Auditing Theory AT 5901: Questions With Easy-to-
Understand Solutions
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. Correct Answer - d. An
audit has a benefit only to the owners.
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 finding to the general public.
d. Inform readers of the degree of correspondence between the quantifiable
information and
the established criteria. Correct Answer - d. Inform readers of the
degree of correspondence between the quantifiable information and
the established criteria.
The auditor communicates the results of his or her work through the medium
of the
a. Engagement letter
b. Audit report
c. Management letter.
d. Financial statements Correct Answer - b. Audit report
As used in auditing, which of the following statements best describes
"assertions"?
a. Assertions are the representations of management as to the reliability of the
information
system.
,b. Assertions are the auditor's findings to be communicated in the audit
report.
c. Assertions are the representations of management as to the fairness of the
financial
statements.
d. Assertions are found only in the footnotes to the financial statements.
Correct Answer - c. Assertions are the representations of management as to
the fairness of the financial
statements.
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 ASC Statements. Correct Answer - c. Accumulation
and interpretation of evidence.
The framework for auditing and related services as addressed by PSA
excludes
a. Review
b. Tax services
c. Compilation
d. Agreed upon procedure Correct Answer - b. Tax services
It refers to the level of auditor's satisfaction as to the reliability of an assertion
being made by
one party for use by another party.
a. Confidence level
b. Reasonableness level
c. Assurance level
d. Tolerable level Correct Answer - c. Assurance level
Which of the following is an objective of a review engagement?
a. Expressing a positive opinion that the financial information is presented in
conformity with
generally accepted accounting principles.
b. Expressing a limited assurance to users who have agreed as to procedures
that will be
performed by the CPA.
, c. Reporting whether material modifications should be made to such financial
statements to
make them conform with generally accepted accounting principles.
d. Reporting that the financial statements, in all materials respects, fairly
present the
financial position and operating results of the client. Correct Answer - c.
Reporting whether material modifications should be made to such financial
statements to
make them conform with generally accepted accounting principles.
Which of the following is true of the report based on agreed-upon-
procedures?
a. The report is restricted to those parties who have agreed to the procedures
to be
performed.
b. The CPA provides the recipients of the report limited assurance as to
reasonableness of
the assertion(s) presented in the financial information.
c. The report states that the auditor has not recognized any basis that requires
revision of
financial statements.
d. The report should state that the procedures performed are limited to
analytical procedures
and inquiry. Correct Answer - a. The report is restricted to those parties
who have agreed to the procedures to be
performed.
According to Philippine Standard on Auditing, the procedures employed in
doing compilation
are:
a. Designed to enable the accountant to express a limited assurance.
b. Designed to enable the accountant to express a negative assurance.
c. Not designed to enable the accountant to express any form of assurance.
d. Less extensive than review procedures but more extensive than agreed-
upon procedures Correct Answer - c. Not designed to enable the
accountant to express any form of assurance.
Any services in which the CPA firm issues a written communication that
express a conclusion
Understand Solutions
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. Correct Answer - d. An
audit has a benefit only to the owners.
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 finding to the general public.
d. Inform readers of the degree of correspondence between the quantifiable
information and
the established criteria. Correct Answer - d. Inform readers of the
degree of correspondence between the quantifiable information and
the established criteria.
The auditor communicates the results of his or her work through the medium
of the
a. Engagement letter
b. Audit report
c. Management letter.
d. Financial statements Correct Answer - b. Audit report
As used in auditing, which of the following statements best describes
"assertions"?
a. Assertions are the representations of management as to the reliability of the
information
system.
,b. Assertions are the auditor's findings to be communicated in the audit
report.
c. Assertions are the representations of management as to the fairness of the
financial
statements.
d. Assertions are found only in the footnotes to the financial statements.
Correct Answer - c. Assertions are the representations of management as to
the fairness of the financial
statements.
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 ASC Statements. Correct Answer - c. Accumulation
and interpretation of evidence.
The framework for auditing and related services as addressed by PSA
excludes
a. Review
b. Tax services
c. Compilation
d. Agreed upon procedure Correct Answer - b. Tax services
It refers to the level of auditor's satisfaction as to the reliability of an assertion
being made by
one party for use by another party.
a. Confidence level
b. Reasonableness level
c. Assurance level
d. Tolerable level Correct Answer - c. Assurance level
Which of the following is an objective of a review engagement?
a. Expressing a positive opinion that the financial information is presented in
conformity with
generally accepted accounting principles.
b. Expressing a limited assurance to users who have agreed as to procedures
that will be
performed by the CPA.
, c. Reporting whether material modifications should be made to such financial
statements to
make them conform with generally accepted accounting principles.
d. Reporting that the financial statements, in all materials respects, fairly
present the
financial position and operating results of the client. Correct Answer - c.
Reporting whether material modifications should be made to such financial
statements to
make them conform with generally accepted accounting principles.
Which of the following is true of the report based on agreed-upon-
procedures?
a. The report is restricted to those parties who have agreed to the procedures
to be
performed.
b. The CPA provides the recipients of the report limited assurance as to
reasonableness of
the assertion(s) presented in the financial information.
c. The report states that the auditor has not recognized any basis that requires
revision of
financial statements.
d. The report should state that the procedures performed are limited to
analytical procedures
and inquiry. Correct Answer - a. The report is restricted to those parties
who have agreed to the procedures to be
performed.
According to Philippine Standard on Auditing, the procedures employed in
doing compilation
are:
a. Designed to enable the accountant to express a limited assurance.
b. Designed to enable the accountant to express a negative assurance.
c. Not designed to enable the accountant to express any form of assurance.
d. Less extensive than review procedures but more extensive than agreed-
upon procedures Correct Answer - c. Not designed to enable the
accountant to express any form of assurance.
Any services in which the CPA firm issues a written communication that
express a conclusion
