,Auditing: The Art and Science of Assurance Engagements, 15ce (Arens)
Chapter 1 The Demand for Audit and Other Assurance Services
1.1 Define an assurance engagement.
1) What is the nature of the service provided when an auditor evaluates information using
suitable criteria and issues a report that attests to the reliability of the information?
A) internal audit engagement
B) review engagement
C) compilation engagement
D) attestation engagement
Answer: D
Diff: 2
Learning Objective: 1-1 Define an assurance engagement.
2) The No-Name Agency conducts an independent service for a company to determine if its
suppliers have complied with health and safety regulations, child labour guidelines, and other
employee welfare issues. What type of service is No-Name providing?
A) assurance
B) attest
C) review
D) compilation
Answer: A
Diff: 2
Learning Objective: 1-1 Define an assurance engagement.
3) Which of the following is an example of an attestation engagement?
A) accounting and bookkeeping services for the accounts
B) an audit of internal controls over financial reporting
C) preparation of the annual financial statements with notes
D) completion of provincial and federal tax returns
Answer: B
Diff: 1
Learning Objective: 1-1 Define an assurance engagement.
4) When do individuals and organizations typically need assurance services?
A) usually only when organizations obtain debt or other loans
B) for five years from the start of an organization until debt is retired
C) only when historical data, such as financial information, need to be audited
D) whenever assurance is provided by a practitioner who is independent and unbiased
Answer: D
Diff: 2
Learning Objective: 1-1 Define an assurance engagement.
1
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,5) A major type of assurance service performed by large public accounting firms is
A) auditing.
B) reviewing.
C) compilation.
D) management consulting.
Answer: A
Diff: 1
Learning Objective: 1-1 Define an assurance engagement.
6) Two types of services provided by public accounting firms are audits and reviews. Discuss the
similarities and differences between these two types of services. Which type provides the most
assurance?
Answer: Two primary types of services are audits of historical financial statements and reviews
of historical financial statements. While both services involve the accumulation and evaluation
of evidence regarding assertions made by management in the company's financial statements, an
audit involves a more extensive examination and provides a higher level of assurance about the
client's financial statements than a review.
Diff: 1
Learning Objective: 1-1 Define an assurance engagement.
1.2 Define auditing and its purpose.
1) Which of the following illustrates the definition of auditing with respect to the evidence
analysis process?
A) accumulation and evaluation of evidence regarding assertions
B) learning about different types of computing technology, such as mainframes
C) writing an operational audit report that is tailored to the client's situation
D) making sure that the auditor is competent and understands evidence gathering
Answer: A
Diff: 1
Learning Objective: 1-2 Define auditing and its purpose.
2) Auditing should be done by a qualified
A) chartered accountant.
B) certified management accountant.
C) competent and independent person.
D) professional accountant.
Answer: C
Diff: 2
Learning Objective: 1-2 Define auditing and its purpose.
2
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, 3) Which of the following illustrates the definition of auditing with respect to the reporting
process?
A) accumulation and evaluation of evidence about balance sheet accounts
B) reporting on the degree of correspondence between financial statements and ASPE/IFRS
C) writing an operational audit report that is tailored to the client's situation
D) making sure that the auditor is competent and understands evidence gathering
Answer: B
Diff: 2
Learning Objective: 1-2 Define auditing and its purpose.
4) In the audit of historical financial statements by PA firms, the criteria used are
A) generally accepted auditing standards.
B) relevant accounting frameworks.
C) regulations of the Canada Revenue Agency.
D) regulations of the provincial securities commissions.
Answer: B
Diff: 1
Learning Objective: 1-2 Define auditing and its purpose.
5) A large PA firm has assessed evidence collected during an engagement. Criteria used to assess
the financial statements were International Financial Reporting Standards (IFRS). A high level of
assurance was obtained. The type of engagement conducted was
A) an audit.
B) a review.
C) management consulting.
D) a compilation.
Answer: A
Diff: 2
Learning Objective: 1-2 Define auditing and its purpose.
6) The auditor and the entities being audited should agree on the criteria to be used in the audit
A) well in advance before the audit starts.
B) after the audit planning has been done.
C) as they progress with the audit, as they can determine which criteria are most suitable.
D) at the end of the audit.
Answer: A
Diff: 1
Learning Objective: 1-2 Define auditing and its purpose.
3
Copyright © 2022 Pearson Canada, Inc.
Chapter 1 The Demand for Audit and Other Assurance Services
1.1 Define an assurance engagement.
1) What is the nature of the service provided when an auditor evaluates information using
suitable criteria and issues a report that attests to the reliability of the information?
A) internal audit engagement
B) review engagement
C) compilation engagement
D) attestation engagement
Answer: D
Diff: 2
Learning Objective: 1-1 Define an assurance engagement.
2) The No-Name Agency conducts an independent service for a company to determine if its
suppliers have complied with health and safety regulations, child labour guidelines, and other
employee welfare issues. What type of service is No-Name providing?
A) assurance
B) attest
C) review
D) compilation
Answer: A
Diff: 2
Learning Objective: 1-1 Define an assurance engagement.
3) Which of the following is an example of an attestation engagement?
A) accounting and bookkeeping services for the accounts
B) an audit of internal controls over financial reporting
C) preparation of the annual financial statements with notes
D) completion of provincial and federal tax returns
Answer: B
Diff: 1
Learning Objective: 1-1 Define an assurance engagement.
4) When do individuals and organizations typically need assurance services?
A) usually only when organizations obtain debt or other loans
B) for five years from the start of an organization until debt is retired
C) only when historical data, such as financial information, need to be audited
D) whenever assurance is provided by a practitioner who is independent and unbiased
Answer: D
Diff: 2
Learning Objective: 1-1 Define an assurance engagement.
1
Copyright © 2022 Pearson Canada, Inc.
,5) A major type of assurance service performed by large public accounting firms is
A) auditing.
B) reviewing.
C) compilation.
D) management consulting.
Answer: A
Diff: 1
Learning Objective: 1-1 Define an assurance engagement.
6) Two types of services provided by public accounting firms are audits and reviews. Discuss the
similarities and differences between these two types of services. Which type provides the most
assurance?
Answer: Two primary types of services are audits of historical financial statements and reviews
of historical financial statements. While both services involve the accumulation and evaluation
of evidence regarding assertions made by management in the company's financial statements, an
audit involves a more extensive examination and provides a higher level of assurance about the
client's financial statements than a review.
Diff: 1
Learning Objective: 1-1 Define an assurance engagement.
1.2 Define auditing and its purpose.
1) Which of the following illustrates the definition of auditing with respect to the evidence
analysis process?
A) accumulation and evaluation of evidence regarding assertions
B) learning about different types of computing technology, such as mainframes
C) writing an operational audit report that is tailored to the client's situation
D) making sure that the auditor is competent and understands evidence gathering
Answer: A
Diff: 1
Learning Objective: 1-2 Define auditing and its purpose.
2) Auditing should be done by a qualified
A) chartered accountant.
B) certified management accountant.
C) competent and independent person.
D) professional accountant.
Answer: C
Diff: 2
Learning Objective: 1-2 Define auditing and its purpose.
2
Copyright © 2022 Pearson Canada, Inc.
, 3) Which of the following illustrates the definition of auditing with respect to the reporting
process?
A) accumulation and evaluation of evidence about balance sheet accounts
B) reporting on the degree of correspondence between financial statements and ASPE/IFRS
C) writing an operational audit report that is tailored to the client's situation
D) making sure that the auditor is competent and understands evidence gathering
Answer: B
Diff: 2
Learning Objective: 1-2 Define auditing and its purpose.
4) In the audit of historical financial statements by PA firms, the criteria used are
A) generally accepted auditing standards.
B) relevant accounting frameworks.
C) regulations of the Canada Revenue Agency.
D) regulations of the provincial securities commissions.
Answer: B
Diff: 1
Learning Objective: 1-2 Define auditing and its purpose.
5) A large PA firm has assessed evidence collected during an engagement. Criteria used to assess
the financial statements were International Financial Reporting Standards (IFRS). A high level of
assurance was obtained. The type of engagement conducted was
A) an audit.
B) a review.
C) management consulting.
D) a compilation.
Answer: A
Diff: 2
Learning Objective: 1-2 Define auditing and its purpose.
6) The auditor and the entities being audited should agree on the criteria to be used in the audit
A) well in advance before the audit starts.
B) after the audit planning has been done.
C) as they progress with the audit, as they can determine which criteria are most suitable.
D) at the end of the audit.
Answer: A
Diff: 1
Learning Objective: 1-2 Define auditing and its purpose.
3
Copyright © 2022 Pearson Canada, Inc.
