Test Bank Complete_
Auditing: A Practical Approach With Data Analytics 2nd Edition, (2021)
By Raymond N. Johnson, Laura D. Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton
All Chapters 1-16| Updated Edition With Verified Answers| Rated A+
From: [Bestmaxsolutions.stuvia
,Chapter 1: Introduction And Overview Of Audit And Assurance ________________________ 3
Chapter 2: Professionalism And Professional Responsibilities _________________________ 61
Chapter 3: Risk Assessment Part I: Audit Risk And Audit Strategy ____________________ 138
Chapter 4: Risk Assessment Part Ii: Understanding The Client _______________________ 214
Chapter 5: Audit Evidence ____________________________________________________ 261
Chapter 6: Gaining An Understanding Of The Client's System Of Internal Controls _______ 314
Chapter 7: Risk Response Performing Tests Of Controls _____________________________ 320
Chapter 8: Audit Data Analytics _______________________________________________ 375
Chapter 9: Risk Response Performing Substantive Procedures _______________________ 426
Chapter 10: Risk Response: Audit Sampling For Substantive Procedures _______________ 478
Chapter 11: Auditing The Revenue Process _______________________________________ 523
Chapter 12: Auditing The Purchasing And Payroll Processes _________________________ 553
Chapter 13: Auditing Cash, Inventory, and Related Income Statement Accounts ________ 570
Chapter 14: Auditing Investing And Financing Activities ____________________________ 625
Chapter 15: Completing The Audit _____________________________________________ 677
Chapter 16: Reporting On The Audit ____________________________________________ 690
,Chapter 1: Introduction And Overview Of Audit And Assurance
Raymond N. Johnson: Auditing: A Practical Approach With Data Analytics 2nd Edition, (2021) Test Bank
Question Type: True Or False
1. GAAP And IFRS Are Examples Of Applicable Financial Reporting Framework.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Communication,
Learning Objective: Lo1.1, Solution: The Applicable Financial Reporting Framework
Refers To The Set Of Standards Used In Preparing The Historical Financial Statements,
Such As Gaap, Ifrs Or A Federal Income Tax Basis Of Accounting.
2. Review Of Financial Forecasts Falls Under Attestation Services.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Measurement Analysis And
Interpretation, Aacsb: Ethics, Learning Objective: Lo1.1, Solution: Attestation Services
(Under The Umbrella Of Assurance Services) Include Review Of Historical Financial
Statements, Review Of Financial Forecasts, And Examination Of Internal Control.
3. Within A U.S. Context, The Applicable Financial Reporting Framework Is Typically
Generally Accepted Accounting Principles (GAAP).
A. True
B. False
,ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, AICPA Fc: Measurement Analysis And
Interpretation, AACSB: Ethics, Learning Objective: Lo1.2, Solution: Within A U.S.
Context, The Applicable Financial Reporting Framework Is Typically Generally
Accepted Accounting Principles (GAAP).
4. Private Companies, Or Non-Issuers, Are Not Required By The U.S. Government To
Have An Annual Financial Statement Audit
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Analytic,
Learning Objective: Lo1.2, Solution: Private Companies, Or Non-Issuers, Are Not
Required By The
U.S. Government To Have An Annual Financial Statement Audit, But Often Other
Interested Users, Such As A Bank Or Lender, May Request That A Private Company
Provide Audited Financial Statements.
5. One Of The Reasons There Is A Demand For Financial Statement Audits Is That Users
Of Financial Statements Often Lack Accounting And Legal Knowledge To Fully
Understand Complex Accounting And Disclosure Choices.
A. True
B. False
ANSWER: A,
Taxonomy: Comprehension, Difficulty: Easy, Aicpa Pc: Communication, Aacsb:
Analytic, Learning Objective: Lo1.3, Solution: Complexity: Financial Statements Are
,Complex, The Amounts Are Often Affected By Significant Estimates, And The
Disclosures Often Require Significant Knowledge And Experience To Evaluate. Most
Financial Statement Users Do Not Have The Accounting And Legal Knowledge To
Assess The Reasonableness Of Complex Accounting And Disclosure Choices Being
Made By The Company.
6. In Financial Accounting, The Balance Sheet Is A Statement Of Financial Position
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Pc: Communication, Aacsb: Analytic,
Learning Objective: Lo1.3, Solution: In Financial Accounting, The Financial Statements
Include The Balance Sheet (Statement Of Financial Position), Income Statement
(Statement Of Comprehensive Income), Statement Of Cash Flows, Statement Of Changes
In Equity And Accompanying Notes.
7. Business Valuation Falls Within The Purview Of Non-Assurance Services.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Measurement Analysis And
Interpretation, Aacsb: Analytic, Learning Objective: Lo1.4, Solution: Many Of These
Accounting Firms Provide Non-Assurance (Or Non-Audit) Services As Well As
Assurance Services. These Non- Assurance Services Include Management Consulting,
Business Valuation, Mergers And Acquisitions, Insolvency, Tax And Accounting
Services.
,8. Securities Exchange Act Of 1934 Regulates The Ongoing Trading Of Securities After
The Initial Public Offering And Requires The Annual Audit Of A Public Company’s
Financial Statements.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Bb: Governance Perspective, Aacsb:
Ethics, Learning Objective: Lo1.5, Solution: The Securities Exchange Act Of 1934
Regulates The Ongoing Trading Of Securities After The Initial Public Offering And
Requires The Annual Audit Of A Public Company’s Financial Statements.
9. The Securities Act Of 1933 Enhances Annual Financial Disclosures For Public
Companies And Placed More Emphasis On Corporate Responsibility.
A. True
B. False
ANSWER: B,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Bb: Governance Perspective, Aacsb:
Ethics, Learning Objective: Lo1.5, Solution: The Securities Act Of 1933 Regulates The
Disclosure Of Financial Information In A Company’s Initial Public Offering Of Stock
And Requires That The Financial Information Be Audited.
10. Neither Client Characteristics Nor Actions Of The Auditor Affect The Audit Risk.
A. True
B. False
ANSWER: B,
,Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Ethics, Learning
Objective: Lo1.6, Solution: Audit Risk Is Affected By Client Characteristics As Well As
Actions Of The Auditor.
11. Materiality Is A Relative Concept, And It Differs From Company To Company And
From Year To Year For A Given Company.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Ethics, Learning
Objective: Lo1.6, Solution: Materiality Is A Relative Concept, And It Differs From
Company To Company And From Year To Year For A Given Company. Auditors
Design An Audit To Provide Reasonable Assurance That The Financial Statements Are
Free Of Material Misstatement. However, Auditors Do Not Design An Audit To Look
For Immaterial Misstatements Because They Would Not Influence A Financial Statement
User.
12. When Auditors Determine That The Financial Statements Of A Public Company Are
Presented Fairly In Accordance With The Applicable Financial Reporting Framework,
They Issue A Type Of Report That Pcaob Standards Call “The Standard Clean Report.”
A. True
B. False
ANSWER: B,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Ethics, Learning
Objective: Lo1.6, Solution: If Auditors Have Determined The Financial Statements Are
Presented Fairly In Accordance With The Applicable Financial Reporting Framework,
,They Issue The Standard Unqualified Report. The Pcaob Standards Use The Term
“Unqualified” Report.
13. In An Unqualified Audit Report On The Financial Statements Of A Public Company,
The Concluding Statement Of The Scope Paragraph Mentions Reasonable Basis For The
Audit Firm’s Opinion.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Ethics, Learning
Objective: Lo1.6, Solution: The Scope Paragraph Explains, In Brief Terms, The Process
Of Conducting An Audit. It Mentions The Concept Of Reasonable Assurance About
Whether The Financial Statements Are Free Of Material Misstatement. It Includes An
Explicit Statement That Pcaob Audit Standards Were Followed Because The Audit
Pertains To A Public Company. The Scope Paragraph Also Includes A Brief Discussion
Of The Professional Judgments Made During The Audit. Finally, It Concludes With A
Statement That The Audit Firm Believes That Its Audit Provides A Reasonable Basis For
Its Opinion.
14. In An Audit Report On The Effectiveness Of Icfr For A Public Company, The Scope
Paragraph States The Different Responsibilities Of Management And Auditors.
A. True
B. False
ANSWER: B,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Bb: Governance Perspective, Aacsb:
Communication, Learning Objective: Lo1.7, Solution: In An Audit Report On The
Effectiveness Of Icfr For A Public Company, The Basis For Opinion Paragraph States
,The Different Responsibilities Of Management And Auditors. Like The Audit Report On
The Financial Statements, This Paragraph References Registration With The Pcaob And
Independence Requirements Of The Sec And Other Federal Securities Laws.
15. In An Audit Report On The Effectiveness Of Icfr For A Public Company, The Scope
Paragraph Mentions That Auditors Are Only Required To Obtain Reasonable Assurance
About Whether The Company Maintained, In All Material Respects, Effective Icfr.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Bb: Governance Perspective, Aacsb:
Communication, Learning Objective: Lo1.7, Solution: In An Audit Report On The
Effectiveness Of Icfr For A Public Company, The Scope Paragraph Explains That
Auditors Conducted Their Audit In Accordance With The Standards Of The Pcaob. In
Brief Terms, It Explains The Process Of Conducting An Audit Of The Effectiveness Of
Icfr. It Mentions That Auditors Are Only Required To Obtain Reasonable Assurance
About Whether The Company Maintained, In All Material Respects, Effective Icfr. It
Concludes With A Statement That The Audit Firm Believes Its Audit Provides A
Reasonable Basis For Its Opinion.
16. A Financial Statement User’s Expectations Are Only Impacted By Legislation.
A. True
B. False
ANSWER: B,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Measurement Analysis And
Interpretation, Aacsb: Communication, Learning Objective: Lo1.8, Solution: A Financial
, Statement User’s Expectations Are Often Impacted By Audit Standards, Ethical
Standards, Regulations, Legislation, And Firm Policy And Procedures.
17. The Audit Expectation Gap Is Caused By User Expectations Such As: The Auditor
Will Catch All Instances Of Fraud.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Communication,
Learning Objective: Lo1.8, Solution: The Audit Expectation Gap Is Caused By
Unrealistic User Expectations Such As: The Auditor Is Providing Complete Assurance;
The Auditor Is Guaranteeing The Future Viability Of The Entity; An Unmodified Audit
Opinion Is An Indicator Of Complete Accuracy Of The Financial Statements; The
Auditor Will Definitely Find Any And All Fraud; And That The Auditor Has Checked
All Transactions.
QUESTION TYPE: MULTIPLE CHOICE
18. Identify A Service That Falls Under Audit Services.
A. Examination Of Historical Financial Statements
B. Compilation Of Historical Financial Statements
C. Inspection Of Website Security
D. Review Of Financial Forecast
ANSWER: A,
Auditing: A Practical Approach With Data Analytics 2nd Edition, (2021)
By Raymond N. Johnson, Laura D. Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton
All Chapters 1-16| Updated Edition With Verified Answers| Rated A+
From: [Bestmaxsolutions.stuvia
,Chapter 1: Introduction And Overview Of Audit And Assurance ________________________ 3
Chapter 2: Professionalism And Professional Responsibilities _________________________ 61
Chapter 3: Risk Assessment Part I: Audit Risk And Audit Strategy ____________________ 138
Chapter 4: Risk Assessment Part Ii: Understanding The Client _______________________ 214
Chapter 5: Audit Evidence ____________________________________________________ 261
Chapter 6: Gaining An Understanding Of The Client's System Of Internal Controls _______ 314
Chapter 7: Risk Response Performing Tests Of Controls _____________________________ 320
Chapter 8: Audit Data Analytics _______________________________________________ 375
Chapter 9: Risk Response Performing Substantive Procedures _______________________ 426
Chapter 10: Risk Response: Audit Sampling For Substantive Procedures _______________ 478
Chapter 11: Auditing The Revenue Process _______________________________________ 523
Chapter 12: Auditing The Purchasing And Payroll Processes _________________________ 553
Chapter 13: Auditing Cash, Inventory, and Related Income Statement Accounts ________ 570
Chapter 14: Auditing Investing And Financing Activities ____________________________ 625
Chapter 15: Completing The Audit _____________________________________________ 677
Chapter 16: Reporting On The Audit ____________________________________________ 690
,Chapter 1: Introduction And Overview Of Audit And Assurance
Raymond N. Johnson: Auditing: A Practical Approach With Data Analytics 2nd Edition, (2021) Test Bank
Question Type: True Or False
1. GAAP And IFRS Are Examples Of Applicable Financial Reporting Framework.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Communication,
Learning Objective: Lo1.1, Solution: The Applicable Financial Reporting Framework
Refers To The Set Of Standards Used In Preparing The Historical Financial Statements,
Such As Gaap, Ifrs Or A Federal Income Tax Basis Of Accounting.
2. Review Of Financial Forecasts Falls Under Attestation Services.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Measurement Analysis And
Interpretation, Aacsb: Ethics, Learning Objective: Lo1.1, Solution: Attestation Services
(Under The Umbrella Of Assurance Services) Include Review Of Historical Financial
Statements, Review Of Financial Forecasts, And Examination Of Internal Control.
3. Within A U.S. Context, The Applicable Financial Reporting Framework Is Typically
Generally Accepted Accounting Principles (GAAP).
A. True
B. False
,ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, AICPA Fc: Measurement Analysis And
Interpretation, AACSB: Ethics, Learning Objective: Lo1.2, Solution: Within A U.S.
Context, The Applicable Financial Reporting Framework Is Typically Generally
Accepted Accounting Principles (GAAP).
4. Private Companies, Or Non-Issuers, Are Not Required By The U.S. Government To
Have An Annual Financial Statement Audit
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Analytic,
Learning Objective: Lo1.2, Solution: Private Companies, Or Non-Issuers, Are Not
Required By The
U.S. Government To Have An Annual Financial Statement Audit, But Often Other
Interested Users, Such As A Bank Or Lender, May Request That A Private Company
Provide Audited Financial Statements.
5. One Of The Reasons There Is A Demand For Financial Statement Audits Is That Users
Of Financial Statements Often Lack Accounting And Legal Knowledge To Fully
Understand Complex Accounting And Disclosure Choices.
A. True
B. False
ANSWER: A,
Taxonomy: Comprehension, Difficulty: Easy, Aicpa Pc: Communication, Aacsb:
Analytic, Learning Objective: Lo1.3, Solution: Complexity: Financial Statements Are
,Complex, The Amounts Are Often Affected By Significant Estimates, And The
Disclosures Often Require Significant Knowledge And Experience To Evaluate. Most
Financial Statement Users Do Not Have The Accounting And Legal Knowledge To
Assess The Reasonableness Of Complex Accounting And Disclosure Choices Being
Made By The Company.
6. In Financial Accounting, The Balance Sheet Is A Statement Of Financial Position
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Pc: Communication, Aacsb: Analytic,
Learning Objective: Lo1.3, Solution: In Financial Accounting, The Financial Statements
Include The Balance Sheet (Statement Of Financial Position), Income Statement
(Statement Of Comprehensive Income), Statement Of Cash Flows, Statement Of Changes
In Equity And Accompanying Notes.
7. Business Valuation Falls Within The Purview Of Non-Assurance Services.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Measurement Analysis And
Interpretation, Aacsb: Analytic, Learning Objective: Lo1.4, Solution: Many Of These
Accounting Firms Provide Non-Assurance (Or Non-Audit) Services As Well As
Assurance Services. These Non- Assurance Services Include Management Consulting,
Business Valuation, Mergers And Acquisitions, Insolvency, Tax And Accounting
Services.
,8. Securities Exchange Act Of 1934 Regulates The Ongoing Trading Of Securities After
The Initial Public Offering And Requires The Annual Audit Of A Public Company’s
Financial Statements.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Bb: Governance Perspective, Aacsb:
Ethics, Learning Objective: Lo1.5, Solution: The Securities Exchange Act Of 1934
Regulates The Ongoing Trading Of Securities After The Initial Public Offering And
Requires The Annual Audit Of A Public Company’s Financial Statements.
9. The Securities Act Of 1933 Enhances Annual Financial Disclosures For Public
Companies And Placed More Emphasis On Corporate Responsibility.
A. True
B. False
ANSWER: B,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Bb: Governance Perspective, Aacsb:
Ethics, Learning Objective: Lo1.5, Solution: The Securities Act Of 1933 Regulates The
Disclosure Of Financial Information In A Company’s Initial Public Offering Of Stock
And Requires That The Financial Information Be Audited.
10. Neither Client Characteristics Nor Actions Of The Auditor Affect The Audit Risk.
A. True
B. False
ANSWER: B,
,Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Ethics, Learning
Objective: Lo1.6, Solution: Audit Risk Is Affected By Client Characteristics As Well As
Actions Of The Auditor.
11. Materiality Is A Relative Concept, And It Differs From Company To Company And
From Year To Year For A Given Company.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Ethics, Learning
Objective: Lo1.6, Solution: Materiality Is A Relative Concept, And It Differs From
Company To Company And From Year To Year For A Given Company. Auditors
Design An Audit To Provide Reasonable Assurance That The Financial Statements Are
Free Of Material Misstatement. However, Auditors Do Not Design An Audit To Look
For Immaterial Misstatements Because They Would Not Influence A Financial Statement
User.
12. When Auditors Determine That The Financial Statements Of A Public Company Are
Presented Fairly In Accordance With The Applicable Financial Reporting Framework,
They Issue A Type Of Report That Pcaob Standards Call “The Standard Clean Report.”
A. True
B. False
ANSWER: B,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Ethics, Learning
Objective: Lo1.6, Solution: If Auditors Have Determined The Financial Statements Are
Presented Fairly In Accordance With The Applicable Financial Reporting Framework,
,They Issue The Standard Unqualified Report. The Pcaob Standards Use The Term
“Unqualified” Report.
13. In An Unqualified Audit Report On The Financial Statements Of A Public Company,
The Concluding Statement Of The Scope Paragraph Mentions Reasonable Basis For The
Audit Firm’s Opinion.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Ethics, Learning
Objective: Lo1.6, Solution: The Scope Paragraph Explains, In Brief Terms, The Process
Of Conducting An Audit. It Mentions The Concept Of Reasonable Assurance About
Whether The Financial Statements Are Free Of Material Misstatement. It Includes An
Explicit Statement That Pcaob Audit Standards Were Followed Because The Audit
Pertains To A Public Company. The Scope Paragraph Also Includes A Brief Discussion
Of The Professional Judgments Made During The Audit. Finally, It Concludes With A
Statement That The Audit Firm Believes That Its Audit Provides A Reasonable Basis For
Its Opinion.
14. In An Audit Report On The Effectiveness Of Icfr For A Public Company, The Scope
Paragraph States The Different Responsibilities Of Management And Auditors.
A. True
B. False
ANSWER: B,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Bb: Governance Perspective, Aacsb:
Communication, Learning Objective: Lo1.7, Solution: In An Audit Report On The
Effectiveness Of Icfr For A Public Company, The Basis For Opinion Paragraph States
,The Different Responsibilities Of Management And Auditors. Like The Audit Report On
The Financial Statements, This Paragraph References Registration With The Pcaob And
Independence Requirements Of The Sec And Other Federal Securities Laws.
15. In An Audit Report On The Effectiveness Of Icfr For A Public Company, The Scope
Paragraph Mentions That Auditors Are Only Required To Obtain Reasonable Assurance
About Whether The Company Maintained, In All Material Respects, Effective Icfr.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Bb: Governance Perspective, Aacsb:
Communication, Learning Objective: Lo1.7, Solution: In An Audit Report On The
Effectiveness Of Icfr For A Public Company, The Scope Paragraph Explains That
Auditors Conducted Their Audit In Accordance With The Standards Of The Pcaob. In
Brief Terms, It Explains The Process Of Conducting An Audit Of The Effectiveness Of
Icfr. It Mentions That Auditors Are Only Required To Obtain Reasonable Assurance
About Whether The Company Maintained, In All Material Respects, Effective Icfr. It
Concludes With A Statement That The Audit Firm Believes Its Audit Provides A
Reasonable Basis For Its Opinion.
16. A Financial Statement User’s Expectations Are Only Impacted By Legislation.
A. True
B. False
ANSWER: B,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Measurement Analysis And
Interpretation, Aacsb: Communication, Learning Objective: Lo1.8, Solution: A Financial
, Statement User’s Expectations Are Often Impacted By Audit Standards, Ethical
Standards, Regulations, Legislation, And Firm Policy And Procedures.
17. The Audit Expectation Gap Is Caused By User Expectations Such As: The Auditor
Will Catch All Instances Of Fraud.
A. True
B. False
ANSWER: A,
Taxonomy: Knowledge, Difficulty: Easy, Aicpa Fc: Reporting, Aacsb: Communication,
Learning Objective: Lo1.8, Solution: The Audit Expectation Gap Is Caused By
Unrealistic User Expectations Such As: The Auditor Is Providing Complete Assurance;
The Auditor Is Guaranteeing The Future Viability Of The Entity; An Unmodified Audit
Opinion Is An Indicator Of Complete Accuracy Of The Financial Statements; The
Auditor Will Definitely Find Any And All Fraud; And That The Auditor Has Checked
All Transactions.
QUESTION TYPE: MULTIPLE CHOICE
18. Identify A Service That Falls Under Audit Services.
A. Examination Of Historical Financial Statements
B. Compilation Of Historical Financial Statements
C. Inspection Of Website Security
D. Review Of Financial Forecast
ANSWER: A,
