Test Bank for Auditing: A Practical Approach with Data Analytics 2nd Edition by Raymond N. Johnson | Complete Exam Questions, Answers & Detailed Rationales

TEST BANK
Auditing: A Practical Approach with Data Analytics

JOHNSON; WILEY

2nd Edition


All Chapters Complete (Questions with Verified Answers)

, Table of Contents
Chapter 1: Introduction and Overview of Audit and Assurance
Chapter 2: Professionalism and Professional Responsibilities
Chapter 3: Risk Assessment Part I: Audit Risk and Audit Strategy
Chapter 4: Risk Assessment Part II: Understanding the Client
Chapter 5: Audit Evidence
Chapter 6: Gaining an Understanding of the Client's System of Internal
Control
Chapter 7: Audit Data Analytics
Chapter 8: Risk Response: Performing Tests of Controls
Chapter 9: Risk Response: Performing Substantive Procedures
Chapter 10: Risk Response: Evaluating Audit Data Analytics and Audit
Sampling
Chapter 11: Auditing the Revenue Process
Chapter 12: Auditing the Purchasing and Payroll Processes
Chapter 13: Auditing Various Balance Sheet Accounts (and Related
Income Statement Accounts)
Chapter 14: Completing the Audit
Chapter 15: Reporting on the Audit

, Chapter 1 Introduction and Overview of Audit and Assurance
Question Type: True or False


1. GAAP and IFRS are examples of applicable financial reporting framework.
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Communication,
Learning Objective: LO1.1, Solution: The applicable financial reporting framework refers to the set of
standards used in preparing the historical financial statements, such as GAAP, IFRS or a Federal Income
Tax Basis of Accounting.



2. Review of financial forecasts falls under attestation services.
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and
Interpretation, AACSB: Ethics, Learning Objective: LO1.1, Solution: Attestation services (under the
umbrella of assurance services) include review of historical financial statements, review of financial
forecasts, and examination of internal control.



3. Within a U.S. context, the applicable financial reporting framework is typically Generally
Accepted Accounting Principles (GAAP).
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and
Interpretation, AACSB: Ethics, Learning Objective: LO1.2, Solution: Within a U.S. context, the applicable
financial reporting framework is typically generally accepted accounting principles (GAAP).




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4. Private companies, or non-issuers, are not required by the U.S. government to have an annual
financial statement audit
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Analytic, Learning
Objective: LO1.2, Solution: Private companies, or non-issuers, are not required by the
U.S. government to have an annual financial statement audit, but often other interested users, such as a bank
or lender, may request that a private company provide audited financial statements.



5. One of the reasons there is a demand for financial statement audits is that users of financial
statements often lack accounting and legal knowledge to fully understand complex
accounting and disclosure choices.
A. True
B. False
Answer: A, Taxonomy: Comprehension, Difficulty: Easy, AICPA PC: Communication, AACSB: Analytic,
Learning Objective: LO1.3, Solution: Complexity: Financial statements are complex, the amounts are often
affected by significant estimates, and the disclosures often require significant knowledge and experience to
evaluate. Most financial statement users do not have the accounting and legal knowledge to assess the
reasonableness of complex accounting and disclosure choices being made by the company.



6. In financial accounting, the balance sheet is a statement of financial position
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA PC: Communication, AACSB: Analytic, Learning
Objective: LO1.3, Solution: In financial accounting, the financial statements include the balance sheet
(statement of financial position), income statement (statement of comprehensive income), statement of cash
flows, statement of changes in equity and accompanying notes.



7. Business valuation falls within the purview of non-assurance services.
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and
Interpretation, AACSB: Analytic, Learning Objective: LO1.4, Solution: Many of these accounting firms
provide non-assurance (or non-audit) services as well as assurance services. These non-assurance
services include management consulting, business valuation, mergers and acquisitions, insolvency, tax
and accounting services.




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