TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren
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CHAPTER 1
TestBank for Auditing A Practical Approach,
4th Canadian Edition 4th Edition, Kindle Edition INTRODUCTION AND OVERVIEW OF AUDIT AND
by Robyn Moroney , Fiona Campbell , Jane ASSURANCE
Hamilton , Valerie Warren CHAPTER LEARNING OBJECTIVES
1. Define an assurance engagement.
An assurance engagement involves an assurance provider arriving atan opinion about some
information being provided by their client toa third party. A financial statement audit is one
type of assuranceengagement. This engagement involves an auditor arriving at an
opinionabout the fair presentation of the financial statements. The auditreport is addressed
to the shareholders of the company being audited,but other users may read the financial
statements. Learning aboutauditing and assurance requires an understanding of auditing
andassurance terminology, including terms such as audit risk, materiality,internal controls,
listed entity, and assertions.
2. Explain why there is a demand for audit and assurance services.
Financial statement users include investors (shareholders), suppliers,customers, lenders,
employees, governments, and the general public.These groups of users demand audited
financial statements because oftheir remoteness from the entity, accounting complexity,
theirincentivescompeting with those of the entity‘s managers, and their needfor reliable
information on which to base decisions. The theories usedto describe the demand for audit
and assurance services are agencytheory, the information hypothesis, and the insurance
hypothesis.
3. Differentiate between types of assurance services.
Assurance services include financial statement audits, complianceaudits, performance
audits, comprehensive audits, internal audits,and assurance on corporate social
responsibility (CSR) disclosures.
4. Explain the different levels of assurance.
The different levels of assurance include reasonable assurance, whichis the highest level of
assurance, limited assurance, and no assurance.Reasonable assurance is provided on an
audit of a company‘sfinancial statements. Limited assurance is provided in a review of
acompany‘s financial Dsotwante
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TRUE-FALSE STATEMENTS
5. Outline different audit opinions
An auditor can issue an unmodified opinion, also known as a cleanreport, or an unmodified
1. Only current investors (not potential investors) are considered to be users of the financial
opinion with an emphasis of matter paragraph.Alternatively, a modified opinion may be
statements.
issued as a qualified, anadverse, or a disclaimer of opinion.
Answer: False
6. Differentiate between the roles of the preparer and the auditor, and discuss the
Bloomcode: Knowledge
different firms that provide assurance services.
Difficulty: Easy
It is the responsibility of a company‘s governing body to ensure thatits financial statements
Learning Objective: Explain why there is a demand for audit and assurance services.
are relevant, reliable, comparable, understandable,and true and fair. It is the responsibility of
Section Reference: 1.2 Demand for audit and assurance services
the auditor to form anopinion on the fair presentation of the financial statements. In doing,so
CPA Competency: Audit and Assurance
1- 2 Auditing: A Practical Approach, Fourth Canadian Edition
AACSB: Analytic
the auditor must maintain professional scepticism and utilize professionaljudgement and due
care. 2. Insurance hypothesis is a means whereby the investor can guarantee the success of their
investment.
The firms that provide assurance services include the Big-4international firms, the national
firms (with international links),local and regional firms, and consulting firms that tend to Answer: False
specializein assurance of CSR and environmental disclosures.
Bloomcode: Comprehension
Difficulty: Medium
7. Identify the different regulators, legislation, and regulations surrounding the Learning Objective: Explain why there is a demand for audit and assurance services.
assurance process. Section Reference: 1.2 Demand for audit and assurance services
CPA Competency: Audit and Assurance
lOM oAR c P S D | 30878 49 5
AACSB: Analytic
Introduction and Overview of Audit and Assurance 1-3 3. A compliance audit involves gathering evidence to ascertain whether the person or entity
under review has followed the rules, policies, procedures, laws and regulations with which
they must conform
Answer: True
Bloomcode: Comprehension
Difficulty: Medium
Learning Objective: Differentiate between types of assurance services.
Section Reference: 1.3 Different assurance services
CPA Competency: Audit and Assurance
AACSB: Analytic
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4. An operational audit is an example of a compliance audit. Answer: False
Answer: False Bloomcode: Knowledge
Difficulty: Medium
Bloomcode: Knowledge Learning Objective: Differentiate between types of assurance services.
Difficulty: Medium Section Reference: 1.3 Different assurance services
Learning Objective: Differentiate between types of assurance services. CPA Competency: Audit and Assurance
Section Reference: 1.3 Different assurance services AACSB: Analytic
CPA Competency: Audit and Assurance
AACSB: Analytic
8. An auditor can provide a reasonable level of assurance on information other than
1- 4 Auditing: A Practical Approach, Fourth Canadian Edition historical financial information.
Answer: True
5. The most common types of assurance engagements are financial statement audits,
confirmation audits, performance audits, comprehensive audits and assurance on corporate
Bloomcode: Comprehension
social responsibility (CSR) disclosures.
Difficulty: Easy
Learning Objective: Explain the different levels of assurance.
Answer: False
Section Reference: 1.4 Different levels of assurance
CPA Competency: Audit and Assurance
Bloomcode: Comprehension
AACSB: Analytic
Difficulty: Medium
Learning Objective: Differentiate between types of assurance services.
Section Reference: 1.3 Different assurance services
9. A reasonable level of assurance is the highest level of assurance that an auditor can
CPA Competency: Audit and Assurance
provide.
AACSB: Analytic
.
Answer: True
6. The nature of audit procedures refers to the reliance on evidence provided by the client
and its management. Bloomcode: Comprehension
Difficulty: Medium
Answer: True Learning Objective: Explain the different levels of assurance.
Section Reference: 1.4 Different levels of assurance
Bloomcode: Knowledge CPA Competency: Audit and Assurance
Difficulty: Medium AACSB: Analytic
Learning Objective: Differentiate between types of assurance services.
Section Reference: 1.3 Different assurance services
CPA Competency: Audit and Assurance 10. A no assurance engagement is of little use as no assurance is given to the client.
AACSB: Analytic
Answer: False
7. It is the auditor‘s responsibility to prepare the financial statements. Bloomcode: Comprehension
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Difficulty: Medium
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Learning Objective: Explain the different levels of assurance. 1- 6 Auditing: A Practical Approach, Fourth Canadian Edition
Section Reference: 1.4 Different levels of assurance
CPA Competency: Audit and Assurance
Learning Objective: Describe the audit expectation gap.
AACSB: Analytic
Section Reference: 1.8 The audit expectation gap
CPA Competency: Audit and Assurance
AACSB: Analytic
11. A negative expression of opinion is only given when there is a disagreement with
management and the auditor.
Answer: False
Bloomcode:Knowledge
Difficulty: Medium
Learning Objective: Outline different audit opinions.
Section Reference: 1.5 Different audit opinions
CPA Competency: Audit and Assurance
AACSB: Analytic
12. All modified audit reports are qualified audit opinions.
Answer: False
Bloomcode: Knowledge
Difficulty: Medium
Learning Objective: Outline different audit opinions.
Section Reference: 1.5 Different audit opinions
CPA Competency: Audit and Assurance
AACSB: Analytic
13. The expectation gap is caused by unrealistic user expectations such as the auditor
providing a moderate level of assurance.
Answer: False
Bloomcode:Comprehension
Difficulty: Medium
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CHAPTER 1
TestBank for Auditing A Practical Approach,
4th Canadian Edition 4th Edition, Kindle Edition INTRODUCTION AND OVERVIEW OF AUDIT AND
by Robyn Moroney , Fiona Campbell , Jane ASSURANCE
Hamilton , Valerie Warren CHAPTER LEARNING OBJECTIVES
1. Define an assurance engagement.
An assurance engagement involves an assurance provider arriving atan opinion about some
information being provided by their client toa third party. A financial statement audit is one
type of assuranceengagement. This engagement involves an auditor arriving at an
opinionabout the fair presentation of the financial statements. The auditreport is addressed
to the shareholders of the company being audited,but other users may read the financial
statements. Learning aboutauditing and assurance requires an understanding of auditing
andassurance terminology, including terms such as audit risk, materiality,internal controls,
listed entity, and assertions.
2. Explain why there is a demand for audit and assurance services.
Financial statement users include investors (shareholders), suppliers,customers, lenders,
employees, governments, and the general public.These groups of users demand audited
financial statements because oftheir remoteness from the entity, accounting complexity,
theirincentivescompeting with those of the entity‘s managers, and their needfor reliable
information on which to base decisions. The theories usedto describe the demand for audit
and assurance services are agencytheory, the information hypothesis, and the insurance
hypothesis.
3. Differentiate between types of assurance services.
Assurance services include financial statement audits, complianceaudits, performance
audits, comprehensive audits, internal audits,and assurance on corporate social
responsibility (CSR) disclosures.
4. Explain the different levels of assurance.
The different levels of assurance include reasonable assurance, whichis the highest level of
assurance, limited assurance, and no assurance.Reasonable assurance is provided on an
audit of a company‘sfinancial statements. Limited assurance is provided in a review of
acompany‘s financial Dsotwante
lom
ade
ednbts
y:.BN
Ro aTsEsRuSra
IGH nDcIeESis| jp
TU roohvriadbehd
am in70a@cgm
asa omail.p
coilm
ationengagem
Weannttt.o earn $1.236
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A+ Distribution of this document is illegal
2
, TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren
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TRUE-FALSE STATEMENTS
5. Outline different audit opinions
An auditor can issue an unmodified opinion, also known as a cleanreport, or an unmodified
1. Only current investors (not potential investors) are considered to be users of the financial
opinion with an emphasis of matter paragraph.Alternatively, a modified opinion may be
statements.
issued as a qualified, anadverse, or a disclaimer of opinion.
Answer: False
6. Differentiate between the roles of the preparer and the auditor, and discuss the
Bloomcode: Knowledge
different firms that provide assurance services.
Difficulty: Easy
It is the responsibility of a company‘s governing body to ensure thatits financial statements
Learning Objective: Explain why there is a demand for audit and assurance services.
are relevant, reliable, comparable, understandable,and true and fair. It is the responsibility of
Section Reference: 1.2 Demand for audit and assurance services
the auditor to form anopinion on the fair presentation of the financial statements. In doing,so
CPA Competency: Audit and Assurance
1- 2 Auditing: A Practical Approach, Fourth Canadian Edition
AACSB: Analytic
the auditor must maintain professional scepticism and utilize professionaljudgement and due
care. 2. Insurance hypothesis is a means whereby the investor can guarantee the success of their
investment.
The firms that provide assurance services include the Big-4international firms, the national
firms (with international links),local and regional firms, and consulting firms that tend to Answer: False
specializein assurance of CSR and environmental disclosures.
Bloomcode: Comprehension
Difficulty: Medium
7. Identify the different regulators, legislation, and regulations surrounding the Learning Objective: Explain why there is a demand for audit and assurance services.
assurance process. Section Reference: 1.2 Demand for audit and assurance services
CPA Competency: Audit and Assurance
lOM oAR c P S D | 30878 49 5
AACSB: Analytic
Introduction and Overview of Audit and Assurance 1-3 3. A compliance audit involves gathering evidence to ascertain whether the person or entity
under review has followed the rules, policies, procedures, laws and regulations with which
they must conform
Answer: True
Bloomcode: Comprehension
Difficulty: Medium
Learning Objective: Differentiate between types of assurance services.
Section Reference: 1.3 Different assurance services
CPA Competency: Audit and Assurance
AACSB: Analytic
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4
, TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren
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4. An operational audit is an example of a compliance audit. Answer: False
Answer: False Bloomcode: Knowledge
Difficulty: Medium
Bloomcode: Knowledge Learning Objective: Differentiate between types of assurance services.
Difficulty: Medium Section Reference: 1.3 Different assurance services
Learning Objective: Differentiate between types of assurance services. CPA Competency: Audit and Assurance
Section Reference: 1.3 Different assurance services AACSB: Analytic
CPA Competency: Audit and Assurance
AACSB: Analytic
8. An auditor can provide a reasonable level of assurance on information other than
1- 4 Auditing: A Practical Approach, Fourth Canadian Edition historical financial information.
Answer: True
5. The most common types of assurance engagements are financial statement audits,
confirmation audits, performance audits, comprehensive audits and assurance on corporate
Bloomcode: Comprehension
social responsibility (CSR) disclosures.
Difficulty: Easy
Learning Objective: Explain the different levels of assurance.
Answer: False
Section Reference: 1.4 Different levels of assurance
CPA Competency: Audit and Assurance
Bloomcode: Comprehension
AACSB: Analytic
Difficulty: Medium
Learning Objective: Differentiate between types of assurance services.
Section Reference: 1.3 Different assurance services
9. A reasonable level of assurance is the highest level of assurance that an auditor can
CPA Competency: Audit and Assurance
provide.
AACSB: Analytic
.
Answer: True
6. The nature of audit procedures refers to the reliance on evidence provided by the client
and its management. Bloomcode: Comprehension
Difficulty: Medium
Answer: True Learning Objective: Explain the different levels of assurance.
Section Reference: 1.4 Different levels of assurance
Bloomcode: Knowledge CPA Competency: Audit and Assurance
Difficulty: Medium AACSB: Analytic
Learning Objective: Differentiate between types of assurance services.
Section Reference: 1.3 Different assurance services
CPA Competency: Audit and Assurance 10. A no assurance engagement is of little use as no assurance is given to the client.
AACSB: Analytic
Answer: False
7. It is the auditor‘s responsibility to prepare the financial statements. Bloomcode: Comprehension
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4
, TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren TEST BANK for Auditing A Practical Approach, 4th Canadian Edition Moroney, Campbell, Warren
Stuvia.com - The Marketplace to Buy and Sell your Study Material Stuvia.com - The Marketplace to Buy and Sell your Study Material
Difficulty: Medium
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Learning Objective: Explain the different levels of assurance. 1- 6 Auditing: A Practical Approach, Fourth Canadian Edition
Section Reference: 1.4 Different levels of assurance
CPA Competency: Audit and Assurance
Learning Objective: Describe the audit expectation gap.
AACSB: Analytic
Section Reference: 1.8 The audit expectation gap
CPA Competency: Audit and Assurance
AACSB: Analytic
11. A negative expression of opinion is only given when there is a disagreement with
management and the auditor.
Answer: False
Bloomcode:Knowledge
Difficulty: Medium
Learning Objective: Outline different audit opinions.
Section Reference: 1.5 Different audit opinions
CPA Competency: Audit and Assurance
AACSB: Analytic
12. All modified audit reports are qualified audit opinions.
Answer: False
Bloomcode: Knowledge
Difficulty: Medium
Learning Objective: Outline different audit opinions.
Section Reference: 1.5 Different audit opinions
CPA Competency: Audit and Assurance
AACSB: Analytic
13. The expectation gap is caused by unrealistic user expectations such as the auditor
providing a moderate level of assurance.
Answer: False
Bloomcode:Comprehension
Difficulty: Medium
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