic communications with outsiders
b b b b b
3. Observations by the auditor b b b
4. Oral testimony of the auditee (client)
b b b b b
Terms: Basic types of audit evidence
b b b b b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
4) The criteria by which an auditor evaluates the information under audit may vary with the
b b b b b b b b b b b b b b
information being audited.
b b b
A) True
B) False
Answer: A
b b
Terms: Criteria which an auditor evaluates information
b b b b b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
5) The criteria used by an external auditor to evaluate published financial statements are known as
b b b b b b b b b b b b b b
generally accepted auditing standards.
b b b b
A) True
B) False
Answer: B
b b
Terms: Criteria used by external auditor to evaluate published financial statements
b b b b b b b b b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
6) The Sarbanes-Oxley Act establishes standards related to the audits of privately held
b b b b b b b b b b b
companies.
b
A) True
B) False
Answer: B
b b
Terms: Sarbanes-Oxley Act
b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
Topic: SOX
b b
2
, 7) The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to auditing
b b b b b b b b b b b b b
and financial reporting.
b b b
A) True
B) False
Answer: A
b b
Terms: Sarbanes-Oxley Act
b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
Topic: SOX
b b
8) An auditor must be competent and have an independent mental attitude.
b b b b b b b b b b
A) True
B) False
Answer: A
b b
Terms: Competence and independent mental attitude Diff:
b b b b b b
bEasy
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
b Learning Objective 1-2 b b
1) Recording, classifying, and summarizing economic events in a logical manner for the purpose of
b b b b b b b b b b b b b
providing financial information for decision making is commonly called:
b b b b b b b b b
A) finance.
B) auditing.
C) accounting.
D) economics.
Answer: C
b b
Terms: Recording, classifying, and summarizing economic events
b b b b b b
Diff: Easy
b b
Objective: LO 1-2 b b
AACSB: Reflective thinking skills
b b b
2) An accountant:
b
A) must possess expertise in the accumulation of audit evidence.
b b b b b b b b
B) must decide the number and types of items to test.
b b b b b b b b b
C) must have an understanding of the principles and rules that provide the basis for preparing the
b b b b b b b b b b b b b b b
accounting information.
b b
D) must be a CPA. b b b
Answer: C
b b
Terms: Distinguishes auditors from accountants
b b b b
Diff: Moderate
b b
Objective: LO 1-2 b b
AACSB: Reflective thinking skills
b b b
3
b
AUDITING AND b
ASSURANCE
b
SERVICES, 16TH
b b
EDITION BY ARENS,
b b b
ELDER,
b
BEASLEY,HOGAN
b b
,Auditing and Assurance Services, (Arens)
b b b
Chapter 1 The Demand for Audit and Other Assurance Services
b b b b b b b b b b
Learning Objective 1-1 b b
1) The Sarbanes-Oxley Act applies to which of the following companies?
b b b b b b b b b
A) All companies b
B) Privately held companies b b
C) Public companies b
D) All public companies and privately held companies with assets greater than $500 million
b b b b b b b b b b b b
Answer: C
b b
Terms: Sarbanes-Oxley Act
b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills b b b
Topic: SOX
b b
2) Which of the following is considered audit evidence?
b b b b b b b
A)
b
Oral statements b Written Auditor
made by management
b b Communications
b Observation b b
Y N N
B)
Oral statements b Written Auditor
b made by management
b b Communications
b Observation
b
N Y Y
C)
Oral statements b Written Auditor
b made by management
b b Communications
b Observation
b
Y Y Y
D)
Oral statements b Written Auditor
b made by management
b b Communications
b Observation
b
N N Y
Answer: C b
Terms: Audit evidence b b
Diff: Moderate
b b
Objective: LO 1-1
b b b
AACSB: Reflective thinking skills b b b
1
,3) Evidence is paramount to audit and attestation engagements. List the four basic types of audit
b b b b b b b b b b b b b b
evidence.
b
Answer: The four types of audit and attestation evidence include:
b b b b b b b b b
1. Electronic and documentary data about transactions
b b b b b
2. Written and electronic communications with outsiders
b b b b b
3. Observations by the auditor b b b
4. Oral testimony of the auditee (client)
b b b b b
Terms: Basic types of audit evidence
b b b b b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
4) The criteria by which an auditor evaluates the information under audit may vary with the
b b b b b b b b b b b b b b
information being audited.
b b b
A) True
B) False
Answer: A
b b
Terms: Criteria which an auditor evaluates information
b b b b b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
5) The criteria used by an external auditor to evaluate published financial statements are known as
b b b b b b b b b b b b b b
generally accepted auditing standards.
b b b b
A) True
B) False
Answer: B
b b
Terms: Criteria used by external auditor to evaluate published financial statements
b b b b b b b b b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
6) The Sarbanes-Oxley Act establishes standards related to the audits of privately held
b b b b b b b b b b b
companies.
b
A) True
B) False
Answer: B
b b
Terms: Sarbanes-Oxley Act
b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
Topic: SOX
b b
2
, 7) The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to auditing
b b b b b b b b b b b b b
and financial reporting.
b b b
A) True
B) False
Answer: A
b b
Terms: Sarbanes-Oxley Act
b b
Diff: Easy
b b
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
Topic: SOX
b b
8) An auditor must be competent and have an independent mental attitude.
b b b b b b b b b b
A) True
B) False
Answer: A
b b
Terms: Competence and independent mental attitude Diff:
b b b b b b
bEasy
Objective: LO 1-1 b b
AACSB: Reflective thinking skills
b b b
b Learning Objective 1-2 b b
1) Recording, classifying, and summarizing economic events in a logical manner for the purpose of
b b b b b b b b b b b b b
providing financial information for decision making is commonly called:
b b b b b b b b b
A) finance.
B) auditing.
C) accounting.
D) economics.
Answer: C
b b
Terms: Recording, classifying, and summarizing economic events
b b b b b b
Diff: Easy
b b
Objective: LO 1-2 b b
AACSB: Reflective thinking skills
b b b
2) An accountant:
b
A) must possess expertise in the accumulation of audit evidence.
b b b b b b b b
B) must decide the number and types of items to test.
b b b b b b b b b
C) must have an understanding of the principles and rules that provide the basis for preparing the
b b b b b b b b b b b b b b b
accounting information.
b b
D) must be a CPA. b b b
Answer: C
b b
Terms: Distinguishes auditors from accountants
b b b b
Diff: Moderate
b b
Objective: LO 1-2 b b
AACSB: Reflective thinking skills
b b b
3
