ACG 4632 FSU EXAM 1 QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED ANSWERS) ALREADY
GRADED A+
Business Risk Ans✓✓✓The risk that an entity will fail to meet its stated
business objectives
Information Risk Ans✓✓✓The risk that the information disseminated by
a company will be materially false or misleading.
Auditing Ans✓✓✓a systematic process of objectively obtaining and
evaluating evidence regarding assertions about economic actions and
events to ascertain the degree of correspondence between the assertions
and established criteria and communicating the results to interested users
An attestation engagement Ans✓✓✓a practitioner assesses and reports
on "subject matter or an assertion about the subject matter that is the
responsibility of another party."
Assurance services Ans✓✓✓independent professional services that
improve the quality of information, or its context, for decision makers
Professional skepticism Ans✓✓✓an auditor's questioning mindset
towards representations made by management and evidential matter
gathered
,•Inquiry alone is never enough. The auditor must obtain sufficient
corroborative evidence.
•Unusual financial trends need investigation
•Documents are always checked for authenticity or possible alteration
•Ask questions, get answers, then verify the answers.
Internal Auditing
Governmental Auditing
Regulatory Auditors Ans✓✓✓•Improve operational management &
efficiency
•Includes accuracy of financial reporting, reviews of internal controls,
compliance, evaluations of efficiency, and more
•Emphasizes accountability of public officials for use of public funds
•Includes accuracy of financial reporting, reviews of efficiency, and
compliance
Verifies compliance with laws and regulations
IRS, bank examiners, etc
Generally Accepted Auditing Standards (GAAS) Ans✓✓✓•What they
do: Identify necessary qualifications and characteristics of auditors and
guide the conduct of the audit
•Purpose: achieve the following objectives on an audit:
, •Obtain reasonable assurance about whether financial statements are free
of material misstatement
•Report on the financial statements and communicate in accordance with
auditor's findings
•Sources:
•ASB, PCAOB, IAASB, U.S. GAO
Responsibilities (integrity & qualifications) Ans✓✓✓a) Competence &
capabilities, b) ethical requirements (independence & due care), c)
professional skepticism
Performance Principle (how to conduct an audit) Ans✓✓✓a) Plan &
supervise the audit, b) determine & apply materiality, c) assess risk of
material misstatement, d) obtain sufficient & appropriate evidence
Reporting (how to report the results of an audit) Ans✓✓✓a) Express an
opinion, b) opinion based on conformity with financial reporting
framework
Audit Risk Model Ans✓✓✓Audit Risk = Inherent Risk * Control Risk *
Detection Risk
Appropriate Evidence Ans✓✓✓•Relevance: Does evidence address
assertion(s) of interest?
•Reliability: Source of evidence
DETAILED ANSWERS (VERIFIED ANSWERS) ALREADY
GRADED A+
Business Risk Ans✓✓✓The risk that an entity will fail to meet its stated
business objectives
Information Risk Ans✓✓✓The risk that the information disseminated by
a company will be materially false or misleading.
Auditing Ans✓✓✓a systematic process of objectively obtaining and
evaluating evidence regarding assertions about economic actions and
events to ascertain the degree of correspondence between the assertions
and established criteria and communicating the results to interested users
An attestation engagement Ans✓✓✓a practitioner assesses and reports
on "subject matter or an assertion about the subject matter that is the
responsibility of another party."
Assurance services Ans✓✓✓independent professional services that
improve the quality of information, or its context, for decision makers
Professional skepticism Ans✓✓✓an auditor's questioning mindset
towards representations made by management and evidential matter
gathered
,•Inquiry alone is never enough. The auditor must obtain sufficient
corroborative evidence.
•Unusual financial trends need investigation
•Documents are always checked for authenticity or possible alteration
•Ask questions, get answers, then verify the answers.
Internal Auditing
Governmental Auditing
Regulatory Auditors Ans✓✓✓•Improve operational management &
efficiency
•Includes accuracy of financial reporting, reviews of internal controls,
compliance, evaluations of efficiency, and more
•Emphasizes accountability of public officials for use of public funds
•Includes accuracy of financial reporting, reviews of efficiency, and
compliance
Verifies compliance with laws and regulations
IRS, bank examiners, etc
Generally Accepted Auditing Standards (GAAS) Ans✓✓✓•What they
do: Identify necessary qualifications and characteristics of auditors and
guide the conduct of the audit
•Purpose: achieve the following objectives on an audit:
, •Obtain reasonable assurance about whether financial statements are free
of material misstatement
•Report on the financial statements and communicate in accordance with
auditor's findings
•Sources:
•ASB, PCAOB, IAASB, U.S. GAO
Responsibilities (integrity & qualifications) Ans✓✓✓a) Competence &
capabilities, b) ethical requirements (independence & due care), c)
professional skepticism
Performance Principle (how to conduct an audit) Ans✓✓✓a) Plan &
supervise the audit, b) determine & apply materiality, c) assess risk of
material misstatement, d) obtain sufficient & appropriate evidence
Reporting (how to report the results of an audit) Ans✓✓✓a) Express an
opinion, b) opinion based on conformity with financial reporting
framework
Audit Risk Model Ans✓✓✓Audit Risk = Inherent Risk * Control Risk *
Detection Risk
Appropriate Evidence Ans✓✓✓•Relevance: Does evidence address
assertion(s) of interest?
•Reliability: Source of evidence
