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Auditing and Assurance Services, 14e (Arens)
Chapter 6 The CPA Profession
Learning Objective 6-1
1)The objective of the ordinary audit of financial statements is the expression of
an opinion on: A) the fairness of the financial statements in all material respects.
B) the accuracy of the financial
statements. C) the accuracy of the
annual report.
D) the accuracy of the balance sheet and income
statement. Answer: A
Terms: Objective of ordinary audit of financial statements
Diff: Easy
Objective: LO 6-1
AACSB: Reflective thinking skills
2)If the auditor believes that the financial statements are not fairly stated or is
unable to reach a conclusion because of insufficient evidence, the auditor:
A) should withdraw from the engagement.
B) should request an increase in audit fees so that more resources can be used to
conduct the audit. C) has the responsibility of notifying financial statement users
through the auditor's report.
D) should notify regulators of the
circumstances. Answer: C
Terms: Auditor believes that financial statements are nor fairly presented
Diff: Easy
Objective: LO 6-1
AACSB: Reflective thinking skills
3)Auditors accumulate evidence to:
A) defend themselves in the event of a lawsuit.
B) justify the conclusions they have otherwise reached.
C)satisfy the requirements of the Securities Acts of 1933 and 1934.
D)enable them to reach conclusions about the fairness of the financial
statements. Answer: D
Terms: Auditors accumulate evidence
Diff: Easy
Objective: LO 6-1
AACSB: Reflective thinking skills
1
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Learning Objective 6-2
1)The responsibility for adopting sound accounting policies and maintaining adequate
internal control rests with the:
A) board of directors.
B) company management.
C) financial statement auditor.
D) company's internal audit
department. Answer: B
Terms: Responsibility for adopting sound accounting policies and maintaining adequate internal
controls
Diff: Easy
Objective: LO 6-2
AACSB: Reflective thinking skills
2)If the auditor insists on financial statement disclosures that the management finds
unacceptable, the auditor can:
A)
Issue an adverse audit report Issue a qualified audit report
Yes Yes
B)
Issue an adverse audit report Issue a qualified audit report
No No
C)
Issue an adverse audit report Issue a qualified audit report
Yes No
D)
Issue an adverse audit report Issue a qualified audit report
No Yes
Answer: A
Terms: Auditor insists on financial statement disclosures that management finds unacceptable
Diff: Easy
Objective: LO 6-2
AACSB: Reflective thinking skills
2
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3)In certifying their annual financial statements, the CEO and CFO of a public company
certify that the financial statements comply with the requirements of:
A) GAAP.
B) the Sarbanes-Oxley Act.
C) the Securities Exchange Act of
1934. D) GAAS.
Answer: C
Terms: Certifying annual financial statements by CEO and CFO
Diff: Easy
Objective: LO 6-2
AACSB: Reflective thinking skills
Topic: Public
4)Which of the following statements is true of a public company's financial statements?
A) Sarbanes-Oxley requires the CEO only to certify the financial statements.
B) Sarbanes-Oxley requires the CFO only to certify the financial statements.
C)Sarbanes-Oxley requires the CEO and CFO to certify the financial statements.
D)Sarbanes-Oxley neither requires the CEO nor the CFO to certify the
financial statements. Answer: C
Terms: Public company's financial statements
Diff: Easy
Objective: LO 6-2
AACSB: Reflective thinking skills
Topic: SOX
5)The responsibility for the preparation of the financial statements and the
accompanying footnotes belongs to:
A) the auditor.
B)
management.
C) both management and the auditor equally.
D) management for the statements and the auditor for
the notes. Answer: B
Terms: Responsibility for preparation of the financial statements and the accompanying footnotes
Diff: Moderate
Objective: LO 6-2
AACSB: Reflective thinking skills
6)Responsibility for the fair presentation of financial statements rests equally with
management and the auditor.
A) True
B) False
Answer:
B
Terms: Responsibility for fair presentation of financial statements
Diff: Easy
Objective: LO 6-2
AACSB: Reflective thinking skills
3
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Learning Objective 6-3
1)The auditor's best defense when material misstatements are not uncovered is to have
conducted the audit:
A) in accordance with generally accepted auditing
standards. B) as effectively as reasonably possible.
C) in a timely manner.
D) only after an adequate investigation of the
management team. Answer: A
Terms: Auditors' best defense when material misstatements are not uncovered
Diff: Easy
Objective: LO 6-3
AACSB: Reflective thinking skills
2)In order to provide reasonable assurance the audit must be performed with an attitude
of professional skepticism. Which of the following is most correct regarding the "attitude"
of professional skepticism? A) auditors should assume that management is dishonest
B) auditors should assume that management is neither dishonest nor honest
C) auditors should assume that management is honest and mistakes are unintentional
D) auditors should assume that management is incumbent in preparing
financial statements Answer: B
Terms: Attitude of professional skepticism
Diff: Easy
Objective: LO 6-3
AACSB: Reflective thinking skills
3)Which of the following is not one of the reasons that auditors provide only reasonable
assurance on the financial statements?
A) The auditor commonly examines a sample, rather than the entire population of
transactions. B) Accounting presentations contain complex estimates which
involve uncertainty.
C) Fraudulently prepared financial statements are often difficult to detect.
D) Auditors believe that reasonable assurance is sufficient in the vast
majority of cases. Answer: D
Terms: Reasons auditors provide only reasonable assurance on financial statements
Diff: Easy
Objective: LO 6-3
AACSB: Reflective thinking skills
4)Which of the following statements is most correct regarding errors and fraud?
A) An error is unintentional, whereas fraud is intentional.
B) Frauds occur more often than errors in financial statements.
C) Errors are always fraud and frauds are always errors.
D)Auditors have more responsibility for finding fraud
than errors. Answer: A
Terms: Errors and fraud
Diff: Easy
Objective: LO 6-3
AACSB: Reflective thinking skills
4
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Auditing and Assurance Services, 14e (Arens)
Chapter 6 The CPA Profession
Learning Objective 6-1
1)The objective of the ordinary audit of financial statements is the expression of
an opinion on: A) the fairness of the financial statements in all material respects.
B) the accuracy of the financial
statements. C) the accuracy of the
annual report.
D) the accuracy of the balance sheet and income
statement. Answer: A
Terms: Objective of ordinary audit of financial statements
Diff: Easy
Objective: LO 6-1
AACSB: Reflective thinking skills
2)If the auditor believes that the financial statements are not fairly stated or is
unable to reach a conclusion because of insufficient evidence, the auditor:
A) should withdraw from the engagement.
B) should request an increase in audit fees so that more resources can be used to
conduct the audit. C) has the responsibility of notifying financial statement users
through the auditor's report.
D) should notify regulators of the
circumstances. Answer: C
Terms: Auditor believes that financial statements are nor fairly presented
Diff: Easy
Objective: LO 6-1
AACSB: Reflective thinking skills
3)Auditors accumulate evidence to:
A) defend themselves in the event of a lawsuit.
B) justify the conclusions they have otherwise reached.
C)satisfy the requirements of the Securities Acts of 1933 and 1934.
D)enable them to reach conclusions about the fairness of the financial
statements. Answer: D
Terms: Auditors accumulate evidence
Diff: Easy
Objective: LO 6-1
AACSB: Reflective thinking skills
1
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
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Learning Objective 6-2
1)The responsibility for adopting sound accounting policies and maintaining adequate
internal control rests with the:
A) board of directors.
B) company management.
C) financial statement auditor.
D) company's internal audit
department. Answer: B
Terms: Responsibility for adopting sound accounting policies and maintaining adequate internal
controls
Diff: Easy
Objective: LO 6-2
AACSB: Reflective thinking skills
2)If the auditor insists on financial statement disclosures that the management finds
unacceptable, the auditor can:
A)
Issue an adverse audit report Issue a qualified audit report
Yes Yes
B)
Issue an adverse audit report Issue a qualified audit report
No No
C)
Issue an adverse audit report Issue a qualified audit report
Yes No
D)
Issue an adverse audit report Issue a qualified audit report
No Yes
Answer: A
Terms: Auditor insists on financial statement disclosures that management finds unacceptable
Diff: Easy
Objective: LO 6-2
AACSB: Reflective thinking skills
2
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
, To
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3)In certifying their annual financial statements, the CEO and CFO of a public company
certify that the financial statements comply with the requirements of:
A) GAAP.
B) the Sarbanes-Oxley Act.
C) the Securities Exchange Act of
1934. D) GAAS.
Answer: C
Terms: Certifying annual financial statements by CEO and CFO
Diff: Easy
Objective: LO 6-2
AACSB: Reflective thinking skills
Topic: Public
4)Which of the following statements is true of a public company's financial statements?
A) Sarbanes-Oxley requires the CEO only to certify the financial statements.
B) Sarbanes-Oxley requires the CFO only to certify the financial statements.
C)Sarbanes-Oxley requires the CEO and CFO to certify the financial statements.
D)Sarbanes-Oxley neither requires the CEO nor the CFO to certify the
financial statements. Answer: C
Terms: Public company's financial statements
Diff: Easy
Objective: LO 6-2
AACSB: Reflective thinking skills
Topic: SOX
5)The responsibility for the preparation of the financial statements and the
accompanying footnotes belongs to:
A) the auditor.
B)
management.
C) both management and the auditor equally.
D) management for the statements and the auditor for
the notes. Answer: B
Terms: Responsibility for preparation of the financial statements and the accompanying footnotes
Diff: Moderate
Objective: LO 6-2
AACSB: Reflective thinking skills
6)Responsibility for the fair presentation of financial statements rests equally with
management and the auditor.
A) True
B) False
Answer:
B
Terms: Responsibility for fair presentation of financial statements
Diff: Easy
Objective: LO 6-2
AACSB: Reflective thinking skills
3
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
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Learning Objective 6-3
1)The auditor's best defense when material misstatements are not uncovered is to have
conducted the audit:
A) in accordance with generally accepted auditing
standards. B) as effectively as reasonably possible.
C) in a timely manner.
D) only after an adequate investigation of the
management team. Answer: A
Terms: Auditors' best defense when material misstatements are not uncovered
Diff: Easy
Objective: LO 6-3
AACSB: Reflective thinking skills
2)In order to provide reasonable assurance the audit must be performed with an attitude
of professional skepticism. Which of the following is most correct regarding the "attitude"
of professional skepticism? A) auditors should assume that management is dishonest
B) auditors should assume that management is neither dishonest nor honest
C) auditors should assume that management is honest and mistakes are unintentional
D) auditors should assume that management is incumbent in preparing
financial statements Answer: B
Terms: Attitude of professional skepticism
Diff: Easy
Objective: LO 6-3
AACSB: Reflective thinking skills
3)Which of the following is not one of the reasons that auditors provide only reasonable
assurance on the financial statements?
A) The auditor commonly examines a sample, rather than the entire population of
transactions. B) Accounting presentations contain complex estimates which
involve uncertainty.
C) Fraudulently prepared financial statements are often difficult to detect.
D) Auditors believe that reasonable assurance is sufficient in the vast
majority of cases. Answer: D
Terms: Reasons auditors provide only reasonable assurance on financial statements
Diff: Easy
Objective: LO 6-3
AACSB: Reflective thinking skills
4)Which of the following statements is most correct regarding errors and fraud?
A) An error is unintentional, whereas fraud is intentional.
B) Frauds occur more often than errors in financial statements.
C) Errors are always fraud and frauds are always errors.
D)Auditors have more responsibility for finding fraud
than errors. Answer: A
Terms: Errors and fraud
Diff: Easy
Objective: LO 6-3
AACSB: Reflective thinking skills
4
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
