BYU ACC 406 Auditing Midterm 1 Exam Questions With Correct Answers

BYU ACC 406 Auditing Midterm 1 Exam
Questions With Correct Answers

CH |1: |Introduction |to |Assurance |and |Financial |Statement |Auditing



The |role |of |auditing |- |CORRECT |ANSWER✔✔-Study |figure |1-1 |on |p. |7



Assertions |about |classes |of |transactions |and |events |for |the |period |under |audit: |- |CORRECT |
ANSWER✔✔-• |Occurrence

• |Completeness

• |Authorization

• |Accuracy

• |Cutoff

• |Classification



Assertions |about |account |balances |at |the |period |end: |- |CORRECT |ANSWER✔✔-• |Existence

• |Rights |and |obligations

• |Completeness

• |Valuation |and |allocation



Assertions |about |presentation |and |disclosure: |- |CORRECT |ANSWER✔✔-• |Occurrence |and |
rights |and |obligations

• |Completeness

• |Classification |and |understandability

• |Accuracy |and |valuation

,Auditing |definition |- |CORRECT |ANSWER✔✔-A |systematic |process |of |objectively |obtaining |and |
evaluating |evidence |regarding |assertions |about |economic |actions |and |events |to |ascertain |the |
degree |of |correspondence |between |those |assertions |and |established |criteria |and |
communicating |the |results |to |interested |users



Attestation |- |CORRECT |ANSWER✔✔-occur |when |a |practitioner |is |engaged |to |issue...a |report |
on |subject |matter, |or |an |assertion |about |subject |matter, |that |is |the |responsibility |of |another |
party



Assurance |- |CORRECT |ANSWER✔✔-Independent |professional |services |that |improve |the |quality
|of |information, |or |its |context, |for |decision |makers




Materiality |- |CORRECT |ANSWER✔✔-A |set |of |financial |statements |could |be |misstated |without |
affecting |the |judgment |of |reasonable |people

Information |is |material |if |omitting |it |or |misstating |it |could |influence |decision |that |users |make |
on |the |basis |of |financial |information |of |a |specific |reporting |entity.



Different |opinion |on |an |audit |report |- |CORRECT |ANSWER✔✔-- |Unqualified

- |Qualified

- |Adverse



Major |phases |of |an |audit: |- |CORRECT |ANSWER✔✔-1. |Client |acceptance/continuance

2. |Preliminary |engagement |activities

3. |Plan |the |audit

4. |Consider |and |audit |internal |control

5. |Audit |business |processes |and |related |accounts

6. |Complete |the |audit

7. |Evaluate |results |and |issue |audit |report

, 1. |Client |acceptance/continuance |- |CORRECT |ANSWER✔✔-• |Review |available |financial |
information |(annual |reports, |financial |statements, |tax |returns, |etc.)

• |Inquire |of |3rd |parties |about |client's |integrity

• |Communicate |with |predecessor |auditor |(with |client's |permission)

• |Consider |special |circumstances |- |litigation |or |going |concern

• |Determine |independence

• |Determine |firm's |technical |skills |and |knowledge |of |industry



2. |Preliminary |engagement |- |CORRECT |ANSWER✔✔-• |Determine |the |audit |engagement |team |
requirements |(training |and |proficiency)

• |Ensure |the |audit |team |and |firm |comply |with |ethical |and |independence |requirements

• |Establish |an |understanding |with |the |client |(engagement |letter, |use |of |work |of |internal |
auditors, |role |of |audit |committee)



3. |Plan |the |audit |- |CORRECT |ANSWER✔✔-• |Risk |assessment |procedures |(inquire |of |mgt, |
required |preliminary |analytical |procedures |for |assessing |risk, |observation/inspection) |- |AR, |IR, |
CR, |etc.; |materiality: |planning |materiality |& |tolerable |misstatement

• |Determine |audit |steps |(reliance |vs. |Substantive |approach); |auditing |standards |require |the |
auditor |obtain |an |understanding |of |internal |control |in |order |to |plan |an |audit; |inquire, |
inspections |of |docs/reports, |observation |of |activities/operations



4. |Consider |and |audit |internal |control |- |CORRECT |ANSWER✔✔-• |Test |of |controls: |audit |
procedures |to |test |the |operating |effectiveness |of |controls |in |preventing |or |detecting |& |
correcting |material |misstatements; |management |assertion; |evidence; |public |companies: |ICFR |-
|internal |control |over |financial |reporting




5. |Audit |business |processes |and |related |accounts |- |CORRECT |ANSWER✔✔-• |Substantive |tests: |

1. |Test |of |details |( |test |of |transactions |and |test |of |balances)