TESTBANK FOR Auditing and Assurance Principles Jose M. Ireneo Shirley C. Ireneo George R. James Latest update
A When the auditor becomes aware of information concerning a possible
noncompliance to laws or regulations, the auditor should appropriately:
A.Obtain an understanding of the nature of the act and the circumstances in which it
has occurred, and evaluate the possible effect on the financial statements.
B. Discuss his suspicion with the management.
C. Ask management to determine whether a violation is really committed.
D. Consult with the entity's legal counsel as to what appropriate action the aud
A Which of the following is mandatory if the auditor is to comply with generally
accepted auditing standards?
a. Possession by the auditor of adequate technical training.
b. Use of analytical review on audit engagements.
c. Use of statistical sampling whenever feasible on an audit engagement.
d. Confirmation by the auditor of material accounts receivable balances.
C Competence as a certified public accountant includes all of the following except
a. Having the technical qualifications to perform an engagement.
b. Possessing the ability to supervise and evaluate the quality of staff work.
c. Warranting the infallibility of the work performed.
d. Consulting others if additional technical information is needed.
C Which of the following did not result at least partially due to the alleged audit failures
of the 1980s and 1990s?
a. The Treadway Report.
b. An SAS further defining the auditor's responsibility for fraud detection.
c. Formation of the AICPA Fraud Commission.
d. Formation of the Independence Standards Board.
B Which of the following is an element of a CPA firm's quality control system that
should be considered in establishing its quality control policies and procedures?
a. Complying with laws and regulations
b. Assigning personnel to engagements
c. Using statistical sampling techniques
d. Considering audit risk and materiality
D Certain fundamental beliefs called "postulates" underlie auditing theory. Which of
the following is not a postulate of auditing?
a. No long-term conflict exists between the auditor and the management of the
enterprise under audit.
b. Economic assertions can be verified.
c. The auditor acts exclusively as an auditor.
d. An audit has a benefit only to the owners.
D In all cases, audit reports must:
a. Be signed by the individual who performed the audit procedures.
b. Certify the accuracy of the quantitative information which was audited.
c. Communicate the auditor's findings to the general public.
d. Inform readers of the degree of correspondence between the quantifiable
information and the established criteria.
C The auditor communicates the results of his or her work through the medium of the:
a. Engagement letter.
b. Management letter.
c. Audit report.
d. Financial statements.
A Which of the following is a correct statement relating to the theoretical framework of
auditing?
a. The financial data to be audited can be verified.
b. Short-term conflicts do not exist between managers who prepare data and
auditors who examine data.
c. Auditors do not necessarily need independence.
d. An audit has a benefit only to the owners.
,TESTBANK FOR Auditing and Assurance Principles Jose M. Ireneo Shirley C. Ireneo George R. James Latest update
A Which of the following underlies the application of generally accepted auditing
standards, particularly the standards of field work and reporting?
a. The elements of materiality and risk.
b. The element of internal control.
c. The element of corroborating evidence.
d. The element of reasonable assurance.
C Which of the following 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
C 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.
D. The study
C Assurance services may improve all of the following except
A. Relevance
B. Credibility
C. Periodicity
D. Reliability
B Which of the following best describes why publicly-traded corporations follow the
practice of having the external auditor appointed by the board of directors or elected
by the stockholders?
A. To comply with the regulations of the government
B. To emphasize auditor independence from the management of the corporation
C. To encourage a policy of rotation of the independent auditors
D. To provide the corporate owners with an opportunity to voice their opinion
concerning the quality of the auditi
B Which of the following best describes the concept of audit risk?
A. The risk of the auditor being sued because of association with an audit client.
B. The risk that the auditor will provide an unqualified opinion on financial
statements that are, in face, materially misstated.
C. The overall risk that a material misstatement exists in the financial statements.
D. The risk that auditors use audit procedures that are inappropriate.
C Which of the following types of audits are most similar?
a. Operational audits and compliance audits.
b. Independent financial statements audits and operational audits.
c. Compliance audits and independent financial statements audits.
d. Internal audits and independent financial statements audits.
D The least important evidence of a public accounting firm's evaluation of its system
of quality controls would concern the firm's policies and procedures with respect to
a. Employment (hiring).
b. Confidentiality of audit engagement.
c. Assigning personnel to audit engagement.
d. Determination of audit fee
,TESTBANK FOR Auditing and Assurance Principles Jose M. Ireneo Shirley C. Ireneo George R. James Latest update
D The primary purpose of an independent financial statement audit is to
a. Provide a basis for assessing management's performance.
b. Comply with state and federal regulatory requirements.
c. Assure management that the financial statements are unbiased and free from
material error.
d. Provide users with an unbiased opinion about the fairness of information reported
in the financial statements.
B Which of the following statements is an example of an assertion made by
management in an entity's financial statements?
a. The financial statements were prepared in an unbiased manner.
b. Reported inventory balances reflect all related transactions for the period.
c. Reported accounts receivable do not include any uncollectible accounts.
d. The scope of the auditors' investigation was not limited in any way by
management.
B The objective of quality control mandates that a public accounting firm should
establish policies and procedures for professional development that provide
reasonable assurance that all entry-level personnel
a. Prepare working papers that are standardized in form and content.
b. Have the knowledge required to enable them to fulfill responsibilities assigned.
c. Will advance within the organization.
d. Develop specialties in specific areas of public accounting.
D Which of the following best describes the objective of an audit of financial
statements?
a. To express an opinion whether the financial statements are prepared in
accordance with prescribed criteria.
b. To express an assurance as to the future viability of the entity whose financial
statements are being audited.
c. To express an assurance about the management's efficiency or effectiveness in
conducting the operations of an entity.
d. To express an opinion whether the financial statements are pr
C The expertise that distinguishes auditors from accountants is in the:
a. Ability to interpret generally accepted accounting principles.
b. Requirement to possess education beyond the Bachelor's degree.
c. Accumulation and interpretation of evidence.
d. Ability to interpret AASC Statements.
B It refers to the level of the auditor's satisfaction as to the reliability of an assertion
being made by one party for use by another party.
a. Confidence level
b. Assurance level
c. Reasonableness level
d. Tolerable level
B A review of any part of an organization's procedures and methods for the purpose of
evaluating efficiency and effectiveness is classified as a(n):
a. Audit of financial statements
b. Operational audit
c. Compliance audit
d. Production audit
A In "auditing" accounting data, the concern is with:
a. Determining whether recorded information properly 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.
, TESTBANK FOR Auditing and Assurance Principles Jose M. Ireneo Shirley C. Ireneo George R. James Latest update
A Which of the following procedures primarily satisfies the valuation and allocation
assertion?
a. Calculated depreciation expense for the year
b. Test counted the client's year end inventory of materials and finished goods
c. Examined vehicle title applicable to a new truck purchased during the current
year
d. Considered need for a footnote describing a lawsuit pending against the client
B Independent auditing can best be described as a:
a. Branch of accounting
b. Discipline that attests to the results of accounting and other operations and data
c. Professional activity that measures and communicates financial and business
data
d. Regulatory function that prevents the issuance of improper financial information
A Which of the following is responsible for an entity's financial statements?
a. The entity's management
b. The entity's audit committee
c. The entity's internal auditors
d. The entity's board of directors
B Users of financial statements demand independent audit because:
a. Users demand assurance that fraud does not exist
b. Management may not be objective in reporting.
c. Users expect auditors to correct management errors.
d. Management relies on the auditor to improve internal control.
B Which of the following types of audits is performed to determine whether an entity's
financial statements are fairly stated in conformity with generally accepted
accounting principles?
a. Operational audit
b. Financial statement audit
c. Compliance audit
d. Performance audit
C Which of the following is an appraisal activity established within an entity as a
service to the entity?
a. External auditing
b. Financial auditing
c. Internal auditing
d. Compliance auditing
D Internal auditors cannot be independent:
a. Since they do not possess the CPA license.
b. Because they don't audit financial statements.
c. Unless their immediate supervisor is a CPA.
d. As long as an employer-employee relationship exists.
A To provide for the greatest degree of independence in performing internal auditing
functions, an internal auditor most likely should report to:
a. Board of Directors.
b. Corporate Controller.
c. Vice-President for Finance.
d. Corporate Stockholders.
D The factor that distinguishes error from fraud is
a. Materiality
b. Type of error or irregularity
c. Quality of internal control
d. Intent
A When the auditor becomes aware of information concerning a possible
noncompliance to laws or regulations, the auditor should appropriately:
A.Obtain an understanding of the nature of the act and the circumstances in which it
has occurred, and evaluate the possible effect on the financial statements.
B. Discuss his suspicion with the management.
C. Ask management to determine whether a violation is really committed.
D. Consult with the entity's legal counsel as to what appropriate action the aud
A Which of the following is mandatory if the auditor is to comply with generally
accepted auditing standards?
a. Possession by the auditor of adequate technical training.
b. Use of analytical review on audit engagements.
c. Use of statistical sampling whenever feasible on an audit engagement.
d. Confirmation by the auditor of material accounts receivable balances.
C Competence as a certified public accountant includes all of the following except
a. Having the technical qualifications to perform an engagement.
b. Possessing the ability to supervise and evaluate the quality of staff work.
c. Warranting the infallibility of the work performed.
d. Consulting others if additional technical information is needed.
C Which of the following did not result at least partially due to the alleged audit failures
of the 1980s and 1990s?
a. The Treadway Report.
b. An SAS further defining the auditor's responsibility for fraud detection.
c. Formation of the AICPA Fraud Commission.
d. Formation of the Independence Standards Board.
B Which of the following is an element of a CPA firm's quality control system that
should be considered in establishing its quality control policies and procedures?
a. Complying with laws and regulations
b. Assigning personnel to engagements
c. Using statistical sampling techniques
d. Considering audit risk and materiality
D Certain fundamental beliefs called "postulates" underlie auditing theory. Which of
the following is not a postulate of auditing?
a. No long-term conflict exists between the auditor and the management of the
enterprise under audit.
b. Economic assertions can be verified.
c. The auditor acts exclusively as an auditor.
d. An audit has a benefit only to the owners.
D In all cases, audit reports must:
a. Be signed by the individual who performed the audit procedures.
b. Certify the accuracy of the quantitative information which was audited.
c. Communicate the auditor's findings to the general public.
d. Inform readers of the degree of correspondence between the quantifiable
information and the established criteria.
C The auditor communicates the results of his or her work through the medium of the:
a. Engagement letter.
b. Management letter.
c. Audit report.
d. Financial statements.
A Which of the following is a correct statement relating to the theoretical framework of
auditing?
a. The financial data to be audited can be verified.
b. Short-term conflicts do not exist between managers who prepare data and
auditors who examine data.
c. Auditors do not necessarily need independence.
d. An audit has a benefit only to the owners.
,TESTBANK FOR Auditing and Assurance Principles Jose M. Ireneo Shirley C. Ireneo George R. James Latest update
A Which of the following underlies the application of generally accepted auditing
standards, particularly the standards of field work and reporting?
a. The elements of materiality and risk.
b. The element of internal control.
c. The element of corroborating evidence.
d. The element of reasonable assurance.
C Which of the following 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
C 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.
D. The study
C Assurance services may improve all of the following except
A. Relevance
B. Credibility
C. Periodicity
D. Reliability
B Which of the following best describes why publicly-traded corporations follow the
practice of having the external auditor appointed by the board of directors or elected
by the stockholders?
A. To comply with the regulations of the government
B. To emphasize auditor independence from the management of the corporation
C. To encourage a policy of rotation of the independent auditors
D. To provide the corporate owners with an opportunity to voice their opinion
concerning the quality of the auditi
B Which of the following best describes the concept of audit risk?
A. The risk of the auditor being sued because of association with an audit client.
B. The risk that the auditor will provide an unqualified opinion on financial
statements that are, in face, materially misstated.
C. The overall risk that a material misstatement exists in the financial statements.
D. The risk that auditors use audit procedures that are inappropriate.
C Which of the following types of audits are most similar?
a. Operational audits and compliance audits.
b. Independent financial statements audits and operational audits.
c. Compliance audits and independent financial statements audits.
d. Internal audits and independent financial statements audits.
D The least important evidence of a public accounting firm's evaluation of its system
of quality controls would concern the firm's policies and procedures with respect to
a. Employment (hiring).
b. Confidentiality of audit engagement.
c. Assigning personnel to audit engagement.
d. Determination of audit fee
,TESTBANK FOR Auditing and Assurance Principles Jose M. Ireneo Shirley C. Ireneo George R. James Latest update
D The primary purpose of an independent financial statement audit is to
a. Provide a basis for assessing management's performance.
b. Comply with state and federal regulatory requirements.
c. Assure management that the financial statements are unbiased and free from
material error.
d. Provide users with an unbiased opinion about the fairness of information reported
in the financial statements.
B Which of the following statements is an example of an assertion made by
management in an entity's financial statements?
a. The financial statements were prepared in an unbiased manner.
b. Reported inventory balances reflect all related transactions for the period.
c. Reported accounts receivable do not include any uncollectible accounts.
d. The scope of the auditors' investigation was not limited in any way by
management.
B The objective of quality control mandates that a public accounting firm should
establish policies and procedures for professional development that provide
reasonable assurance that all entry-level personnel
a. Prepare working papers that are standardized in form and content.
b. Have the knowledge required to enable them to fulfill responsibilities assigned.
c. Will advance within the organization.
d. Develop specialties in specific areas of public accounting.
D Which of the following best describes the objective of an audit of financial
statements?
a. To express an opinion whether the financial statements are prepared in
accordance with prescribed criteria.
b. To express an assurance as to the future viability of the entity whose financial
statements are being audited.
c. To express an assurance about the management's efficiency or effectiveness in
conducting the operations of an entity.
d. To express an opinion whether the financial statements are pr
C The expertise that distinguishes auditors from accountants is in the:
a. Ability to interpret generally accepted accounting principles.
b. Requirement to possess education beyond the Bachelor's degree.
c. Accumulation and interpretation of evidence.
d. Ability to interpret AASC Statements.
B It refers to the level of the auditor's satisfaction as to the reliability of an assertion
being made by one party for use by another party.
a. Confidence level
b. Assurance level
c. Reasonableness level
d. Tolerable level
B A review of any part of an organization's procedures and methods for the purpose of
evaluating efficiency and effectiveness is classified as a(n):
a. Audit of financial statements
b. Operational audit
c. Compliance audit
d. Production audit
A In "auditing" accounting data, the concern is with:
a. Determining whether recorded information properly 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.
, TESTBANK FOR Auditing and Assurance Principles Jose M. Ireneo Shirley C. Ireneo George R. James Latest update
A Which of the following procedures primarily satisfies the valuation and allocation
assertion?
a. Calculated depreciation expense for the year
b. Test counted the client's year end inventory of materials and finished goods
c. Examined vehicle title applicable to a new truck purchased during the current
year
d. Considered need for a footnote describing a lawsuit pending against the client
B Independent auditing can best be described as a:
a. Branch of accounting
b. Discipline that attests to the results of accounting and other operations and data
c. Professional activity that measures and communicates financial and business
data
d. Regulatory function that prevents the issuance of improper financial information
A Which of the following is responsible for an entity's financial statements?
a. The entity's management
b. The entity's audit committee
c. The entity's internal auditors
d. The entity's board of directors
B Users of financial statements demand independent audit because:
a. Users demand assurance that fraud does not exist
b. Management may not be objective in reporting.
c. Users expect auditors to correct management errors.
d. Management relies on the auditor to improve internal control.
B Which of the following types of audits is performed to determine whether an entity's
financial statements are fairly stated in conformity with generally accepted
accounting principles?
a. Operational audit
b. Financial statement audit
c. Compliance audit
d. Performance audit
C Which of the following is an appraisal activity established within an entity as a
service to the entity?
a. External auditing
b. Financial auditing
c. Internal auditing
d. Compliance auditing
D Internal auditors cannot be independent:
a. Since they do not possess the CPA license.
b. Because they don't audit financial statements.
c. Unless their immediate supervisor is a CPA.
d. As long as an employer-employee relationship exists.
A To provide for the greatest degree of independence in performing internal auditing
functions, an internal auditor most likely should report to:
a. Board of Directors.
b. Corporate Controller.
c. Vice-President for Finance.
d. Corporate Stockholders.
D The factor that distinguishes error from fraud is
a. Materiality
b. Type of error or irregularity
c. Quality of internal control
d. Intent
