ACC 480 Chapter 1 Exam Questions With 100% Correct Answers.

ACC 480 Chapter 1 Exam Questions With 100% Correct Answers. Auditing focuses on rules, techniques, and computations required to prepare and analyze financial information. - answerFalse Decision makers demand reliable information that is provided by accountants. - answerTrue Information asymmetry seldom occurs. - answerFalse Conflicts of interest often occur between absentee owners and managers. - answerTrue Auditing services and attestation services are the same. - answerFalse Auditing is a type of attest service. - answerTrue Testing all transactions that occurred during the period is cost prohibitive. - answerTrue Why do auditors generally use a sampling approach to evidence gathering? A) Auditors are experts and do not need to look at much to know whether the financial statements are correct or not. B) Auditors must balance the cost of the audit with the need for precision. C) Auditors must limit their exposure to their auditee to maintain independence. D) The auditor's relationship with the auditee is generally adversarial, so the auditor will not have access to all of the financial information of the company. - answerB) Auditors must balance the cost of the audit with the need for precision. Which of the following statements best describes a relationship between sample size and other elements of auditing? A) If materiality increases, so will the sample size. B) If the desired level of assurance increases, sample sizes can be smaller. C) If materiality decreases, sample size will need to increase. D) There is no relationship between sample size and materiality or the desired level of assurance. - answerC) If materiality decreases, sample size will need to increase. Which of the following statements about the study of auditing is NOT true? A) The study of auditing can be valuable to future accountants and business decision makers whether or not they plan to become auditors. B) The study of auditing focuses on learning the analytical and logical skills necessary to evaluate the relevance and reliability of information. C) The study of auditing focuses on learning the rules, techniques, and computations required to analyze financial statements. D) The study of auditing begins with the understanding of a coherent logical framework and techniques useful for gathering and analyzing evidence about others' assertions. - answerC) The study of auditing focuses on learning the rules, techniques, and computations required to analyze financial statements. The basic definition of auditing states it is a process to: A) detect fraud. B) examine individual transactions so that the auditor may certify as to their validity. C) objectively obtain and evaluate evidence regarding assertions. D) assure the consistent application of correct accounting procedures. - answerC) objectively obtain and evaluate evidence regarding assertions. Assurance services may improve all of the following except: A) relevance. B) credibility. C) periodicity. D) reliability. - answerC) periodicity. 13) Evidence is reliable if it: A) signals the true state of a management assertion. B) applies to the period being audited. C) relates to the audit assertion being tested. D) is sufficient to justify a conclusion. - answerA) signals the true state of a management assertion. Which of the following best describes the concept of audit risk? A) The risk of the auditor being sued because of association with an auditee. B) The risk that the auditor will provide a "clean" opinion on financial statements that are, in fact, materially misstated. C) The overall risk that a material misstatement exists in the financial statements.