Audit Exam 1 UPDATED Exam Questions
and CORRECT Answers
completeness - CORRECT ANSWER - The audit objective that all transactions and
accounts that should be presented in the financial statements are in fact included is related to
which of the PCAOB assertions?
Which of your employees is a fraudster? - CORRECT ANSWER - Which of the following
questions would be inappropriate for an auditor to ask a client when exhibiting an appropriate
level of professional skepticism while completing an audit procedure related to the internal
control system?
Potential conflict of interest. - CORRECT ANSWER - Which of the following is not
included in the American Accounting Association (AAA) definition of auditing?
Information risk. - CORRECT ANSWER - What is the term used to identify the risk that
the client's financial statements may be materially false and misleading?
Attesting to the fairness of the financial statements. - CORRECT ANSWER - Which of
the following is not a recommendation usually made following the completion of an operational
audit?
Existence or occurrence. - CORRECT ANSWER - The audit objective that all the
transactions and accounts presented in the financial statements represent real assets, liabilities,
revenues, and expenses is related most closely to which of the PCAOB assertions?
cutoff - CORRECT ANSWER - The audit objective that all transactions are recorded in
the proper period is related most closely to which of the Audit Standards Board (ASB)
transaction assertions?
Classification - CORRECT ANSWER - The audit objective that all transactions are
recorded in the proper account is related most closely to which one of the ASB transaction
assertions?
, Rights and obligations. - CORRECT ANSWER - The audit objective that all balances
include items owned by the client is related most closely to which one of the ASB balance
assertions?
Completeness Constraint - CORRECT ANSWER - The audit objective that all balances
include all items that should be recorded in that account is related most closely to which one of
the ASB balance assertions?
Understandability - CORRECT ANSWER - The audit objective that footnotes in the
financial statements should be clear and expressed such that the information is easily conveyed
to the readers of the financial statements is related most closely with which of the ASB
presentation and disclosure assertions?
express an opinion on the fairness of a company's annual financial statements and footnotes. -
CORRECT ANSWER - Which of the following best describes the primary role and
responsibility of independent external auditor?
they have read the financial statements.
they are not aware of any false or misleading statements (or any key omitted disclosures).
they believe that the financial statements present an accurate picture of the company's financial
condition. - CORRECT ANSWER - The Sarbanes-Oxley Act of 2002 requires that the key
company officials certify the financial statements. Certification means that the company CEO
and CFO must sign a statement indicating:
substantial equivalency. - CORRECT ANSWER - The process of a CPA obtaining a
certificate and license in a state other than the state in which the CPA's certificate was originally
obtained is referred to as:
and CORRECT Answers
completeness - CORRECT ANSWER - The audit objective that all transactions and
accounts that should be presented in the financial statements are in fact included is related to
which of the PCAOB assertions?
Which of your employees is a fraudster? - CORRECT ANSWER - Which of the following
questions would be inappropriate for an auditor to ask a client when exhibiting an appropriate
level of professional skepticism while completing an audit procedure related to the internal
control system?
Potential conflict of interest. - CORRECT ANSWER - Which of the following is not
included in the American Accounting Association (AAA) definition of auditing?
Information risk. - CORRECT ANSWER - What is the term used to identify the risk that
the client's financial statements may be materially false and misleading?
Attesting to the fairness of the financial statements. - CORRECT ANSWER - Which of
the following is not a recommendation usually made following the completion of an operational
audit?
Existence or occurrence. - CORRECT ANSWER - The audit objective that all the
transactions and accounts presented in the financial statements represent real assets, liabilities,
revenues, and expenses is related most closely to which of the PCAOB assertions?
cutoff - CORRECT ANSWER - The audit objective that all transactions are recorded in
the proper period is related most closely to which of the Audit Standards Board (ASB)
transaction assertions?
Classification - CORRECT ANSWER - The audit objective that all transactions are
recorded in the proper account is related most closely to which one of the ASB transaction
assertions?
, Rights and obligations. - CORRECT ANSWER - The audit objective that all balances
include items owned by the client is related most closely to which one of the ASB balance
assertions?
Completeness Constraint - CORRECT ANSWER - The audit objective that all balances
include all items that should be recorded in that account is related most closely to which one of
the ASB balance assertions?
Understandability - CORRECT ANSWER - The audit objective that footnotes in the
financial statements should be clear and expressed such that the information is easily conveyed
to the readers of the financial statements is related most closely with which of the ASB
presentation and disclosure assertions?
express an opinion on the fairness of a company's annual financial statements and footnotes. -
CORRECT ANSWER - Which of the following best describes the primary role and
responsibility of independent external auditor?
they have read the financial statements.
they are not aware of any false or misleading statements (or any key omitted disclosures).
they believe that the financial statements present an accurate picture of the company's financial
condition. - CORRECT ANSWER - The Sarbanes-Oxley Act of 2002 requires that the key
company officials certify the financial statements. Certification means that the company CEO
and CFO must sign a statement indicating:
substantial equivalency. - CORRECT ANSWER - The process of a CPA obtaining a
certificate and license in a state other than the state in which the CPA's certificate was originally
obtained is referred to as:
