Audit Exam 1 - Questions & Verified Answers
1) In the auditing process C) the audit report communicates the auditor's findings to users.
A) the types and amounts of evidence remain constant
from audit to audit.
B) the criteria for evaluating information will not vary
depending on the information being audited.
C) the audit report communicates the auditor's findings to
users.
D) records are gathered by the auditor to determine
whether the audited information is stated in accordance
with SEC standards.
3) Which of the following can be used as a criteria for D) all of the above
evaluating information being audited?
A) International Financial Reporting Standards (IFRS)
B) Generally Accepted Accounting Principles (GAAP)
C) Internal Revenue Code (IRC)
D) all of the above
4) Evidence is paramount to audit and attestation
engagements. List the four basic types of audit evidence.
Answer: The four types of audit and attestation evidence
include
1. Electronic and documentary data about transactions
2. Written and electronic communications with outsiders
3. Observations by the auditor
4. Oral testimony of the auditee (client)
1) Recording, classifying, and summarizing economic C) accounting.
events in a logical manner for the purpose of providing
financial information for decision making is commonly
called
A) finance.
B) auditing.
C) accounting.
D) economics.
2) An accountant C) must have an understanding of the principles and rules that provide the basis for
A) must possess expertise in the accumulation of audit preparing the accounting information.
evidence.
B) must decide the number and types of items to test.
C) must have an understanding of the principles and rules
that provide the basis for preparing the accounting
information.
D) must be a CPA.
3) When auditing accounting data, auditors focus on A) determining whether recorded information properly reflects the economic events
A) determining whether recorded information properly that occurred during the accounting period.
reflects the economic events that occurred during the
accounting period.
B) determining if fraud has occurred.
C) determining if taxable income has been calculated
correctly.
D) analyzing the financial information to be sure that it
complies with government requirements.
4) The trait that distinguishes auditors from accountants is D) auditor's expertise in the accumulation and interpretation of audit evidence.
the
A) auditor's ability to interpret accounting principles
generally accepted in the United States.
B) auditor's education beyond the bachelor's degree.
C) auditor's ability to interpret FASB Statements.
D) auditor's expertise in the accumulation and
interpretation of audit evidence.
Stuvia Study Pack | 2026-2027 Edition
, Audit Exam 1 - Questions & Verified Answers
1) ________ risk reflects the possibility that the information B) Information
upon which the business decision was made was
inaccurate.
A) Client acceptance
B) Information
C) Business
D) Control
2) The possibility that a business may not be able to repay D) business risk.
a bank loan because of an economic downturn is referred
to as
A) materiality risk.
B) information risk.
C) interest rate risk.
D) business risk.
1) A correct relationship among the auditor, the client, and D) the external users can rely upon the auditor's report to reduce information risk.
the external users is
A) management of a public company hires the
independent auditor.
B) the audit committee of a private company hires the
independent auditor.
C) the client provides capital to the external users.
D) the external users can rely upon the auditor's report to
reduce information risk.
2) The most common way for users to obtain reliable B) have an independent audit.
information is to
A) have an internal audit.
B) have an independent audit.
C) verify all information individually.
D) verify the information with management.
3) External users of the financial statements D) all of the above.
A) value the auditor's report because of the auditor's
independence from the client.
B) look to the auditor's report as an indication of the
statements' reliability.
C) use the audited information on the assumption that it is
reasonably complete, accurate, and unbiased.
D) all of the above.
1) In the audit of historical financial statements, D) B and C
management asserts that the financial statements are
fairly stated in accordance with what standards?
A) regulatory accounting principles
B) applicable international accounting standards
C) applicable U.S. accounting standards
D) B and C
2) Any service that requires a CPA firm to issue a report B) attestation service.
about the reliability of an assertion that is made by another
party is a(n)
A) accounting and bookkeeping service.
B) attestation service.
C) assurance service.
D) tax service.
Stuvia Study Pack | 2026-2027 Edition
, Audit Exam 1 - Questions & Verified Answers
3) Three common types of attestation services are A) audits of historical financial statements, reviews of historical financial statements,
A) audits of historical financial statements, reviews of and audits of internal control over financial reporting.
historical financial statements, and audits of internal
control over financial reporting.
B) audits of historical financial information, verifications of
historical financial information, and attestations regarding
internal controls.
C) reviews of historical financial information, verifications
of future financial information, and attestations regarding
internal controls.
D) audits of historical financial information, reviews of
controls related to investments, and verifications of
historical financial information.
4) Which of the following services provides the lowest level A) review
of assurance on a financial statement?
A) review
B) audit
C) Neither service provides assurance on financial
statements.
D) Each service provides the same level of assurance on
financial statements.
5) Which of the following is an accurate statement C) Assurance services improve the quality of information for decision makers.
regarding assurance services?
A) Assurance services must be performed by a CPA.
B) An attestation service is not a type of assurance
service.
C) Assurance services improve the quality of information
for decision makers.
D) Assurance services can only be performed on financial
data.
6) Audits C) are required for publicly traded companies in the United States.
A) are an assurance service, but not an attestation service.
B) are designed to provide absolute assurance that the
financial statements are free of material misstatement.
C) are required for publicly traded companies in the United
States.
D) do not require the auditor to express their opinion in a
written report.
7) A high, but not absolute, level of assurance is called B) reasonable assurance.
A) probable assurance.
B) reasonable assurance.
C) limited assurance.
D) incomplete assurance.
8) Which of the following is an accurate statement D) The market for other forms of assurance services is open to non-CPA
regarding the various types of other assurance services? competitors.
A) Assurance services must be about the reliability of
another party's assertion about compliance with specified
criteria.
B) Other assurance services must meet the definition of an
attestation service.
C) The primary purpose of a management consulting
engagement is to improve the quality of information.
D) The market for other forms of assurance services is
open to non-CPA competitors.
1) One objective of an operational audit is to C) make recommendations for improving performance.
A) determine whether the financial statements fairly
present the entity's operations.
B) determine if the auditee is in compliance with GAAP.
C) make recommendations for improving performance.
D) report on the entity's relative success in attaining profit
maximization.
Stuvia Study Pack | 2026-2027 Edition
, Audit Exam 1 - Questions & Verified Answers
2) An examination of part of an organization's procedures A) operational audit
and methods for the purpose of evaluating efficiency and
effectiveness is what type of audit?
A) operational audit
B) compliance audit
C) financial statement audit
D) production audit
3) An audit to determine whether an entity is following B) compliance audit.
specific procedures or rules set down by some higher
authority is classified as a(n)
A) audit of financial statements.
B) compliance audit.
C) operational audit.
D) production audit.
4) Which one of the following is more difficult to evaluate C) efficiency and effectiveness of operations
objectively?
A) presentation of financial statements in accordance with
generally accepted accounting principles
B) compliance with government regulations
C) efficiency and effectiveness of operations
D) All three of the above are equally difficult.
5) Which of the following audits can be regarded as A) IRS agents' examinations of taxpayer returns
generally being a compliance audit?
A) IRS agents' examinations of taxpayer returns
B) GAO auditor's evaluation of the computer operations of
governmental units
C) an internal auditor's review of a company's payroll
authorization procedures
D) a CPA firm's audit of a public company
7) In a financial statement audit, the auditor D) all of the above.
A) gathers evidence to determine whether the statements
contain material errors or other misstatements.
B) must have a thorough understanding of the entity and
its environment.
C) determines whether the financial statements are stated
in accordance with specified criteria.
D) all of the above.
1) Internal auditors C) are employed by all types of organizations.
A) must be independent of the entity that employs them.
B) generally report to the accounting department.
C) are employed by all types of organizations.
D) must be CPAs.
2) Which type of auditor audits the financial information D) GAO auditor
prepared by various federal government agencies before it
is submitted to Congress?
A) internal auditor
B) revenue agent
C) independent auditor
D) GAO auditor
1) The three requirements for becoming a CPA include all C) character requirements
but which of the following?
A) uniform CPA examination requirement
B) education requirements
C) character requirements
D) experience requirement
Stuvia Study Pack | 2026-2027 Edition
1) In the auditing process C) the audit report communicates the auditor's findings to users.
A) the types and amounts of evidence remain constant
from audit to audit.
B) the criteria for evaluating information will not vary
depending on the information being audited.
C) the audit report communicates the auditor's findings to
users.
D) records are gathered by the auditor to determine
whether the audited information is stated in accordance
with SEC standards.
3) Which of the following can be used as a criteria for D) all of the above
evaluating information being audited?
A) International Financial Reporting Standards (IFRS)
B) Generally Accepted Accounting Principles (GAAP)
C) Internal Revenue Code (IRC)
D) all of the above
4) Evidence is paramount to audit and attestation
engagements. List the four basic types of audit evidence.
Answer: The four types of audit and attestation evidence
include
1. Electronic and documentary data about transactions
2. Written and electronic communications with outsiders
3. Observations by the auditor
4. Oral testimony of the auditee (client)
1) Recording, classifying, and summarizing economic C) accounting.
events in a logical manner for the purpose of providing
financial information for decision making is commonly
called
A) finance.
B) auditing.
C) accounting.
D) economics.
2) An accountant C) must have an understanding of the principles and rules that provide the basis for
A) must possess expertise in the accumulation of audit preparing the accounting information.
evidence.
B) must decide the number and types of items to test.
C) must have an understanding of the principles and rules
that provide the basis for preparing the accounting
information.
D) must be a CPA.
3) When auditing accounting data, auditors focus on A) determining whether recorded information properly reflects the economic events
A) determining whether recorded information properly that occurred during the accounting period.
reflects the economic events that occurred during the
accounting period.
B) determining if fraud has occurred.
C) determining if taxable income has been calculated
correctly.
D) analyzing the financial information to be sure that it
complies with government requirements.
4) The trait that distinguishes auditors from accountants is D) auditor's expertise in the accumulation and interpretation of audit evidence.
the
A) auditor's ability to interpret accounting principles
generally accepted in the United States.
B) auditor's education beyond the bachelor's degree.
C) auditor's ability to interpret FASB Statements.
D) auditor's expertise in the accumulation and
interpretation of audit evidence.
Stuvia Study Pack | 2026-2027 Edition
, Audit Exam 1 - Questions & Verified Answers
1) ________ risk reflects the possibility that the information B) Information
upon which the business decision was made was
inaccurate.
A) Client acceptance
B) Information
C) Business
D) Control
2) The possibility that a business may not be able to repay D) business risk.
a bank loan because of an economic downturn is referred
to as
A) materiality risk.
B) information risk.
C) interest rate risk.
D) business risk.
1) A correct relationship among the auditor, the client, and D) the external users can rely upon the auditor's report to reduce information risk.
the external users is
A) management of a public company hires the
independent auditor.
B) the audit committee of a private company hires the
independent auditor.
C) the client provides capital to the external users.
D) the external users can rely upon the auditor's report to
reduce information risk.
2) The most common way for users to obtain reliable B) have an independent audit.
information is to
A) have an internal audit.
B) have an independent audit.
C) verify all information individually.
D) verify the information with management.
3) External users of the financial statements D) all of the above.
A) value the auditor's report because of the auditor's
independence from the client.
B) look to the auditor's report as an indication of the
statements' reliability.
C) use the audited information on the assumption that it is
reasonably complete, accurate, and unbiased.
D) all of the above.
1) In the audit of historical financial statements, D) B and C
management asserts that the financial statements are
fairly stated in accordance with what standards?
A) regulatory accounting principles
B) applicable international accounting standards
C) applicable U.S. accounting standards
D) B and C
2) Any service that requires a CPA firm to issue a report B) attestation service.
about the reliability of an assertion that is made by another
party is a(n)
A) accounting and bookkeeping service.
B) attestation service.
C) assurance service.
D) tax service.
Stuvia Study Pack | 2026-2027 Edition
, Audit Exam 1 - Questions & Verified Answers
3) Three common types of attestation services are A) audits of historical financial statements, reviews of historical financial statements,
A) audits of historical financial statements, reviews of and audits of internal control over financial reporting.
historical financial statements, and audits of internal
control over financial reporting.
B) audits of historical financial information, verifications of
historical financial information, and attestations regarding
internal controls.
C) reviews of historical financial information, verifications
of future financial information, and attestations regarding
internal controls.
D) audits of historical financial information, reviews of
controls related to investments, and verifications of
historical financial information.
4) Which of the following services provides the lowest level A) review
of assurance on a financial statement?
A) review
B) audit
C) Neither service provides assurance on financial
statements.
D) Each service provides the same level of assurance on
financial statements.
5) Which of the following is an accurate statement C) Assurance services improve the quality of information for decision makers.
regarding assurance services?
A) Assurance services must be performed by a CPA.
B) An attestation service is not a type of assurance
service.
C) Assurance services improve the quality of information
for decision makers.
D) Assurance services can only be performed on financial
data.
6) Audits C) are required for publicly traded companies in the United States.
A) are an assurance service, but not an attestation service.
B) are designed to provide absolute assurance that the
financial statements are free of material misstatement.
C) are required for publicly traded companies in the United
States.
D) do not require the auditor to express their opinion in a
written report.
7) A high, but not absolute, level of assurance is called B) reasonable assurance.
A) probable assurance.
B) reasonable assurance.
C) limited assurance.
D) incomplete assurance.
8) Which of the following is an accurate statement D) The market for other forms of assurance services is open to non-CPA
regarding the various types of other assurance services? competitors.
A) Assurance services must be about the reliability of
another party's assertion about compliance with specified
criteria.
B) Other assurance services must meet the definition of an
attestation service.
C) The primary purpose of a management consulting
engagement is to improve the quality of information.
D) The market for other forms of assurance services is
open to non-CPA competitors.
1) One objective of an operational audit is to C) make recommendations for improving performance.
A) determine whether the financial statements fairly
present the entity's operations.
B) determine if the auditee is in compliance with GAAP.
C) make recommendations for improving performance.
D) report on the entity's relative success in attaining profit
maximization.
Stuvia Study Pack | 2026-2027 Edition
, Audit Exam 1 - Questions & Verified Answers
2) An examination of part of an organization's procedures A) operational audit
and methods for the purpose of evaluating efficiency and
effectiveness is what type of audit?
A) operational audit
B) compliance audit
C) financial statement audit
D) production audit
3) An audit to determine whether an entity is following B) compliance audit.
specific procedures or rules set down by some higher
authority is classified as a(n)
A) audit of financial statements.
B) compliance audit.
C) operational audit.
D) production audit.
4) Which one of the following is more difficult to evaluate C) efficiency and effectiveness of operations
objectively?
A) presentation of financial statements in accordance with
generally accepted accounting principles
B) compliance with government regulations
C) efficiency and effectiveness of operations
D) All three of the above are equally difficult.
5) Which of the following audits can be regarded as A) IRS agents' examinations of taxpayer returns
generally being a compliance audit?
A) IRS agents' examinations of taxpayer returns
B) GAO auditor's evaluation of the computer operations of
governmental units
C) an internal auditor's review of a company's payroll
authorization procedures
D) a CPA firm's audit of a public company
7) In a financial statement audit, the auditor D) all of the above.
A) gathers evidence to determine whether the statements
contain material errors or other misstatements.
B) must have a thorough understanding of the entity and
its environment.
C) determines whether the financial statements are stated
in accordance with specified criteria.
D) all of the above.
1) Internal auditors C) are employed by all types of organizations.
A) must be independent of the entity that employs them.
B) generally report to the accounting department.
C) are employed by all types of organizations.
D) must be CPAs.
2) Which type of auditor audits the financial information D) GAO auditor
prepared by various federal government agencies before it
is submitted to Congress?
A) internal auditor
B) revenue agent
C) independent auditor
D) GAO auditor
1) The three requirements for becoming a CPA include all C) character requirements
but which of the following?
A) uniform CPA examination requirement
B) education requirements
C) character requirements
D) experience requirement
Stuvia Study Pack | 2026-2027 Edition
