,Test Bank: Auditing & Assurance Services: A Systematic Approach, 12th Edition
Overview
Component Details
Textbook Auditing & Assurance Services: A Systematic Approach, 12th Edition
Authors William F. Messier Jr., Steven M. Glover, Douglas F. Prawitt
Publisher McGraw Hill (2022)
Total Chapters 21
Question Format Multiple-choice, scenario-based, application questions
Target Audience Accounting and auditing students, CPA exam candidates
Chapter 1: An Introduction to Assurance and Financial Statement Auditing
Question 1
Why do auditors often use a sampling approach to evidence gathering?
A) Auditors are experts and do not need to look at much to know whether the financial statements are
correct or not.
B) Auditors must balance the cost of the audit with the need for precision and for some types of
evidence, computer data analytic approaches can't be used.
C) Auditors must limit their exposure to their auditee to maintain independence.
D) The auditor's relationship with the auditee is generally adversarial, so the auditor will not have access
to all of the financial information of the company.
Correct Answer: B
Rationale:
Why B is correct: Auditors use sampling to balance the cost of the audit with the need for reasonable
assurance. Testing every transaction would be prohibitively expensive and time-consuming. Sampling
allows auditors to draw conclusions about entire populations based on examining a subset of items .
Why A is incorrect: Auditors cannot rely on expertise alone; they must gather sufficient appropriate
evidence to support their opinion.
,Why C is incorrect: Independence relates to objectivity and mental attitude, not to limiting exposure to
the auditee.
Why D is incorrect: The auditor-client relationship is not generally adversarial, and auditors typically
have access to all financial information needed to conduct the audit.
Question 2
Which of the following statements best describes a relationship between sample size and other
elements of auditing?
A) If materiality increases, so will the sample size.
B) If the desired level of assurance increases, sample sizes can be smaller.
C) If materiality decreases, sample size will need to increase.
D) There is no relationship between sample size and materiality or the desired level of assurance.
Correct Answer: C
Rationale:
Why C is correct: Materiality and sample size have an inverse relationship. When materiality decreases
(i.e., a smaller misstatement is considered material), the auditor must examine a larger sample to
achieve the required precision .
Why A is incorrect: If materiality increases, the auditor can accept larger misstatements, so sample size
can decrease, not increase.
Why B is incorrect: Higher desired assurance requires more evidence, so sample sizes should increase,
not decrease.
Why D is incorrect: There is a direct relationship between sample size and both materiality and desired
level of assurance.
Question 3
Which of the following statements about the study of auditing is NOT true?
A) The study of auditing can be valuable to future accountants and business decision makers whether or
not they plan to become auditors.
B) The study of auditing focuses on learning the analytical and logical skills necessary to evaluate the
relevance and reliability of information.
C) The study of auditing focuses on learning the rules, techniques, and computations required to analyze
financial statements for making investment recommendations.
D) The study of auditing begins with the understanding of a coherent logical framework and techniques
useful for gathering and analyzing evidence about others' assertions.
Correct Answer: C
Rationale:
, Why C is correct: This statement is NOT true. Auditing focuses on evaluating evidence and forming
conclusions about assertions, not on analyzing financial statements for investment recommendations .
Financial statement analysis for investment purposes is the domain of financial analysts, not auditors.
Why A is correct: Understanding auditing is valuable for accountants, managers, board members, and
others who rely on financial information.
Why B is correct: Auditing develops analytical and logical skills for evaluating the relevance and
reliability of information.
Why D is correct: Auditing is built on a framework for gathering and evaluating evidence about
assertions made by others.
Question 4
The basic definition of auditing essentially indicates that, overall, auditing is a process to:
A) detect fraud.
B) examine individual transactions so that the auditor may certify as to their validity.
C) objectively obtain and evaluate evidence regarding assertions made by another party.
D) assure the consistent application of correct accounting procedures.
Correct Answer: C
Rationale:
Why C is correct: The fundamental definition of auditing is 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 .
Why A is incorrect: While auditors have a responsibility to detect material misstatements due to fraud,
detecting fraud is not the primary definition of auditing.
Why B is incorrect: Auditors do not "certify" transactions; they provide reasonable assurance that
financial statements are free from material misstatement.
Why D is incorrect: Auditing is not about ensuring consistent application of procedures; it is about
evaluating evidence and forming conclusions.
Question 5
Assurance services may improve all of the following except:
A) relevance.
B) credibility.
C) periodicity.
D) reliability.
Correct Answer: C
Overview
Component Details
Textbook Auditing & Assurance Services: A Systematic Approach, 12th Edition
Authors William F. Messier Jr., Steven M. Glover, Douglas F. Prawitt
Publisher McGraw Hill (2022)
Total Chapters 21
Question Format Multiple-choice, scenario-based, application questions
Target Audience Accounting and auditing students, CPA exam candidates
Chapter 1: An Introduction to Assurance and Financial Statement Auditing
Question 1
Why do auditors often use a sampling approach to evidence gathering?
A) Auditors are experts and do not need to look at much to know whether the financial statements are
correct or not.
B) Auditors must balance the cost of the audit with the need for precision and for some types of
evidence, computer data analytic approaches can't be used.
C) Auditors must limit their exposure to their auditee to maintain independence.
D) The auditor's relationship with the auditee is generally adversarial, so the auditor will not have access
to all of the financial information of the company.
Correct Answer: B
Rationale:
Why B is correct: Auditors use sampling to balance the cost of the audit with the need for reasonable
assurance. Testing every transaction would be prohibitively expensive and time-consuming. Sampling
allows auditors to draw conclusions about entire populations based on examining a subset of items .
Why A is incorrect: Auditors cannot rely on expertise alone; they must gather sufficient appropriate
evidence to support their opinion.
,Why C is incorrect: Independence relates to objectivity and mental attitude, not to limiting exposure to
the auditee.
Why D is incorrect: The auditor-client relationship is not generally adversarial, and auditors typically
have access to all financial information needed to conduct the audit.
Question 2
Which of the following statements best describes a relationship between sample size and other
elements of auditing?
A) If materiality increases, so will the sample size.
B) If the desired level of assurance increases, sample sizes can be smaller.
C) If materiality decreases, sample size will need to increase.
D) There is no relationship between sample size and materiality or the desired level of assurance.
Correct Answer: C
Rationale:
Why C is correct: Materiality and sample size have an inverse relationship. When materiality decreases
(i.e., a smaller misstatement is considered material), the auditor must examine a larger sample to
achieve the required precision .
Why A is incorrect: If materiality increases, the auditor can accept larger misstatements, so sample size
can decrease, not increase.
Why B is incorrect: Higher desired assurance requires more evidence, so sample sizes should increase,
not decrease.
Why D is incorrect: There is a direct relationship between sample size and both materiality and desired
level of assurance.
Question 3
Which of the following statements about the study of auditing is NOT true?
A) The study of auditing can be valuable to future accountants and business decision makers whether or
not they plan to become auditors.
B) The study of auditing focuses on learning the analytical and logical skills necessary to evaluate the
relevance and reliability of information.
C) The study of auditing focuses on learning the rules, techniques, and computations required to analyze
financial statements for making investment recommendations.
D) The study of auditing begins with the understanding of a coherent logical framework and techniques
useful for gathering and analyzing evidence about others' assertions.
Correct Answer: C
Rationale:
, Why C is correct: This statement is NOT true. Auditing focuses on evaluating evidence and forming
conclusions about assertions, not on analyzing financial statements for investment recommendations .
Financial statement analysis for investment purposes is the domain of financial analysts, not auditors.
Why A is correct: Understanding auditing is valuable for accountants, managers, board members, and
others who rely on financial information.
Why B is correct: Auditing develops analytical and logical skills for evaluating the relevance and
reliability of information.
Why D is correct: Auditing is built on a framework for gathering and evaluating evidence about
assertions made by others.
Question 4
The basic definition of auditing essentially indicates that, overall, auditing is a process to:
A) detect fraud.
B) examine individual transactions so that the auditor may certify as to their validity.
C) objectively obtain and evaluate evidence regarding assertions made by another party.
D) assure the consistent application of correct accounting procedures.
Correct Answer: C
Rationale:
Why C is correct: The fundamental definition of auditing is 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 .
Why A is incorrect: While auditors have a responsibility to detect material misstatements due to fraud,
detecting fraud is not the primary definition of auditing.
Why B is incorrect: Auditors do not "certify" transactions; they provide reasonable assurance that
financial statements are free from material misstatement.
Why D is incorrect: Auditing is not about ensuring consistent application of procedures; it is about
evaluating evidence and forming conclusions.
Question 5
Assurance services may improve all of the following except:
A) relevance.
B) credibility.
C) periodicity.
D) reliability.
Correct Answer: C
