TEST BANK For Auditing & Assurance Services: A Systematic Approach, 12th Edition Chapters 1 - 21 Complete

Chapter 1: An Introduction to Assurance and Financial Statement Auditing Chapter 2: The Financial Statement Auditing Environment Chapter 3: Audit Planning, Types of Audit Tests, and Materiality Chapter 4: Risk Assessment Chapter 5: Evidence and Documentation Chapter 6: Internal Control in a Financial Statement Audit Chapter 7: Auditing Internal Control over Financial Reporting Chapter 8: Audit Sampling: An Overview and Application to Tests of Controls Chapter 9: Audit Sampling: An Application to Substantive Tests of Account Balances Chapter 10: Auditing the Revenue Process Chapter 11: Auditing the Purchasing Process Chapter 12: Auditing the Human Resource Management Process Chapter 13: Auditing the Inventory Management Process Chapter 14: Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment Chapter 15: Auditing the Financing/Investing Process: Long-Term Liabilities, Stockholders’ Equity, and Income Statement Accounts Chapter 16: Auditing the Financing/Investing Process: Cash and Investments Chapter 17: Completing the Audit Engagement Chapter 18: Reports on Audited Financial Statements Chapter 19: Professional Conduct, Independence, and Quality Management Chapter 20: Legal Liability Chapter 21: Assurance, Attestation, and Internal Auditing Services Auditing & Assurance Services: A Systematic Approach, 12e (Messier) Chapter 1 An Introduction to Assurance and Financial Statement Auditing 1) Auditing focuses on rules, techniques, and computations required to prepare and analyze financial information. ANSWER: FALSE Difficulty: 1 Easy Topic: The Importance for Studying Auditing Learning Objective: 01-01 Understand why studying auditing can be valuable to you whether or not you plan to become an auditor, and why it is different from studying accounting. Bloom's: Remember AACSB: Communication AICPA: BB Legal; FN Decision Making 2) Decision makers demand reliable information that is provided by accountants. ANSWER: TRUE Difficulty: 1 Easy Topic: The Demand for Auditing and Assurance Learning Objective: 01-02 Understand the demand for auditing and be able to explain the desired characteristics of auditors and audit services through an analogy to a house inspector and a house inspection service. Bloom's: Understand AACSB: Communication AICPA: FN Decision Making; BB Industry 3) Information asymmetry seldom occurs. ANSWER: FALSE Difficulty: 2 Medium Topic: The Demand for Auditing and Assurance Learning Objective: 01-02 Understand the demand for auditing and be able to explain the desired characteristics of auditors and audit services through an analogy to a house inspector and a house inspection service. Bloom's: Apply AACSB: Communication AICPA: BB Industry; FN Reporting 4) Conflicts of interest often occur between absentee owners and managers. ANSWER: TRUE Difficulty: 2 Medium Topic: The Demand for Auditing and Assurance Learning Objective: 01-02 Understand the demand for auditing and be able to explain the desired characteristics of auditors and audit services through an analogy to a house inspector and a house inspection service. Bloom's: Apply AACSB: Communication AICPA: BB Industry; FN Reporting 5) Auditing services and attestation services are the same. ANSWER: FALSE Difficulty: 1 Easy Topic: Auditing, Attest, and Assurance Services Defined Learning Objective: 01-03 Understand the relationships among auditing, attestation, and assurance services. Bloom's: Understand AACSB: Communication AICPA: BB Industry; FN Reporting 6) Auditing is a type of attest service. ANSWER: TRUE Difficulty: 1 Easy Topic: Auditing, Attest, and Assurance Services Defined Learning Objective: 01-03 Understand the relationships among auditing, attestation, and assurance services.; 01-04 Know the basic definition of a financial statement audit. Bloom's: Understand AACSB: Communication AICPA: BB Industry; FN Reporting 7) Testing all transactions that occurred during the period is cost prohibitive. ANSWER: TRUE Difficulty: 2 Medium Topic: The Audit Process Learning Objective: 01-06 Be able to explain why on most audit engagements an auditor tests only a sample of transactions that occurred. Bloom's: Apply AACSB: Communication AICPA: FN Decision Making; BB Critical Thinking 8) Why do auditors generally use a sampling approach to evidence gathering? A) Auditors are experts and do not need to look at much to know whether the financial statements are correct or not. B) Auditors must balance the cost of the audit with the need for precision. C) Auditors must limit their exposure to their auditee to maintain independence. D) The auditor's relationship with the auditee is generally adversarial, so the auditor will not have access to all of the financial information of the company. ANSWER: B Difficulty: 1 Easy Topic: The Audit Process Learning Objective: 01-06 Be able to explain why on most audit engagements an auditor tests only a sample of transactions that occurred. Bloom's: Understand AACSB: Communication AICPA: FN Decision Making; BB Industry 9) Which of the following statements best describes a relationship between sample size and other elements of auditing? A) If materiality increases, so will the sample size. B) If the desired level of assurance increases, sample sizes can be smaller. C) If materiality decreases, sample size will need to increase. D) There is no relationship between sample size and materiality or the desired level of assurance. ANSWER: C Difficulty: 2 Medium Topic: The Audit Process Learning Objective: 01-06 Be able to explain why on most audit engagements an auditor tests only a sample of transactions that occurred. Bloom's: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking; FN Risk Analysis 10) Which of the following statements about the study of auditing is NOT true? A) The study of auditing can be valuable to future accountants and business decision makers whether or not they plan to become auditors. B) The study of auditing focuses on learning the analytical and logical skills necessary to evaluate the relevance and reliability of information. C) The study of auditing focuses on learning the rules, techniques, and computations required to analyze financial statements. D) The study of auditing begins with the understanding of a coherent logical framework and techniques useful for gathering and analyzing evidence about others' assertions. ANSWER: C Difficulty: 2 Medium Topic: The Importance for Studying Auditing Learning Objective: 01-01 Understand why studying auditing can be valuable to you whether or not you plan to become an auditor, and why it is different from studying accounting. Bloom's: Analyze AACSB: Communication AICPA: FN Decision Making; BB Industry 11) The basic definition of auditing states it is a process to: A) detect fraud. B) examine individual transactions so that the auditor may certify as to their validity. C) objectively obtain and evaluate evidence regarding assertions. D) assure the consistent application of correct accounting procedures. ANSWER: C Difficulty: 1 Easy Topic: Auditing, Attest, and Assurance Services Defined Learning Objective: 01-03 Understand the relationships among auditing, attestation, and assurance services.; 01-04 Know the basic definition of a financial statement audit. Bloom's: Remember AACSB: Communication AICPA: FN Reporting; BB Critical Thinking