TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren. All Chapters 1-14

Test Bank for Auditing A Practical Approach, 4th
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Canadian Edition 4th Edition, Kindle Edition by
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e Robyn Moroney , Fiona Campbell , Jane Hamilton
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e , Valerie Warren
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, CHAPTER 1 e




INTRODUCTION AND OVERVIEW OF AUDIT AND ASSURANCE e e e e e e




CHAPTER LEARNING OBJECTIVES e e




1. Define an assurance engagement.
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An assurance engagement involves an assurance provider arriving atan opinion about some
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e information being provided by their client toa third party. A financial statement audit is one
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e type of assuranceengagement. This engagement involves an auditor arriving at an
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e opinionabout the fair presentation of the financial statements. The auditreport is addressed to
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e the shareholders of the company being audited,but other users may read the financial
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e statements. Learning aboutauditing and assurance requires an understanding of auditing
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e andassurance terminology, including terms such as audit risk, materiality,internal controls,
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e listed entity, and assertions.
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2. Explain why there is a demand for audit and assurance services.
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Financial statement users include investors (shareholders), suppliers,customers, lenders,
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e employees, governments, and the general public.These groups of users demand audited
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e financial statements because oftheir remoteness from the entity, accounting complexity,
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e theirincentivescompeting with those of the entity‘s managers, and their needfor reliable e e e e e e e e e e




e information on which to base decisions. The theories usedto describe the demand for audit and
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e assurance services are agencytheory, the information hypothesis, and the insurance
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e hypothesis.



3. Differentiate between types of assurance services. e e e e e




Assurance services include financial statement audits, complianceaudits, performance audits,
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e comprehensive audits, internal audits,and assurance on corporate social responsibility (CSR)
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e disclosures.



4. Explain the different levels of assurance.
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The different levels of assurance include reasonable assurance, whichis the highest level of
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e assurance, limited assurance, and no assurance.Reasonable assurance is provided on an audit
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e of a company‘sfinancial statements. Limited assurance is provided in a review of
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5. Outline different audit opinions
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2

,An auditor can issue an unmodified opinion, also known as a cleanreport, or an unmodified
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e opinion with an emphasis of matter paragraph.Alternatively, a modified opinion may be
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e issued as a qualified, anadverse, or a disclaimer of opinion.
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6. Differentiate between the roles of the preparer and the auditor, and discuss the different
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e firms that provide assurance services.
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It is the responsibility of a company‘s governing body to ensure thatits financial statements
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e are relevant, reliable, comparable, understandable,and true and fair. It is the responsibility of
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e the auditor to form anopinion on the fair presentation of the financial statements. In doing,so
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e 1- 2 Auditing: A Practical Approach, Fourth Canadian Edition
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the auditor must maintain professional scepticism and utilize professionaljudgement and due
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e care.


The firms that provide assurance services include the Big-4international firms, the national firms
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e (with international links),local and regional firms, and consulting firms that tend to specializein
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e assurance of CSR and environmental disclosures.
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7. Identify the different regulators, legislation, and regulations surrounding the assurance
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e process.
lOM oAR c P S D | 30878 49 5
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Introduction and Overview of Audit and Assurance e e e e e e 1-3
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TRUE-FALSE STATEMENTS e




1. Only current investors (not potential investors) are considered to be users of the financial
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e statements.

, Answer: False e




Bloomcode: Knowledge e



e Difficulty: Easy e




Learning Objective: Explain why there is a demand for audit and assurance services. Section
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e Reference: 1.2 Demand for audit and assurance services
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CPA Competency: Audit and Assurance AACSB:
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Analytic
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2. Insurance hypothesis is a means whereby the investor can guarantee the success of their
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e investment.


Answer: False e




Bloomcode: Comprehension e




e Difficulty: Medium e




Learning Objective: Explain why there is a demand for audit and assurance services. Section
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e Reference: 1.2 Demand for audit and assurance services
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CPA Competency: Audit and Assurance AACSB:
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Analytic
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3. A compliance audit involves gathering evidence to ascertain whether the person or entity
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e under review has followed the rules, policies, procedures, laws and regulations with which
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e they must conform
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Answer: True e




Bloomcode: Comprehension e




e Difficulty: Medium e




Learning Objective: Differentiate between types of assurance services.
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e Section Reference: 1.3 Different assurance services
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CPA Competency: Audit and Assurance AACSB:
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Analytic
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4. An operational audit is an example of a compliance audit.
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Answer: False e