Auditing Exam 1 Practice ACTUAL Exam
Questions and CORRECT Answers
Which of the following best describes why an independent auditor is asked to express an opinion
on the fair presentation of financial statements? - CORRECT ANSWER - the opinion of
an independent party is needed because a company may not be objective with respect to its own
financial statements
which of the following professional services is an attestation engagement? - CORRECT
ANSWER - an engagement to report on compliance with statutory requirements
Which of the following attributes is likely to be unique to the audit work of CPAs as compared to
the work performed by practitioners of other professions? - CORRECT ANSWER -
Independence
Operational audits generally have been conducted by internal auditors and governmental audit
agencies but may be performed by certified public accountants. A primary purpose of an
operational audit is to provide - CORRECT ANSWER - a measure of management
performance in meeting organizational goals
Which of the following best describes the operational audit? - CORRECT ANSWER - it
concentrates on seeking aspects of operations in which waste could be reduced by the
introduction of controls
compliance auditing often extends beyond audits leading to the expression of opinions on the
fairness of financial presentation and includes audits of efficiency, economy, effectiveness, as
well as - CORRECT ANSWER - adherence to specific rules or procedures
Which of the following is considered an assurance engagement? - CORRECT ANSWER -
Audit
,Which of the following engagements is most likely to be considered an operational audit? -
CORRECT ANSWER - the auditor evaluates the organization's efficiency in processing
payments
In a financial statement audit, the auditor obtains a reasonable level of assurance about whether
the financial statements are free of material misstatement in order to express an opinion. In order
to obtain reasonable assurance, the auditor must - CORRECT ANSWER - obtain sufficient
audit evidence
Audit, attestation, Assurance Relationship - CORRECT ANSWER - audit is a form of
attestation, and attestation is a form of assurance
(A,A,A) a report on the effectiveness of internal control over financial reporting as required by
Section 404 of the Sarbanes-Oxley Act - CORRECT ANSWER - attestation service other
than an audit service
(A,A,A) an auditor's report on whether the financial statements are fairly presented in accordance
with International Financial Reporting Standards - CORRECT ANSWER - audit of F/S
(A,A,A) an engagement to help a company structure a merger transaction to minimize the taxes
of the combined entities - CORRECT ANSWER - assurance or non-assurance
(A,A,A) a report stating whether the company has compiled with restrictive covenants related to
officer compensation and payment of dividends contained in a bank loan agreement - CORRECT
ANSWER - attestation
(A,A,A) a report on the effectiveness of internal controls at a company that provides payroll
processing for other companies - CORRECT ANSWER - attestation
(A,A,A) an examination report stating whether a company's statement of greenhouse gas
emissions is presented in conformity with standards issued by the World Business Center of
Development and the World Resources Institute - CORRECT ANSWER - attestation
, (A,A,A) evaluating the voting process and certifying the outcome for Rolling Stone Magazine's
"greatest singer of all time" poll - CORRECT ANSWER - attestation
(A,A,A) a report indicating whether a governmental entity has compiled with certain government
regulations - CORRECT ANSWER - attestation
(A,A,A) a review report that provides limited assurance about whether financial statements are
fairly stated in accordance with U.S. GAAP - CORRECT ANSWER - attestation
(A,A,A) a report about management's assertion on the effectiveness of controls over the
availability, reliability, integrity, and maintainability of its accounting information system -
CORRECT ANSWER - attestation
(A,A,A) an evaluation of the effectiveness of key measures used to assess an entity's success in
achieving specific targets linked to an entity's strategic plan and vision - CORRECT
ANSWER - assurance or non-assurance
(Type of Auditor) Federal income tax returns of an officer of the corporation to determine
whether he or she has included all taxable income in his or her return - CORRECT
ANSWER - IRS, compliance
(Type of Auditor) Federal income tax returns of a corporation to determine whether the tax laws
have been followed - CORRECT ANSWER - IRS, compliance
(Type of Auditor) The computer operations of a large corporation to evaluate whether the
internal controls are likely to present misstatements in accounting and operating data -
CORRECT ANSWER - Internal auditor or CPA, Financial statements
(Type of Auditor) Financial statements for use by stockholders when there is an internal audit
staff - CORRECT ANSWER - CPA, financial statements
Questions and CORRECT Answers
Which of the following best describes why an independent auditor is asked to express an opinion
on the fair presentation of financial statements? - CORRECT ANSWER - the opinion of
an independent party is needed because a company may not be objective with respect to its own
financial statements
which of the following professional services is an attestation engagement? - CORRECT
ANSWER - an engagement to report on compliance with statutory requirements
Which of the following attributes is likely to be unique to the audit work of CPAs as compared to
the work performed by practitioners of other professions? - CORRECT ANSWER -
Independence
Operational audits generally have been conducted by internal auditors and governmental audit
agencies but may be performed by certified public accountants. A primary purpose of an
operational audit is to provide - CORRECT ANSWER - a measure of management
performance in meeting organizational goals
Which of the following best describes the operational audit? - CORRECT ANSWER - it
concentrates on seeking aspects of operations in which waste could be reduced by the
introduction of controls
compliance auditing often extends beyond audits leading to the expression of opinions on the
fairness of financial presentation and includes audits of efficiency, economy, effectiveness, as
well as - CORRECT ANSWER - adherence to specific rules or procedures
Which of the following is considered an assurance engagement? - CORRECT ANSWER -
Audit
,Which of the following engagements is most likely to be considered an operational audit? -
CORRECT ANSWER - the auditor evaluates the organization's efficiency in processing
payments
In a financial statement audit, the auditor obtains a reasonable level of assurance about whether
the financial statements are free of material misstatement in order to express an opinion. In order
to obtain reasonable assurance, the auditor must - CORRECT ANSWER - obtain sufficient
audit evidence
Audit, attestation, Assurance Relationship - CORRECT ANSWER - audit is a form of
attestation, and attestation is a form of assurance
(A,A,A) a report on the effectiveness of internal control over financial reporting as required by
Section 404 of the Sarbanes-Oxley Act - CORRECT ANSWER - attestation service other
than an audit service
(A,A,A) an auditor's report on whether the financial statements are fairly presented in accordance
with International Financial Reporting Standards - CORRECT ANSWER - audit of F/S
(A,A,A) an engagement to help a company structure a merger transaction to minimize the taxes
of the combined entities - CORRECT ANSWER - assurance or non-assurance
(A,A,A) a report stating whether the company has compiled with restrictive covenants related to
officer compensation and payment of dividends contained in a bank loan agreement - CORRECT
ANSWER - attestation
(A,A,A) a report on the effectiveness of internal controls at a company that provides payroll
processing for other companies - CORRECT ANSWER - attestation
(A,A,A) an examination report stating whether a company's statement of greenhouse gas
emissions is presented in conformity with standards issued by the World Business Center of
Development and the World Resources Institute - CORRECT ANSWER - attestation
, (A,A,A) evaluating the voting process and certifying the outcome for Rolling Stone Magazine's
"greatest singer of all time" poll - CORRECT ANSWER - attestation
(A,A,A) a report indicating whether a governmental entity has compiled with certain government
regulations - CORRECT ANSWER - attestation
(A,A,A) a review report that provides limited assurance about whether financial statements are
fairly stated in accordance with U.S. GAAP - CORRECT ANSWER - attestation
(A,A,A) a report about management's assertion on the effectiveness of controls over the
availability, reliability, integrity, and maintainability of its accounting information system -
CORRECT ANSWER - attestation
(A,A,A) an evaluation of the effectiveness of key measures used to assess an entity's success in
achieving specific targets linked to an entity's strategic plan and vision - CORRECT
ANSWER - assurance or non-assurance
(Type of Auditor) Federal income tax returns of an officer of the corporation to determine
whether he or she has included all taxable income in his or her return - CORRECT
ANSWER - IRS, compliance
(Type of Auditor) Federal income tax returns of a corporation to determine whether the tax laws
have been followed - CORRECT ANSWER - IRS, compliance
(Type of Auditor) The computer operations of a large corporation to evaluate whether the
internal controls are likely to present misstatements in accounting and operating data -
CORRECT ANSWER - Internal auditor or CPA, Financial statements
(Type of Auditor) Financial statements for use by stockholders when there is an internal audit
staff - CORRECT ANSWER - CPA, financial statements
