Audit 4301 Practice Test Questions and Answers

Nature of Auditing Auditing is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with established criteria. Information Risk reflects the possibility that the information upon which a business decision was made was inaccurate. Auditing of financial information does what? reduces information risk to the users of financial information. Causes of information risk Remoteness of information Biases and motives of the provider Voluminous data Complex exchange transactions Reducing information risk User verifies info user shares info risk with management audited financial statements are provided Types of audits performed by cpa 1. Operational audit- evaluates the efficiency and effectiveness of any part of an organization's operating procedures and methods 2. Compliance audit- determines whether the auditee is following specific procedures, rules or regulations 3. Financial statement audit- determines whether fin. statements are in accordance with GAAP PCAOB (Public Company Accounting Oversight Board) established by SOX Provides oversight for auditors of public companies including: establishing auditing, attestation and quality control standards performing inspections of audit engagements and quality controls