1
,Test Bank forAuditing & Assurance Services 8th Edition by Timothy
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Louwers, Jerry Strawser z z z
Chap 01 9e z z
Answers Included z
1) The audit objective that all transactions and accounts that should be presented in the financial
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zstatements are in fact included is related to which of the PCAOB assertions?
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A) Existence
B) Rights and obligations z z
C) Completeness
D) Valuation
2) Cutoff tests designed to detect purchases made before the end of the year that have been
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zrecorded in the subsequent year provide assurance about management's assertion of
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A) presentation and disclosure. z z
B) completeness.
C) rights and obligations. z z
D) existence.
3) During an audit of an entity's stockholders' equity accounts, the auditor determines whether
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zthere are restrictions on retained earnings resulting from loans, agreements, or state law. This
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zaudit procedure most likely is intended to verify management's assertion of
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A) existence or occurrence. z z
B) completeness.
C) valuation or allocation. z z
D) presentation and disclosure. z z
4) The confirmation of an account payable balance selected from the general ledger provides
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zprimary evidence regarding which management assertion?
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A) Completeness
B) Valuation
C) Allocation
D) Existence
2
,5) What type of evidence would provide the highest level of assurance in an attestation
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zengagement?
A) Evidence secured solely from within the entity.
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B) Evidence obtained from independent sources. z z z z
C) Evidence obtained indirectly. z z
D) Evidence obtained from multiple internal inquiries.
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6) Which of the following management assertions is an auditor most likely testing if the audit
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zobjective states that all inventory on hand is reflected in the ending inventory balance?
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A) The entity has rights to the inventory.
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B) Inventory is properly valued. z z z
C) Inventory is properly presented in the financial statements.
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D) Inventory is complete. z z
7) An auditor traces the serial numbers on equipment to a nonissuer's subledger. Which of the
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zfollowing management assertions is supported by this test?
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A) Valuation and allocation z z
B) Completeness
C) Rights and obligations z z
D) Presentation and disclosure z z
8) An auditor has substantial doubt about the entity's ability to continue as a going concern for a
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zreasonable period of time because of negative cash flows and working capital deficiencies.
z z z z z z z z z z z z
zUnder these circumstances, the auditor would be most concerned about the
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A) control environment factors that affect the organizational structure.
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B) correlation of detection risk and inherent risk. z z z z z z
C) effectiveness of the entity's internal control activities. z z z z z z
D) possible effects on the entity's financial statements.
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9) Which of the following types of audit evidence provides theleast assurance of reliability?
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A) Receivable confirmations received from the client's customers. z z z z z z
B) Prenumbered receiving reports completed by the client's employees. z z z z z z z
C) Prior months' bank statements obtained from the client.
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D) Municipal property tax bills prepared in the client's name.
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3
, 10) Which of the following is a management assertion regarding account balances at the period
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z end?
A) Transactions and events that have been recorded have occurred and pertain to the
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entity.
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B) Transactions and events have been recorded in the proper accounts. z z z z z z z z z
C) The entity holds or controls the rights to assets, and liabilities are obligations of the
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entity.
z
D) Amounts and other data related to the transactions and events have been recorded
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appropriately.
z
11) A practitioner is engaged to express an opinion on management's assertion that the square
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zfootage of a warehouse offered for sale is 150,000 square feet. The practitioner should refer
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zto which of the following sources for professional guidance?
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A) Statement of Auditing Standards. z z z
B) Statements on Standards for Attestation Engagements. z z z z z
C) Statements on Standards for Accounting and Review Services. z z z z z z z
D) Statements on Standards for Consulting Services. z z z z z
12) In auditing the long-term debt account, an auditor's procedures most likely would focus
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zprimarily on management's assertion of
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A) existence.
B) completeness.
C) allocation.
D) rights and obligations. z z
13) An auditor selected items for test counts from the client's warehouse during the physical
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zinventory observation. The auditor then traced these test counts into the detailed inventory
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zlisting that ultimately agreed to the financial statements. This procedure most likely provided
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zevidence concerning management's assertion of
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A) completeness.
B) valuation.
C) presentation and disclosure. z z
D) existence.
E) rights and obligations. z z
4
,Test Bank forAuditing & Assurance Services 8th Edition by Timothy
z z z z z z z z z z
Louwers, Jerry Strawser z z z
Chap 01 9e z z
Answers Included z
1) The audit objective that all transactions and accounts that should be presented in the financial
z z z z z z z z z z z z z z
zstatements are in fact included is related to which of the PCAOB assertions?
z z z z z z z z z z z z
A) Existence
B) Rights and obligations z z
C) Completeness
D) Valuation
2) Cutoff tests designed to detect purchases made before the end of the year that have been
z z z z z z z z z z z z z z z
zrecorded in the subsequent year provide assurance about management's assertion of
z z z z z z z z z z
A) presentation and disclosure. z z
B) completeness.
C) rights and obligations. z z
D) existence.
3) During an audit of an entity's stockholders' equity accounts, the auditor determines whether
z z z z z z z z z z z z
zthere are restrictions on retained earnings resulting from loans, agreements, or state law. This
z z z z z z z z z z z z z
zaudit procedure most likely is intended to verify management's assertion of
z z z z z z z z z z
A) existence or occurrence. z z
B) completeness.
C) valuation or allocation. z z
D) presentation and disclosure. z z
4) The confirmation of an account payable balance selected from the general ledger provides
z z z z z z z z z z z z
zprimary evidence regarding which management assertion?
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A) Completeness
B) Valuation
C) Allocation
D) Existence
2
,5) What type of evidence would provide the highest level of assurance in an attestation
z z z z z z z z z z z z z
zengagement?
A) Evidence secured solely from within the entity.
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B) Evidence obtained from independent sources. z z z z
C) Evidence obtained indirectly. z z
D) Evidence obtained from multiple internal inquiries.
z z z z z
6) Which of the following management assertions is an auditor most likely testing if the audit
z z z z z z z z z z z z z z
zobjective states that all inventory on hand is reflected in the ending inventory balance?
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A) The entity has rights to the inventory.
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B) Inventory is properly valued. z z z
C) Inventory is properly presented in the financial statements.
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D) Inventory is complete. z z
7) An auditor traces the serial numbers on equipment to a nonissuer's subledger. Which of the
z z z z z z z z z z z z z z
zfollowing management assertions is supported by this test?
z z z z z z z
A) Valuation and allocation z z
B) Completeness
C) Rights and obligations z z
D) Presentation and disclosure z z
8) An auditor has substantial doubt about the entity's ability to continue as a going concern for a
z z z z z z z z z z z z z z z z
zreasonable period of time because of negative cash flows and working capital deficiencies.
z z z z z z z z z z z z
zUnder these circumstances, the auditor would be most concerned about the
z z z z z z z z z z
A) control environment factors that affect the organizational structure.
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B) correlation of detection risk and inherent risk. z z z z z z
C) effectiveness of the entity's internal control activities. z z z z z z
D) possible effects on the entity's financial statements.
z z z z z z
9) Which of the following types of audit evidence provides theleast assurance of reliability?
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A) Receivable confirmations received from the client's customers. z z z z z z
B) Prenumbered receiving reports completed by the client's employees. z z z z z z z
C) Prior months' bank statements obtained from the client.
z z z z z z z
D) Municipal property tax bills prepared in the client's name.
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3
, 10) Which of the following is a management assertion regarding account balances at the period
z z z z z z z z z z z z z
z end?
A) Transactions and events that have been recorded have occurred and pertain to the
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entity.
z
B) Transactions and events have been recorded in the proper accounts. z z z z z z z z z
C) The entity holds or controls the rights to assets, and liabilities are obligations of the
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entity.
z
D) Amounts and other data related to the transactions and events have been recorded
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appropriately.
z
11) A practitioner is engaged to express an opinion on management's assertion that the square
z z z z z z z z z z z z z
zfootage of a warehouse offered for sale is 150,000 square feet. The practitioner should refer
z z z z z z z z z z z z z z
zto which of the following sources for professional guidance?
z z z z z z z z
A) Statement of Auditing Standards. z z z
B) Statements on Standards for Attestation Engagements. z z z z z
C) Statements on Standards for Accounting and Review Services. z z z z z z z
D) Statements on Standards for Consulting Services. z z z z z
12) In auditing the long-term debt account, an auditor's procedures most likely would focus
z z z z z z z z z z z z
zprimarily on management's assertion of
z z z z
A) existence.
B) completeness.
C) allocation.
D) rights and obligations. z z
13) An auditor selected items for test counts from the client's warehouse during the physical
z z z z z z z z z z z z z
zinventory observation. The auditor then traced these test counts into the detailed inventory
z z z z z z z z z z z z
zlisting that ultimately agreed to the financial statements. This procedure most likely provided
z z z z z z z z z z z z
zevidence concerning management's assertion of
z z z z
A) completeness.
B) valuation.
C) presentation and disclosure. z z
D) existence.
E) rights and obligations. z z
4
