1
Copyright © 2018 McGraw-
9u 9u 9u
Hill
,) Chapter 1
9u 9u 9 u Auditing and Assurance Service 9u 9u 9u
s
1) The audit objective that all transactions and accounts that should be presented in the financ
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ial statements are in fact included is related to which of the PCAOB assertions?
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A) Existence.
B) Rights and obligations. 9u 9u
C) Completeness.
D) Valuation. An 9u
swer: C Difficul 9 u 9u
ty: 1 Easy
9u 9u
Topic: Management's Financial Statement Assertions
9 u 9u 9u 9u
Learning Objective: 01- 9u 9 u
03 Describe and define the assertions that management makes about the recognition, measure
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
ment, presentation, and disclosure of the financial statements and explain why auditors use th
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
em as the focal point of the audit.
9u 9u 9u 9u 9u 9u 9u
Blooms: Remember 9 u
AACSB: Analytical Thinking Acc
9 u 9u 9u
essibility: Keyboard Navigation 9 u 9u
2) Cutoff tests designed to detect purchases made before the end of the year that have be
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
en recorded in the subsequent year provide assurance about management's assertion of:
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
A) presentation and disclosure. 9u 9u
B) completeness.
C) rights and obligations. 9u 9u
D) existence. Answe 9u
r: B Difficulty: 2 M
9 u 9u 9u 9u
edium
Topic: Management's Financial Statement Assertions
9 u 9u 9u 9u
Learning Objective: 01- 9u 9 u
03 Describe and define the assertions that management makes about the recognition, measure
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
ment, presentation, and disclosure of the financial statements and explain why auditors use th
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
em as the focal point of the audit.
9u 9u 9u 9u 9u 9u 9u
Blooms: Remember 9 u
AACSB: Analytical Thinking Acc
9 u 9u 9u
essibility: Keyboard Navigation 9 u 9u
2
Copyright © 2018 McGraw- 9u 9u 9u
Hill
,3) During an audit of an entity's stockholders' equity accounts, the auditor determines wheth
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
er there are restrictions on retained earnings resulting from loans, agreements, or state law.
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9
This audit procedure most likely is intended to verify management's assertion of:
u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
A) existence or occurrence. 9u 9u
B) completeness.
C) valuation or allocation. 9u 9u
D) presentation and disclosure. 9u 9u
Answer: D
9u 9 u
Difficulty: 2 Medium 9u 9u
Topic: Management's Financial Statement Assertions
9 u 9u 9u 9u
Learning Objective: 01- 9u 9 u
03 Describe and define the assertions that management makes about the recognition, measure
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
ment, presentation, and disclosure of the financial statements and explain why auditors use th
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
em as the focal point of the audit.
9u 9u 9u 9u 9u 9u 9u
Blooms: Remember 9 u
AACSB: Analytical Thinking Acc 9 u 9u 9u
essibility: Keyboard Navigation 9 u 9u
4) The confirmation of an account payable balance selected from the general ledger provid
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
es primary evidence regarding which management assertion?
9u 9u 9u 9u 9u 9u
A) Completeness.
B) Valuation.
C) Allocation.
D) Existence. Answe 9u
r: D Difficulty: 2 M
9 u 9u 9u 9u
edium
Topic: Management's Financial Statement Assertions
9 u 9u 9u 9u
Learning Objective: 01- 9u 9 u
03 Describe and define the assertions that management makes about the recognition, measure
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
ment, presentation, and disclosure of the financial statements and explain why auditors use th
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
em as the focal point of the audit.
9u 9u 9u 9u 9u 9u 9u
Blooms: Remember 9 u
AACSB: Analytical Thinking Acc 9 u 9u 9u
essibility: Keyboard Navigation 9 u 9u
5) What type of evidence would provide the highest level of assurance in an attestati
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
on engagement?
9u
A) Evidence secured solely from within the entity. 9u 9u 9u 9u 9u 9u
B) Evidence obtained from independent sources. 9u 9u 9u 9u
C) Evidence obtained indirectly. 9u 9u
D) Evidence obtained from multiple internal inquiries9u 9u 9u 9u 9u
. Answer: B
9u 9 u
Difficulty: 3 Hard 9u 9u
Topic: Auditing, Attestation, and Assurance Services
9 u 9u 9u 9u 9u
Learning Objective: 01- 9u 9 u
02 Define and contrast financial statement auditing, attestation, and assurance services.
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
Blooms: Remember 9 u
3
Copyright © 2018 McGraw- 9u 9u 9u
Hill
, AACSB: Analytical Thinking Acc
9 u 9u 9u
essibility: Keyboard Navigation
9 u 9u
4
Copyright © 2018 McGraw-
9u 9u 9u
Hill
Copyright © 2018 McGraw-
9u 9u 9u
Hill
,) Chapter 1
9u 9u 9 u Auditing and Assurance Service 9u 9u 9u
s
1) The audit objective that all transactions and accounts that should be presented in the financ
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
ial statements are in fact included is related to which of the PCAOB assertions?
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
A) Existence.
B) Rights and obligations. 9u 9u
C) Completeness.
D) Valuation. An 9u
swer: C Difficul 9 u 9u
ty: 1 Easy
9u 9u
Topic: Management's Financial Statement Assertions
9 u 9u 9u 9u
Learning Objective: 01- 9u 9 u
03 Describe and define the assertions that management makes about the recognition, measure
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
ment, presentation, and disclosure of the financial statements and explain why auditors use th
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
em as the focal point of the audit.
9u 9u 9u 9u 9u 9u 9u
Blooms: Remember 9 u
AACSB: Analytical Thinking Acc
9 u 9u 9u
essibility: Keyboard Navigation 9 u 9u
2) Cutoff tests designed to detect purchases made before the end of the year that have be
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
en recorded in the subsequent year provide assurance about management's assertion of:
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
A) presentation and disclosure. 9u 9u
B) completeness.
C) rights and obligations. 9u 9u
D) existence. Answe 9u
r: B Difficulty: 2 M
9 u 9u 9u 9u
edium
Topic: Management's Financial Statement Assertions
9 u 9u 9u 9u
Learning Objective: 01- 9u 9 u
03 Describe and define the assertions that management makes about the recognition, measure
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
ment, presentation, and disclosure of the financial statements and explain why auditors use th
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
em as the focal point of the audit.
9u 9u 9u 9u 9u 9u 9u
Blooms: Remember 9 u
AACSB: Analytical Thinking Acc
9 u 9u 9u
essibility: Keyboard Navigation 9 u 9u
2
Copyright © 2018 McGraw- 9u 9u 9u
Hill
,3) During an audit of an entity's stockholders' equity accounts, the auditor determines wheth
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
er there are restrictions on retained earnings resulting from loans, agreements, or state law.
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9
This audit procedure most likely is intended to verify management's assertion of:
u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
A) existence or occurrence. 9u 9u
B) completeness.
C) valuation or allocation. 9u 9u
D) presentation and disclosure. 9u 9u
Answer: D
9u 9 u
Difficulty: 2 Medium 9u 9u
Topic: Management's Financial Statement Assertions
9 u 9u 9u 9u
Learning Objective: 01- 9u 9 u
03 Describe and define the assertions that management makes about the recognition, measure
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
ment, presentation, and disclosure of the financial statements and explain why auditors use th
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
em as the focal point of the audit.
9u 9u 9u 9u 9u 9u 9u
Blooms: Remember 9 u
AACSB: Analytical Thinking Acc 9 u 9u 9u
essibility: Keyboard Navigation 9 u 9u
4) The confirmation of an account payable balance selected from the general ledger provid
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
es primary evidence regarding which management assertion?
9u 9u 9u 9u 9u 9u
A) Completeness.
B) Valuation.
C) Allocation.
D) Existence. Answe 9u
r: D Difficulty: 2 M
9 u 9u 9u 9u
edium
Topic: Management's Financial Statement Assertions
9 u 9u 9u 9u
Learning Objective: 01- 9u 9 u
03 Describe and define the assertions that management makes about the recognition, measure
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
ment, presentation, and disclosure of the financial statements and explain why auditors use th
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
em as the focal point of the audit.
9u 9u 9u 9u 9u 9u 9u
Blooms: Remember 9 u
AACSB: Analytical Thinking Acc 9 u 9u 9u
essibility: Keyboard Navigation 9 u 9u
5) What type of evidence would provide the highest level of assurance in an attestati
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
on engagement?
9u
A) Evidence secured solely from within the entity. 9u 9u 9u 9u 9u 9u
B) Evidence obtained from independent sources. 9u 9u 9u 9u
C) Evidence obtained indirectly. 9u 9u
D) Evidence obtained from multiple internal inquiries9u 9u 9u 9u 9u
. Answer: B
9u 9 u
Difficulty: 3 Hard 9u 9u
Topic: Auditing, Attestation, and Assurance Services
9 u 9u 9u 9u 9u
Learning Objective: 01- 9u 9 u
02 Define and contrast financial statement auditing, attestation, and assurance services.
9u 9u 9u 9u 9u 9u 9u 9u 9u 9u
Blooms: Remember 9 u
3
Copyright © 2018 McGraw- 9u 9u 9u
Hill
, AACSB: Analytical Thinking Acc
9 u 9u 9u
essibility: Keyboard Navigation
9 u 9u
4
Copyright © 2018 McGraw-
9u 9u 9u
Hill
