Auditing and Assurance Services Chapter 1 - 4
Multiple Choice Final Exam Questions and Answers
Which of the following topics is not addressed in the auditors' report for a public entity?
a. Responsibilities of the auditor and management in the financial reporting process.
b. Absolute assurance regarding the fairness of the entity's financial statements in accordance with
GAAP.
c. A description of an audit engagement.
d. A summary of the auditors' opinion on the effectiveness of the entity's internal control over financial
reporting.
b. Absolute assurance regarding the fairness of the entity's financial statements in accordance with
GAAP.
Which of the following recognizes that an audit conducted under generally accepted auditing standards
may not detect all material misstatements?
a. Absolute assurance.
b. Professional judgment.
c. Reliability of audit evidence.
d. Reasonable assurance.
d. Reasonable assurance
,Which of the following is most closely related to the relevance of audit evidence?
a. Auditors decide to physically inspect investment securities held by a custodian instead of obtaining
confirmations from the custodian.
b. In addition to confirmations of accounts receivable, auditors perform an analysis of the aging of
accounts receivable to evaluate the collectability of accounts receivable.
c. In response to less effective internal control, auditors increase the number of customer accounts
receivable confirmations mailed compared to that in the prior year.
d. Because of a large number of transactions occurring near year-end, auditors decide to confirm a
larger number of receivables following year-end instead of during the interim period
b. In addition to confirmations of accounts receivable, auditors perform an analysis of the aging of
accounts receivable to evaluate the collectability of accounts receivable.
Written audit plans are required in both initial and continuing audits.
Which of the following statements is not true with respect to the performance principle?
a. Auditors are required to prepare a written audit plan during the planning stages of initial audits but
are not required to do so in continuing audits.
b. Audit teams consider materiality in planning the audit, performing the audit, and evaluating the effect
of misstatements on the entity's financial statements.
c. In assessing the risk of material misstatements, the audit team considers the effectiveness of the
entity's internal controls in preventing and detecting misstatements.
,d. Auditors are required to consider both the relevance and the reliability of evidence in evaluating
whether the evidence they have gathered is appropriate.
a. Auditors are required to prepare a written audit plan during the planning stages of initial audits but
are not required to do so in continuing audits.
Which of the following is true with respect to PCAOB inspections of accounting firms?
a. All firms performing audits of public companies are required to have annual inspections conducted by
the PCAOB.
b. PCAOB inspections review a sample of audits conducted by firms as well as the firm's systems of
quality control.
c. All results of PCAOB inspections are made available to the public following the inspection.
d. Firms performing audits of 100 or fewer public entities may elect to have a peer review conducted
through the AICPA in lieu of a PCAOB inspection.
b. PCAOB inspections review a sample of audits conducted by firms as well as the firm's systems of
quality control.
The particular and specialized actions that auditors take to obtain evidence during a specific
engagement are known as
a. Audit procedures.
b. Audit standards.
c. Interpretive publications.
d. Statements on Auditing Standards.
, a. Audit procedures
Which of the following combinations of standards and types of audits are most closely related to the
activities of the Public Company Accounting Oversight Board?
a. Develop Auditing Standards for the audits of nonpublic entities.
b. Develop Auditing Standards for the audits of public entities.
c. Develop Statements on Auditing Standards for the audits of nonpublic entities.
d. Develop Statements on Auditing Standards for the audits of public entities.
b. Develop auditing standards for the audits of public entities.
Which of the following best describes the general contents of the introductory paragraph of the
auditors' report?
a. A description of an audit examination, including the fact that the audit was conducted under
standards established by the PCAOB.
b. The auditors' conclusion with respect to the fairness of the entity's financial statements.
c. Statements identifying the responsibility of auditors and management in the financial reporting
process.
d. The auditors' conclusion with respect to the effectiveness of the entity's internal control over financial
reporting.
c. Statements identifying the responsibility of auditors and management in the financial reporting
process
Multiple Choice Final Exam Questions and Answers
Which of the following topics is not addressed in the auditors' report for a public entity?
a. Responsibilities of the auditor and management in the financial reporting process.
b. Absolute assurance regarding the fairness of the entity's financial statements in accordance with
GAAP.
c. A description of an audit engagement.
d. A summary of the auditors' opinion on the effectiveness of the entity's internal control over financial
reporting.
b. Absolute assurance regarding the fairness of the entity's financial statements in accordance with
GAAP.
Which of the following recognizes that an audit conducted under generally accepted auditing standards
may not detect all material misstatements?
a. Absolute assurance.
b. Professional judgment.
c. Reliability of audit evidence.
d. Reasonable assurance.
d. Reasonable assurance
,Which of the following is most closely related to the relevance of audit evidence?
a. Auditors decide to physically inspect investment securities held by a custodian instead of obtaining
confirmations from the custodian.
b. In addition to confirmations of accounts receivable, auditors perform an analysis of the aging of
accounts receivable to evaluate the collectability of accounts receivable.
c. In response to less effective internal control, auditors increase the number of customer accounts
receivable confirmations mailed compared to that in the prior year.
d. Because of a large number of transactions occurring near year-end, auditors decide to confirm a
larger number of receivables following year-end instead of during the interim period
b. In addition to confirmations of accounts receivable, auditors perform an analysis of the aging of
accounts receivable to evaluate the collectability of accounts receivable.
Written audit plans are required in both initial and continuing audits.
Which of the following statements is not true with respect to the performance principle?
a. Auditors are required to prepare a written audit plan during the planning stages of initial audits but
are not required to do so in continuing audits.
b. Audit teams consider materiality in planning the audit, performing the audit, and evaluating the effect
of misstatements on the entity's financial statements.
c. In assessing the risk of material misstatements, the audit team considers the effectiveness of the
entity's internal controls in preventing and detecting misstatements.
,d. Auditors are required to consider both the relevance and the reliability of evidence in evaluating
whether the evidence they have gathered is appropriate.
a. Auditors are required to prepare a written audit plan during the planning stages of initial audits but
are not required to do so in continuing audits.
Which of the following is true with respect to PCAOB inspections of accounting firms?
a. All firms performing audits of public companies are required to have annual inspections conducted by
the PCAOB.
b. PCAOB inspections review a sample of audits conducted by firms as well as the firm's systems of
quality control.
c. All results of PCAOB inspections are made available to the public following the inspection.
d. Firms performing audits of 100 or fewer public entities may elect to have a peer review conducted
through the AICPA in lieu of a PCAOB inspection.
b. PCAOB inspections review a sample of audits conducted by firms as well as the firm's systems of
quality control.
The particular and specialized actions that auditors take to obtain evidence during a specific
engagement are known as
a. Audit procedures.
b. Audit standards.
c. Interpretive publications.
d. Statements on Auditing Standards.
, a. Audit procedures
Which of the following combinations of standards and types of audits are most closely related to the
activities of the Public Company Accounting Oversight Board?
a. Develop Auditing Standards for the audits of nonpublic entities.
b. Develop Auditing Standards for the audits of public entities.
c. Develop Statements on Auditing Standards for the audits of nonpublic entities.
d. Develop Statements on Auditing Standards for the audits of public entities.
b. Develop auditing standards for the audits of public entities.
Which of the following best describes the general contents of the introductory paragraph of the
auditors' report?
a. A description of an audit examination, including the fact that the audit was conducted under
standards established by the PCAOB.
b. The auditors' conclusion with respect to the fairness of the entity's financial statements.
c. Statements identifying the responsibility of auditors and management in the financial reporting
process.
d. The auditors' conclusion with respect to the effectiveness of the entity's internal control over financial
reporting.
c. Statements identifying the responsibility of auditors and management in the financial reporting
process
