Exam 1: Chapters 1, 2, 12 UPDATED ACTUAL
QUESTIONS WITH CORRECT ANSWERS
Question 1.
business risk
ANSWER
the risk that an entity will fail to meet its objectives
ex.: - product lines will become obsolete
- taxes will increase
- government contracts will be lost
Question 2.
4 environmental conditions that increase user demand for relevant and reliable information:
ANSWER
1) complexity
2) remoteness
3) time sensitivity
4) consequences
Question 3.
complexity
ANSWER
the services provided by information professionals are needed to help make the information
more understandable for their decision processes
Question 4.
remoteness
ANSWER
information professionals are needed to do the work decision makers are not available to do
,Question 5.
time sensitivity
ANSWER
make decisions more rapidly
Question 6.
consequences
ANSWER
decisions can involve a significant investment of resources
Question 7.
information risk
ANSWER
the probability that the information circulated by a company will be false or misleading
Question 8.
what could information risk be caused by?
ANSWER
a potential conflict of interest between the preparers and users of financial statements
Question 9.
assurance
ANSWER
the lending of credibility to information
Question 10.
assurance service
ANSWER
independent professional service that improves the quality of information or its context for
decision makers
,Question 11.
examples of assurance services:
ANSWER
- cybersecurity risk assessment & assurance
- XBRL reporting
- information risk assessment & assurance
- internal audit outsourcing
- fraud & illegal acts prevention deterrance
Question 12.
attestation
ANSWER
a professional service resulting in a report on an assertion (or assertions) about subject matter
that is the responsibility of another party
Question 13.
attestation engagement
ANSWER
engagement in which a practitioner is requested to examine whether management's assertion
about some subject matter can be relied upon
Question 14.
examples of attestation engagements:
ANSWER
- review engagements
- agreed upon procedures engagements
- prospective financial information
- reporting on pro forma financial information
- compliance attestation
- reporting on controls at a service organization
- examination of management's discussion and analysis
, Question 15.
auditing
ANSWER
the systematic process of objectively obtaining and evaluating evidence regarding assertions
about economic actions and events to ascertain the degree of correspondence between the
assertions and established criteria and communicating the results to interested users
Question 16.
what is an assurance to financial information?
ANSWER
attestation
Question 17.
what is an attestation to financial statements?
ANSWER
audit
Question 18.
management's financial statement assertions:
ANSWER
1) existence or occurrence
2) completeness
3) valuation & allocation
4) rights & obligations
5) presentation & disclosure
Question 19.
PCAOB assertion:
existence or occurrence
ANSWER
management assertion that all assets, liabilities, and equity interests do actually exist
QUESTIONS WITH CORRECT ANSWERS
Question 1.
business risk
ANSWER
the risk that an entity will fail to meet its objectives
ex.: - product lines will become obsolete
- taxes will increase
- government contracts will be lost
Question 2.
4 environmental conditions that increase user demand for relevant and reliable information:
ANSWER
1) complexity
2) remoteness
3) time sensitivity
4) consequences
Question 3.
complexity
ANSWER
the services provided by information professionals are needed to help make the information
more understandable for their decision processes
Question 4.
remoteness
ANSWER
information professionals are needed to do the work decision makers are not available to do
,Question 5.
time sensitivity
ANSWER
make decisions more rapidly
Question 6.
consequences
ANSWER
decisions can involve a significant investment of resources
Question 7.
information risk
ANSWER
the probability that the information circulated by a company will be false or misleading
Question 8.
what could information risk be caused by?
ANSWER
a potential conflict of interest between the preparers and users of financial statements
Question 9.
assurance
ANSWER
the lending of credibility to information
Question 10.
assurance service
ANSWER
independent professional service that improves the quality of information or its context for
decision makers
,Question 11.
examples of assurance services:
ANSWER
- cybersecurity risk assessment & assurance
- XBRL reporting
- information risk assessment & assurance
- internal audit outsourcing
- fraud & illegal acts prevention deterrance
Question 12.
attestation
ANSWER
a professional service resulting in a report on an assertion (or assertions) about subject matter
that is the responsibility of another party
Question 13.
attestation engagement
ANSWER
engagement in which a practitioner is requested to examine whether management's assertion
about some subject matter can be relied upon
Question 14.
examples of attestation engagements:
ANSWER
- review engagements
- agreed upon procedures engagements
- prospective financial information
- reporting on pro forma financial information
- compliance attestation
- reporting on controls at a service organization
- examination of management's discussion and analysis
, Question 15.
auditing
ANSWER
the systematic process of objectively obtaining and evaluating evidence regarding assertions
about economic actions and events to ascertain the degree of correspondence between the
assertions and established criteria and communicating the results to interested users
Question 16.
what is an assurance to financial information?
ANSWER
attestation
Question 17.
what is an attestation to financial statements?
ANSWER
audit
Question 18.
management's financial statement assertions:
ANSWER
1) existence or occurrence
2) completeness
3) valuation & allocation
4) rights & obligations
5) presentation & disclosure
Question 19.
PCAOB assertion:
existence or occurrence
ANSWER
management assertion that all assets, liabilities, and equity interests do actually exist
