TestBank for Auditing A Practical Approach, 4th Canadian Edition 4th Edition, Kindle Edition

TestBank for Auditing A Practical Approach, 4th Canadian Edition 4th Edition, Kindle Edition by Robyn Moroney , Fiona Campbell , Jane Hamilton , Valerie Warren TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren S - The Marketplace to Buy and Sell your Study Material 2 Distribution of this document is illegal extra peP ra yeg ae r? A+ CHAPTER 1 INTRODUCTION AND OVERVIEW OF AUDIT AND ASSURANCE CHAPTER LEARNING OBJECTIVES 1. Define an assurance engagement. An assurance engagement involves an assurance provider arriving atan opinion about some information being provided by their client toa third party. A financial statement audit is one type of assuranceengagement. This engagement involves an auditor arriving at an opinionabout the fair presentation of the financial statements. The auditreport is addressed to the shareholders of the company being audited,but other users may read the financial statements. Learning aboutauditing and assurance requires an understanding of auditing andassurance terminology, including terms such as audit risk, materiality,internal controls, listed entity, and assertions. 2. Explain why there is a demand for audit and assurance services. Financial statement users include investors (shareholders), suppliers,customers, lenders, employees, governments, and the general public.These groups of users demand audited financial statements because oftheir remoteness from the entity, accounting complexity, theirincentivescompeting with those of the entity‘s managers, and their needfor reliable information on which to base decisions. The theories usedto describe the demand for audit and assurance services are agencytheory, the information hypothesis, and the insurance hypothesis. 3. Differentiate between types of assurance services. Assurance services include financial statement audits, complianceaudits, performance audits, comprehensive audits, internal audits,and assurance on corporate social responsibility (CSR) disclosures. 4. Explain the different levels of assurance. The different levels of assurance include reasonable assurance, whichis the highest level of assurance, limited assurance, and no assurance.Reasonable assurance is provided on an audit of a company‘sfinancial statements. Limited assurance is provided in a review of acompany‘s financialDsotwantelomadeednbtsy:.BNRoIGHaTsEsRuSraTUnDcIeESis| jpamroohvriadbehdasain70a@mationengagemWeannttt.o earn $1.236 TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren S - The Marketplace to Buy and Sell your Study Material 3 Downloaded by: BRIGHTERSTUDIES | Distribution of this document is illegal Want to earn $1.236 extra peP ra yeg ae r? A+ 5. Outline different audit opinions An auditor can issue an unmodified opinion, also known as a cleanreport, or an unmodified opinion with an emphasis of matter paragraph.Alternatively, a modified opinion may be issued as a qualified, anadverse, or a disclaimer of opinion. 6. Differentiate between the roles of the preparer and the auditor, and discuss the different firms that provide assurance services. It is the responsibility of a company‘s governing body to ensure thatits financial statements are relevant, reliable, comparable, understandable,and true and fair. It is the responsibility of the auditor to form anopinion on the fair presentation of the financial statements. In doing,so 1- 2 Auditing: A Practical Approach, Fourth Canadian Edition the auditor must maintain professional scepticism and utilize professionaljudgement and due care. The firms that provide assurance services include the Big-4international firms, the national firms (with international links),local and regional firms, and consulting firms that tend to specializein assurance of CSR and environmental disclosures. 7. Identify the different regulators, legislation, and regulations surrounding the assurance process. lOM oAR c P S D | Introduction and Overview of Audit and Assurance 1 - 3 TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren S - The Marketplace to Buy and Sell your Study Material 4 Downloaded by: BRIGHTERSTUDIES | Distribution of this document is illegal Want to earn $1.236 extra peP ra yeg ae r? A+ TRUE-FALSE STATEMENTS 1. Only current investors (not potential investors) are considered to be users of the financial statements. Answer: False Bloomcode: Knowledge Difficulty: Easy Learning Objective: Explain why there is a demand for audit and assurance services. Section Reference: 1.2 Demand for audit and assurance services CPA Competency: Audit and Assurance AACSB: Analytic 2. Insurance hypothesis is a means whereby the investor can guarantee the success of their investment. Answer: False Bloomcode: Comprehension Difficulty: Medium Learning Objective: Explain why there is a demand for audit and assurance services. Section Reference: 1.2 Demand for audit and assurance services CPA Competency: Audit and Assurance AACSB: Analytic 3. A compliance audit involves gathering evidence to ascertain whether the person or entity under review has followed the rules, policies, procedures, laws and regulations with which they must conform Answer: True Bloomcode: Comprehension Difficulty: Medium Learning Objective: Differentiate between types of assurance services. Section Reference: 1.3 Different assurance services CPA Competency: Audit and Assurance AACSB: Analytic TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren S - The Marketplace to Buy and Sell your Study Material 4 Downloaded by: BRIGHTERSTUDIES | Distribution of this document is illegal Want to earn $1.236 extra peP ra yeg ae r? A+ 4. An operational audit is an example of a compliance audit. Answer: False Bloomcode: Knowledge Difficulty: Medium Learning Objective: Differentiate between types of assurance services. Section Reference: 1.3 Different assurance services CPA Competency: Audit and Assurance AACSB: Analytic 1- 4 Auditing: A Practical Approach, Fourth Canadian Edition 5. The most common types of assurance engagements are financial statement audits, confirmation audits, performance audits, comprehensive audits and assurance on corporate social responsibility (CSR) disclosures. Answer: False Bloomcode: Comprehension Difficulty: Medium Learning Objective: Differentiate between types of assurance services. Section Reference: 1.3 Different assurance services CPA Competency: Audit and Assurance AACSB: Analytic 6. The nature of audit procedures refers to the reliance on evidence provided by the client and its management. Answer: True Bloomcode: Knowledge Difficulty: Medium Learning Objective: Differentiate between types of assurance services. Section Reference: 1.3 Different assurance services CPA Competency: Audit and Assurance AACSB: Analytic 7. It is the auditor‘s responsibility to prepare the financial statements. TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren S - The Marketplace to Buy and Sell your Study Material 4 Downloaded by: BRIGHTERSTUDIES | Distribution of this document is illegal Want to earn $1.236 extra peP ra yeg ae r? A+ Answer: False Bloomcode: Knowledge Difficulty: Medium Learning Objective: Differentiate between types of assurance services. Section Reference: 1.3 Different assurance services CPA Competency: Audit and Assurance AACSB: Analytic 8. An auditor can provide a reasonable level of assurance on information other than historical financial information. Answer: True Bloomcode: Comprehension Difficulty: Easy Learning Objective: Explain the different levels of assurance. Section Reference: 1.4 Different levels of assurance CPA Competency: Audit and Assurance AACSB: Analytic 9. A reasonable level of assurance is the highest level of assurance that an auditor can provide. . Answer: True Bloomcode: Comprehension Difficulty: Medium Learning Objective: Explain the different levels of assurance. Section Reference: 1.4 Different levels of assurance CPA Competency: Audit and Assurance AACSB: Analytic 10. A no assurance engagement is of little use as no assurance is given to the client. Answer: False Bloomcode: Comprehension TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren S - The Marketplace to Buy and Sell your Study Material Difficulty: Medium 7 Downloaded by: BRIGHTERSTUDIES | Distribution of this document is illegal Want to earn $1.236 extra peP ra yeg ae r? A+ Learning Objective: Explain the different levels of assurance. Section Reference: 1.4 Different levels of assurance CPA Competency: Audit and Assurance AACSB: Analytic 11.A negative expression of opinion is only given when there is a disagreement with management and the auditor. Answer: False Bloomcode:Knowledge Difficulty: Medium Learning Objective: Outline different audit opinions. Section Reference: 1.5 Different audit opinions CPA Competency: Audit and Assurance AACSB: Analytic 12. All modified audit reports are qualified audit opinions. Answer: False Bloomcode: Knowledge Difficulty: Medium Learning Objective: Outline different audit opinions. Section Reference: 1.5 Different audit opinions CPA Competency: Audit and Assurance AACSB: Analytic 13. The expectation gap is caused by unrealistic user expectations such as the auditor providing a moderate level of assurance. Answer: False Bloomcode:Comprehension Difficulty: Medium TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren S - The Marketplace to Buy and Sell your Study Material 8 Downloaded by: BRIGHTERSTUDIES | Distribution of this document is illegal Want to earn $1.236 extra peP ra yeg ae r? A+ 1- 6 Auditing: A Practical Approach, Fourth Canadian Edition Learning Objective: Describe the audit expectation gap. Section Reference: 1.8 The audit expectation gap CPA Competency: Audit and Assurance AACSB: Analytic TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren S - The Marketplace to Buy and Sell your Study Material 9 Downloaded by: BRIGHTERSTUDIES | Distribution of this document is illegal Want to earn $1.236 extra peP ra yeg ae r? A+ Introduction and Overview of Audit and Assurance 1 - 7 MULTIPLE CHOICE QUESTIONS 14.Martha Minnati was reviewing the previous year‘s audited financial statements of a clothing manufacturer. Her manager explained to her that for a financial statement audit, the clothing company was the accountable party, its shareholders were the users, and the subject matter was the financial statements. What kind of audit engagement was her manager describing? a) consulting engagement b) assurance engagement c) review engagement d) compliance engagement Answer: b Bloomcode: Comprehension Difficulty: Easy Learning Objective: Define an assurance engagement. Section Reference: 1.1 Auditing and assurance defined CPA Competency: Audit and Assurance AACSB: Analytic 15. An engagement performed by an auditor or consultant to enhance the reliability of the subject matter can best be described as a(n) a) compilation engagement. b) review engagement. c) consultancy engagement. d) assurance engagement. Answer: d Bloomcode: Comprehension Difficulty: Medium Learning Objective: Define an assurance engagement. Section Reference: 1.1 Auditing and assurance defined TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren CPA Competency: Aud S it tu a vi n a. d co A m s - s T u he ra M n a c rk e etplace to Buy and Sell your Study Material 0 Downloaded by: BRIGHTERSTUDIES | Distribution of this document is illegal Want to earn $1.236 extra pP ea rg ye ea1 r? A+ AACSB: Analytic 16. An example of the three parties in an assurance engagement would be: a) audit client, employee, customer. b) audit client, supplier, auditor. c) auditor, shareholder, general public. d) auditor, general public, employees. Answer: b Bloomcode: Knowledge Difficulty: Medium 1- 8 Auditing: A Practical Approach, Fourth Canadian Edition Learning Objective: Define an assurance engagement. Section Reference: 1.1 Auditing and assurance defined CPA Competency: Audit and Assurance AACSB: Analytic 17. A limitation of an audit is caused by a) the nature of financial reporting. b) the nature of audit procedures. c) the need for the audit to be conducted within a reasonable period of time and at a reasonable cost. d) all of the above Answer: d Bloomcode: Comprehension Difficulty: Medium Learning Objective: Define an assurance engagement. Section Reference: 1.1 Auditing and assurance defined CPA Competency: Audit and Assurance AACSB: Analytic TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren 18. Which of the followS in tug viag .c r oo mup - T s hwe Mo au r l kd etb ple ace co ton B s u i yd ae n r de Sd elu l y s oe u r r s Sto ud f y th Me ate fi rn iaa l ncial statements? 1 Downloaded by: BRIGHTERSTUDIES | Distribution of this document is illegal Want to earn $1.236 extra pP ea rg ye ea1 r? A+ a) governments b) current shareholders c) general public d) all of the above Answer: d Bloomcode: Comprehension Difficulty: Medium Learning Objective: Explain why there is a demand for audit and assurance services. Section Reference: 1.2 Demand for audit and assurance services CPA Competency: Audit and Assurance AACSB: Analytic 19. The sources of demand for audit and assurance services does not include a) independence. b) complexity. c) reliability. d) competing incentives. Answer: a Bloomcode: Comprehension Difficulty: Medium Learning Objective: Explain why there is a demand for audit and assurance services. Section Reference: 1.2 Demand for audit and assurance services Introduction and Overview of Audit and Assurance 1 - 9 CPA Competency: Audit and Assurance AACSB: Analytic 20. An audit is one way for investors to insure against at least part of their loss should the company they invest in fail – this is an example of a) agency theory. b) information hypothesis. TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren c) insurance hypothesi S s t . - The Marketplace to Buy and Sell your Study Material 2 Downloaded by: BRIGHTERSTUDIES | Distribution of this document is illegal Want to earn $1.236 extra pP ea rg ye ea1 r? A+ d) competing incentives. Answer: c Bloomcode: Comprehension Difficulty: Medium Learning Objective: Explain why there is a demand for audit and assurance services. Section Reference: 1.2 Demand for audit and assurance services CPA Competency: Audit and Assurance AACSB: Analyti