Auditing and Assurance Services – 16th Edition (Arens, Elder, Beasley, Hogan) – Test Bank with Questions and Answers

[TEST BANK]
AUDITING AND
ASSURANCE
SERVICES, 16TH
EDITION BY
ARENS, ELDER,
BEASLEY, HOGAN

,Auditing and Assurance Services,
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Chapter 1 The Demand for Audit and Other Assurance Services
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Learning Objective 1-1
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1) The Sarbanes-Oxley Act applies to which of the following companies?
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A) All companies
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B) Privately held companies Y5 Y5



C) Public companies Y5



D) All public companies and privately held companies with assets greater than $500
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million Answer: C
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Terms: Sarbanes-Oxley Act
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Diff: Easy
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Objective: LO 1-1 Y 5 Y5



AACSB: Reflective thinking skills
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Topic: SOX
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2) Which of the following is considered audit
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evidence? A)
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Oral statements
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made by
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management
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Y N N

B)
Oral statements
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Y5 management
N Y Y

C)
Oral statements
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Y5 management
Y Y Y

D)
Oral statements
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Y5 management
N N Y

Answer: C Y 5



Terms: Audit evidence
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Diff: Moderate
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Objective: LO 1-1
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AACSB: Reflective thinking skills
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,3) Evidence is paramount to audit and attestation engagements. List the four basic types of
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audit evidence.
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Answer: The four types of audit and attestation evidence include:
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1. Electronic and documentary data about transactions
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2. Written and electronic communications with outsiders
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3. Observations by the auditor Y5 Y5 Y5



4. Oral testimony of the auditee
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(client) Terms: Basic types of audit
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evidence Diff: Easy
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Objective: LO 1-1 Y 5 Y5



AACSB: Reflective thinking skills
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4) The criteria by which an auditor evaluates the information under audit may vary with
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the information being audited.
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A) True
B) False
Answer:
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Y5A
Terms: Criteria which an auditor evaluates information
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Diff: Easy
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Objective: LO 1-1 Y 5 Y5



AACSB: Reflective thinking skills
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5) The criteria used by an external auditor to evaluate published financial statements are
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known as generally accepted auditing standards.
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A) True
B) False
Answer:
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B
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Terms: Criteria used by external auditor to evaluate published financial statements
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Diff: Easy
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Objective: LO 1-1 Y 5 Y5



AACSB: Reflective thinking skills
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6) The Sarbanes-Oxley Act establishes standards related to the audits of privately
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held companies.
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A) True
B) False
Answer:
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B
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Terms: Sarbanes-Oxley Act
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Diff: Easy
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Objective: LO 1-1 Y 5 Y5



AACSB: Reflective thinking skills
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Topic: SOX
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2

, 7) The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to
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auditing and financial reporting.
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A) True
B) False
Answer:
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Y5A
Terms: Sarbanes-Oxley Act
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Diff: Easy
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Objective: LO 1-1 Y 5 Y5



AACSB: Reflective thinking skillsY 5 Y5 Y5



Topic: SOX
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8) An auditor must be competent and have an independent mental attitude.
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A) True
B) False
Answer:
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A
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Terms: Competence and independent mental attitude
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Diff: Easy
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Objective: LO 1-1 Y 5 Y5



AACSB: Reflective thinking skillsY 5 Y5 Y5




Y5 Learning Objective 1-2 Y5 Y5




1) Recording, classifying, and summarizing economic events in a logical manner for the
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purpose of providing financial information for decision making is commonly called:
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A) finance.
B) auditing.
C) accounting.
D) economics.
Answer: C
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Terms: Recording, classifying, and summarizing economic
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events Diff: Easy
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Objective: LO 1-2 Y 5 Y5



AACSB: Reflective thinking skillsY 5 Y5 Y5




2) An accountant:
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A) must possess expertise in the accumulation of audit evidence.
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B) must decide the number and types of items to test.
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C) must have an understanding of the principles and rules that provide the basis for preparing
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the accounting information.
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D) must be a CPA. Y5 Y5 Y5



Answer: C
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Terms: Distinguishes auditors from accountants
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Diff: Moderate
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Objective: LO 1-2 Y 5 Y5



AACSB: Reflective thinking skillsY 5 Y5 Y5




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