Test Bank for Auditing and Assurance Services, 16th Edition By Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan,All Chapters Fully Covered With Verified Questions and Answers ||GRADED A+||.

[TEST BANK] AUDITING AND ASSURANCE SERVICES, 16TH EDITION
BY ARENS, ELDER, BEASLEY, HOGAN

Auditing and Assurance Services, (Arens)
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Chapter 1 The Demand for Audit and Other Assurance Services
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Learning Objective 1-1 gd gd




1) The Sarbanes-Oxley Act applies to which of the following companies?
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A) All companies gd



B) Privately held companies gd gd



C) Public companies gd



D) All public companies and privately held companies with assets greater than $500 million
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Answer: C g d



Terms: Sarbanes- g d



Oxley Act Diff: Easy
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Objective: LO 1-1 g d gd



AACSB: Reflective thinking skills To
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pic: SOX
g d




2) Which of the following is considered audit evidence?
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A)
Oral statements m Written Comm
gd Auditor Obser gd gd gd



ade by management
gd unications
gd vation
Y N N

B)
Oral statements m gd gd Written Comm gd Auditor Obser gd



ade by management
gd gd unications vation
N Y Y

C)
Oral statements m gd gd Written Comm gd Auditor Obser gd



ade by management
gd gd unications vation
Y Y Y

D)
Oral statements m gd gd Written Comm gd Auditor Obser gd



ade by management
gd gd unications vation
N N Y

Answer: C g d



Terms: Audit evidence g d gd gd



Diff: Moderate Objectiv
g d gd



e: LO 1-1
g d gd



AACSB: Reflective thinking skills g d gd gd




1

,3) Evidence is paramount to audit and attestation engagements. List the four basic types of audit
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evidence.
Answer: The four types of audit and attestation evidence include:
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1. Electronic and documentary data about transactions gd gd gd gd gd



2. Written and electronic communications with outsiders
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3. Observations by the auditor gd gd gd



4. Oral testimony of the auditee (client)
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Terms: Basic types of audit evidence
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Diff: Easy g d



Objective: LO 1-1 g d gd



AACSB: Reflective thinking skills g d gd gd




4) The criteria by which an auditor evaluates the information under audit may vary with the
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information being audited. gd gd



A) True
B) False A gd



nswer: A gd



Terms: Criteria which an auditor evaluates information
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Diff: Easy g d



Objective: LO 1-1 g d gd



AACSB: Reflective thinking skills g d gd gd




5) The criteria used by an external auditor to evaluate published financial statements are known
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as generally accepted auditing standards.
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A) True
B) False A gd



nswer: B gd



Terms: Criteria used by external auditor to evaluate published financial statements Di
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ff: Easy
g d



Objective: LO 1-1 g d gd



AACSB: Reflective thinking skills g d gd gd




6) The Sarbanes- gd



Oxley Act establishes standards related to the audits of privately held companies.
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A) True
B) False A gd



nswer: B gd



Terms: Sarbanes- g d



Oxley Act Diff: Easygd gd g d



Objective: LO 1-1 g d gd



AACSB: Reflective thinking skills To g d gd gd gd



pic: SOXg d




2

,7) The Sarbanes- gd



Oxley Act is widely viewed as having ushered in sweeping changes to auditing and financial rep
gd gd gd gd gd gd gd gd gd gd gd gd gd gd gd



orting.
A) True
B) False A gd



nswer: A gd



Terms: Sarbanes- g d



Oxley Act Diff: Easy gd gd g d



Objective: LO 1-1 g d gd



AACSB: Reflective thinking skills To g d gd gd gd



pic: SOX g d




8) An auditor must be competent and have an independent mental attitude.
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A) True
B) False A gd



nswer: A gd



Terms: Competence and independent mental attitude Dif
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f: Easy
g d



Objective: LO 1-1 g d gd



AACSB: Reflective thinking skills Le g d gd gd gd




arning Objective 1-2 gd gd




1) Recording, classifying, and summarizing economic events in a logical manner for the purpose
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of providing financial information for decision making is commonly called:
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A) finance.
B) auditing.
C) accounting.
D) economics.
Answer: C
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Terms: Recording, classifying, and summarizing economic events
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Diff: Easy g d



Objective: LO 1-2 g d gd



AACSB: Reflective thinking skills g d gd gd




2) An accountant: gd



A) must possess expertise in the accumulation of audit evidence.
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B) must decide the number and types of items to test.
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C) must have an understanding of the principles and rules that provide the basis for preparing the
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accounting information. gd



D) must be a CPA. gd gd gd gd



Answer: C g d



Terms: Distinguishes auditors from accountants
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Diff: Moderate g d



Objective: LO 1-2 g d gd



AACSB: Reflective thinking skills g d gd gd




3

, 3) In "auditing" financial accounting data, the primary concern is with:
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A) determining whether recorded information properly reflects the economic events that gd gd gd gd gd gd gd gd gd gd



occurred during the accounting period. gd gd gd gd



B) determining if fraud has occurred. gd gd gd gd



C) determining if taxable income has been calculated correctly. gd gd gd gd gd gd gd



D) analyzing the financial information to be sure that it complies with government requirements.
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Answer: A g d



Terms: Auditing financial accounting data primary concern Dif
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f: Moderate
g d



Objective: LO 1-2 g d gd



AACSB: Reflective thinking skills g d gd gd




4) The trait that distinguishes auditors from accountants is the:
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A) auditor's ability to interpret accounting principles generally accepted in the United States.
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B) auditor's education beyond the Bachelor's degree. gd gd gd gd gd



C) auditor's ability to interpret FASB Statements. gd gd gd gd gd



D) auditor's accumulation and interpretation of evidence related to a company's financial
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statements.
Answer: D g d



Terms: Distinguishes auditors from accountants
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Diff: Challenging g d



Objective: LO 1-2 g d gd



AACSB: Reflective thinking skills g d gd gd




5) Discuss the differences and similarities between the roles of accountants and auditors. What
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additional expertise must an auditor possess beyond that of an accountant?
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Answer: The role of accountants is to record, classify, and summarize economic events in a log
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ical manner for the purpose of providing financial information for decision making. To provide
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relevant information, accountants must have a thorough understanding of the principles and rules
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that provide the basis for preparing the accounting information. In addition, accountants must d
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evelop a system to ensure that the entity's economic events are properly recorded on a timely ba
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sis and at a reasonable cost.
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The role of auditors is to determine whether the recorded information prepared by accountants p
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roperly reflects the economic events that occurred during the accounting period. Because U.S. or
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international standards provide the criteria for evaluating whether financial information is prop
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erly recorded, auditors must thoroughly understand those accounting standards. In addition to un
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derstanding accounting, the auditor must possess expertise in the accumulation and interpretatio
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n of audit evidence. It is this expertise that distinguishes auditors from accountants. Determining
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the proper audit procedures, deciding the number and types of items to test, and evaluating the r
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esults are unique to the auditor.
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Terms: Roles of accountants and auditors Di
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ff: Moderate
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Objective: LO 1-2 g d gd



AACSB: Reflective thinking skills g d gd gd




4