Auditing Exam 1 Chapters 1-6 Questions
and Answers
Business Risk - Correct Answers -Risk associated with a company's survival and
profitability
Information Risk - Correct Answers -Risk that information used to assess business risk
is not accurate
Assurance Service - Correct Answers -Used to describe the broad range of information
enhancement services that are provided by CPA
Attestation Service - Correct Answers -To attest to information means to provide
assurance as to its reliability
Existence and occurrence. - Correct Answers -Assets, liabilities, and equity interests
exist and recorded transactions and events have occurred.
Rights and obligations. - Correct Answers -The company holds rights to the assets, and
liabilities are the obligations of the company.
Cutoff. - Correct Answers -Transactions and events have been recorded in the correct
accounting period.
Valuation, allocation, and accuracy. - Correct Answers -All transactions, assets,
liabilities, and equity interests are included in the financial statements at proper
amounts.
ASB: Auditing Standards Board - Correct Answers -Responsibility for issuing official
pronouncements on auditing matters.
AICPA: America Institute of Certified Public Accountant - Correct Answers -National
organization of CPAs
FASB: Financial Accounting Standards Board - Correct Answers -Body designated to
establish accounting standards for entities other than state and local governments.
GAO: Government Accountability Office - Correct Answers -The audit arm of Congress.
FASAB: Federal Accounting Standards Advisory Board - Correct Answers -Body
designated to establish accounting standards for the federal government.
, GASB: Governmental Accounting Standards Board - Correct Answers -Body designated
to establish accounting standards for state and local governments
SEC: Security and Exchange Commission - Correct Answers -Administers the
Securities Acts.
PCAOB: Public Company Accounting Oversight Board - Correct Answers -Group
created to oversee and discipline CPAs and public accounting firms that audit public
companies.
IIA: International organization of internal auditors - Correct Answers -International
organization of internal auditors.
Types of Audits - Correct Answers -(1) financial audits,
(2) compliance audits, and
(3) operational audits
Financial audit - Correct Answers -is an audit of the financial accounting information of
an entity.
Compliance audits - Correct Answers -is dependent upon the existence of verifiable
data and of recognized criteria or standards, such as established laws and regulations
or an organization's policies and procedures.
Periodic bank examination by bank examiners employed by the Federal Deposit
Insurance Corporation and the state banking departments - Correct Answers -
Compliance audits
Operational audits - Correct Answers -is a study of a specific unit of an organization for
the purpose of measuring its performance. (effectiveness or efficiency)
A most important series of pronouncements on auditing by the Auditing Standards
Board is entitled - Correct Answers -Statements on Auditing Standards (SASs)
Internal Auditors - Correct Answers -A principal goal of internal auditors is to investigate
and appraise the effectiveness with which the various organizational units of the
company are carrying out their assigned functions. Much attention is given by internal
auditors to the study and appraisal of internal control.
Government Accountability Office Auditors - Correct Answers -The work of GAO
auditors includes compliance, operational, and financial audits
Internal Revenue Agents - Correct Answers -The Internal Revenue Service is
responsible for enforcement of the federal tax laws. (Compliance)
and Answers
Business Risk - Correct Answers -Risk associated with a company's survival and
profitability
Information Risk - Correct Answers -Risk that information used to assess business risk
is not accurate
Assurance Service - Correct Answers -Used to describe the broad range of information
enhancement services that are provided by CPA
Attestation Service - Correct Answers -To attest to information means to provide
assurance as to its reliability
Existence and occurrence. - Correct Answers -Assets, liabilities, and equity interests
exist and recorded transactions and events have occurred.
Rights and obligations. - Correct Answers -The company holds rights to the assets, and
liabilities are the obligations of the company.
Cutoff. - Correct Answers -Transactions and events have been recorded in the correct
accounting period.
Valuation, allocation, and accuracy. - Correct Answers -All transactions, assets,
liabilities, and equity interests are included in the financial statements at proper
amounts.
ASB: Auditing Standards Board - Correct Answers -Responsibility for issuing official
pronouncements on auditing matters.
AICPA: America Institute of Certified Public Accountant - Correct Answers -National
organization of CPAs
FASB: Financial Accounting Standards Board - Correct Answers -Body designated to
establish accounting standards for entities other than state and local governments.
GAO: Government Accountability Office - Correct Answers -The audit arm of Congress.
FASAB: Federal Accounting Standards Advisory Board - Correct Answers -Body
designated to establish accounting standards for the federal government.
, GASB: Governmental Accounting Standards Board - Correct Answers -Body designated
to establish accounting standards for state and local governments
SEC: Security and Exchange Commission - Correct Answers -Administers the
Securities Acts.
PCAOB: Public Company Accounting Oversight Board - Correct Answers -Group
created to oversee and discipline CPAs and public accounting firms that audit public
companies.
IIA: International organization of internal auditors - Correct Answers -International
organization of internal auditors.
Types of Audits - Correct Answers -(1) financial audits,
(2) compliance audits, and
(3) operational audits
Financial audit - Correct Answers -is an audit of the financial accounting information of
an entity.
Compliance audits - Correct Answers -is dependent upon the existence of verifiable
data and of recognized criteria or standards, such as established laws and regulations
or an organization's policies and procedures.
Periodic bank examination by bank examiners employed by the Federal Deposit
Insurance Corporation and the state banking departments - Correct Answers -
Compliance audits
Operational audits - Correct Answers -is a study of a specific unit of an organization for
the purpose of measuring its performance. (effectiveness or efficiency)
A most important series of pronouncements on auditing by the Auditing Standards
Board is entitled - Correct Answers -Statements on Auditing Standards (SASs)
Internal Auditors - Correct Answers -A principal goal of internal auditors is to investigate
and appraise the effectiveness with which the various organizational units of the
company are carrying out their assigned functions. Much attention is given by internal
auditors to the study and appraisal of internal control.
Government Accountability Office Auditors - Correct Answers -The work of GAO
auditors includes compliance, operational, and financial audits
Internal Revenue Agents - Correct Answers -The Internal Revenue Service is
responsible for enforcement of the federal tax laws. (Compliance)
