TEST BANK for Auditing & Assurance Services:
bv bv bv bv bv bv bv
A Systematic Approach 12TH Edition, by Dougla
bv bv bv bv bv bv
s F. Prawitt William F. Messier Jr, Steven M. Glo
bv bv bv bv bv bv bv bv bv
ver
All Chapters Covered 1- bv bv bv
21| Expert Verified Questions & Correct Answers for Exam Preparati
bv bv bv bv bv bv bv bv bv
ons| A+ GRADE ASSURED bv bv bv
All Answers are at the End of Each Chapter
bv bv bv bv bv bv bv bv
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, Chapterbv01
1) Whybvdobvauditorsbvoftenbvusebvabvsamplingbvapproachbvtobvevidencebvgathering?
A) Auditorsbvarebvexpertsbvandbvdobvnotbvneedbvtobvlookbvatbvmuchbvtobvknowbvwhetherbvthebvfinancialb
vstatementsbvarebvcorrectbvorbvnot.
B) Auditorsbvmustbvbalancebvthebvcostbvofbvthebvauditbvwithbvthebvneedbvforbvprecisionbvandbvforbvsomebvtypesbvof
evidence,bvcomputerbvdatabvanalyticbvapproachesbvcan‘tbvbebvused.
C) Auditorsbvmustbvlimitbvtheirbvexposurebvtobvtheirbvauditeebvtobvmaintainbvindependence.
D) Thebvauditor'sbvrelationshipbvwithbvthebvauditeebvisbvgenerallybvadversarial,bvsobvthebvauditorbvwillb
vnotbvhavebvaccessbvtobvallbvofbvthebvfinancialbvinformationbvofbvthebvcompany.
2) Whichbvofbvthebvfollowingbvstatementsbvbestbvdescribesbvabvrelationshipbvbetweenbvsamplebvsizebva
ndbvotherbvelementsbvofbvauditing?
A) Ifbvmaterialitybvincreases,bvsobvwillbvthebvsamplebvsize.
B) Ifbvthebvdesiredbvlevelbvofbvassurancebvincreases,bvsamplebvsizesbvcanbvbebvsmaller.
C) Ifbvmaterialitybvdecreases,bvsamplebvsizebvwillbvneedbvtobvincrease.
D) Therebvisbvnobvrelationshipbvbetweenbvsamplebvsizebvandbvmaterialitybvorbvthebvdesiredbvlevelbvofbvassurance.
3) WhichbvofbvthebvfollowingbvstatementsbvaboutbvthebvstudybvofbvauditingbvisbvNOTbvtrue?
A) Thebvstudybvofbvauditingbvcanbvbebvvaluablebvtobvfuturebvaccountantsbvandbvbusinessbvdecisionbvmakers
bvwhetherbvorbvnotbvtheybvplanbvtobvbecomebvauditors.
B) Thebvstudybvofbvauditingbvfocusesbvonbvlearningbvthebvanalyticalbvandbvlogicalbvskillsbvnecessarybvto
bvevaluatebvthebvrelevancebvandbvreliabilitybvofbvinformation.
C) Thebvstudybvofbvauditingbvfocusesbvonbvlearningbvthebvrules,bvtechniques,bvandbvcomputationsbvre
quiredbvtobvanalyzebvfinancialbvstatementsbvforbvmakingbvinvestmentbvrecommendations.
D) Thebvstudybvofbvauditingbvbeginsbvwithbvthebvunderstandingbvofbvabvcoherentbvlogicalbvframe
workbvandbvtechniquesbvusefulbvforbvgatheringbvandbvanalyzingbvevidencebvaboutbvothers‘bvassertion
s.
4) Thebvbasicbvdefinitionbvofbvauditingbvessentiallybvindicatesbvthat,bvoverall,bvauditingbvisbvabvprocessbvto:
A) detectbvfraud.
B) examinebvindividualbvtransactionsbvsobvthatbvthebvauditorbvmaybvcertifybvasbvtobvtheirbvvalidity.
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,C) objectivelybvobtainbvandbvevaluatebvevidencebvregardingbvassertionsbvmadebvbybvanotherbvparty.
D) assurebvthebvconsistentbvapplicationbvofbvcorrectbvaccountingbvprocedures.
5) Assurancebvservicesbvmaybvimprovebvallbvofbvthebvfollowingbvexcept:
A) relevance.
B) credibility.
C) periodicity.
D) reliability.
6) Evidencebvisbvreliablebvifbvit:
A) signalsbvthebvtruebvstatebvofbvabvmanagementbvassertion.
B) appliesbvtobvthebvperiodbvbeingbvaudited.
C) relatesbvtobvthebvauditbvassertionbvbeingbvtested.
D) isbvsufficientbvtobvjustifybvabvconclusion.
7) Whichbvofbvthebvfollowingbvbestbvdescribesbvthebvconceptbvofbvauditbvrisk?
A) Thebvriskbvofbvthebvauditorbvbeingbvsuedbvbecausebvofbvassociationbvwithbvanbvauditee.
B) Thebvriskbvthatbvthebvauditorbvwillbvprovidebvanbvinappropriatebvopinionbvonbvfinancialbvstatementsbvt
hatbvare,bvinbvfact,bvmateriallybvmisstated.
C) Thebvoverallbvriskbvthatbvabvmaterialbvmisstatementbvexistsbvinbvthebvfinancialbvstatements.
D) Thebvriskbvthatbvauditorsbvusebvauditbvproceduresbvthatbvarebvinappropriate.
8) Anbvauditorbvwhobvacceptsbvanbvauditbvengagementbvandbvdoesbvnotbvpossessbvexpertisebvwithbvrespectbvtobvthe
businessbventity‘sbvindustrybvatbvthatbvpoint,bvshould:
A) engagebvfinancialbvexpertsbvfamiliarbvwithbvthebvnaturebvofbvthebvbusinessbventity.
B) obtainbvabvknowledgebvofbvmattersbvthatbvrelatebvtobvthebvnaturebvofbvthebventity‘sbvbusinessbvandbvthebvindustrybv
in
whichbvitbvoperates.
C) referbvabvsubstantialbvportionbvofbvthebvauditbvtobvanotherbvCPA,bvwhobvwillbvactbvasbvthebvprincipalbvauditor.
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, D) firstbvinformbvmanagementbvthatbvanbvunqualifiedbvopinionbvcannotbvbebvissued.
9) Forbvpublicly-
heldbvcompanies,bvwhichbvofbvthebvfollowingbvisbvintegratedbvwithbvthebvauditbvofbvfinancialbvstatem
ents?
A) budgetarybvinformationbvaudit
B) thebvauditbvofbvinternalbvcontrols
C) auditbvofbvmanagementbvforecasts
D) auditbvofbvinterimbvfinancialbvstatements
10) Duringbvthebvfirstbvphasebvofbvanbvaudit,bvabvCPAbvmostbvlikelybvwould:
A) identifybvspecificbvinternalbvcontrolbvactivitiesbvthatbvarebvlikelybvtobvpreventbvfraud.
B) evaluatebvthebvreasonablenessbvofbvthebvcompany‘sbvaccountingbvestimates.
C) evaluatebvthebvintegritybvofbvmanagement.
D) inquirebvofbvthebvcompany'sbvattorneybvasbvtobvwhetherbvanybvunrecordedbvclaimsbvarebvprobablebvorbvasserted.
11) Inbvthebvcontextbvofbvagencybvtheory,bvinformationbvasymmetrybvrefersbvtobvthebvideabvthat:
A) informationbvcanbvvarybvinbvitsbvreliability.
B) informationbvcanbvvarybvinbvitsbvrelevance.
C) managementbvhasbvmorebvinformationbvaboutbvthebventity‘sbvtruebvfinancialbvresultsbvandbvpositionb
vthanbvdobvthebvabsenteebvownersbv(i.e.bvstockholders).
D) managementbvlikelybvwillbvnotbvactbvinbvthebvbestbvinterestsbvofbvthebvabsenteebvowners.
12) Whichbvofbvthebvfollowingbvbestbvdescribesbvwhybvanbvindependentbvauditorbvisbvengagedbvtobvexpressbva
nbvopinionbvonbvthebvfairbvpresentationbvofbvfinancialbvstatements?
A) Itbvisbvdifficultbvtobvpreparebvfinancialbvstatementsbvthatbvfairlybvpresentbvabvcompany‘sbvfinancialbvpositionbvan
d
changesbvinbvcashbvflowsbvwithoutbvthebvexpertisebvofbvanbvindependentbvauditor.
B) Itbvisbvmanagement‘sbvresponsibilitybvtobvseekbvavailablebvindependentbvaidbvinbvthebvapprais
albvofbvthebvfinancialbvinformationbvshownbvinbvitsbvfinancialbvstatements.
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bv bv bv bv bv bv bv
A Systematic Approach 12TH Edition, by Dougla
bv bv bv bv bv bv
s F. Prawitt William F. Messier Jr, Steven M. Glo
bv bv bv bv bv bv bv bv bv
ver
All Chapters Covered 1- bv bv bv
21| Expert Verified Questions & Correct Answers for Exam Preparati
bv bv bv bv bv bv bv bv bv
ons| A+ GRADE ASSURED bv bv bv
All Answers are at the End of Each Chapter
bv bv bv bv bv bv bv bv
1
bv|bvPbvabvgbv
e
, Chapterbv01
1) Whybvdobvauditorsbvoftenbvusebvabvsamplingbvapproachbvtobvevidencebvgathering?
A) Auditorsbvarebvexpertsbvandbvdobvnotbvneedbvtobvlookbvatbvmuchbvtobvknowbvwhetherbvthebvfinancialb
vstatementsbvarebvcorrectbvorbvnot.
B) Auditorsbvmustbvbalancebvthebvcostbvofbvthebvauditbvwithbvthebvneedbvforbvprecisionbvandbvforbvsomebvtypesbvof
evidence,bvcomputerbvdatabvanalyticbvapproachesbvcan‘tbvbebvused.
C) Auditorsbvmustbvlimitbvtheirbvexposurebvtobvtheirbvauditeebvtobvmaintainbvindependence.
D) Thebvauditor'sbvrelationshipbvwithbvthebvauditeebvisbvgenerallybvadversarial,bvsobvthebvauditorbvwillb
vnotbvhavebvaccessbvtobvallbvofbvthebvfinancialbvinformationbvofbvthebvcompany.
2) Whichbvofbvthebvfollowingbvstatementsbvbestbvdescribesbvabvrelationshipbvbetweenbvsamplebvsizebva
ndbvotherbvelementsbvofbvauditing?
A) Ifbvmaterialitybvincreases,bvsobvwillbvthebvsamplebvsize.
B) Ifbvthebvdesiredbvlevelbvofbvassurancebvincreases,bvsamplebvsizesbvcanbvbebvsmaller.
C) Ifbvmaterialitybvdecreases,bvsamplebvsizebvwillbvneedbvtobvincrease.
D) Therebvisbvnobvrelationshipbvbetweenbvsamplebvsizebvandbvmaterialitybvorbvthebvdesiredbvlevelbvofbvassurance.
3) WhichbvofbvthebvfollowingbvstatementsbvaboutbvthebvstudybvofbvauditingbvisbvNOTbvtrue?
A) Thebvstudybvofbvauditingbvcanbvbebvvaluablebvtobvfuturebvaccountantsbvandbvbusinessbvdecisionbvmakers
bvwhetherbvorbvnotbvtheybvplanbvtobvbecomebvauditors.
B) Thebvstudybvofbvauditingbvfocusesbvonbvlearningbvthebvanalyticalbvandbvlogicalbvskillsbvnecessarybvto
bvevaluatebvthebvrelevancebvandbvreliabilitybvofbvinformation.
C) Thebvstudybvofbvauditingbvfocusesbvonbvlearningbvthebvrules,bvtechniques,bvandbvcomputationsbvre
quiredbvtobvanalyzebvfinancialbvstatementsbvforbvmakingbvinvestmentbvrecommendations.
D) Thebvstudybvofbvauditingbvbeginsbvwithbvthebvunderstandingbvofbvabvcoherentbvlogicalbvframe
workbvandbvtechniquesbvusefulbvforbvgatheringbvandbvanalyzingbvevidencebvaboutbvothers‘bvassertion
s.
4) Thebvbasicbvdefinitionbvofbvauditingbvessentiallybvindicatesbvthat,bvoverall,bvauditingbvisbvabvprocessbvto:
A) detectbvfraud.
B) examinebvindividualbvtransactionsbvsobvthatbvthebvauditorbvmaybvcertifybvasbvtobvtheirbvvalidity.
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,C) objectivelybvobtainbvandbvevaluatebvevidencebvregardingbvassertionsbvmadebvbybvanotherbvparty.
D) assurebvthebvconsistentbvapplicationbvofbvcorrectbvaccountingbvprocedures.
5) Assurancebvservicesbvmaybvimprovebvallbvofbvthebvfollowingbvexcept:
A) relevance.
B) credibility.
C) periodicity.
D) reliability.
6) Evidencebvisbvreliablebvifbvit:
A) signalsbvthebvtruebvstatebvofbvabvmanagementbvassertion.
B) appliesbvtobvthebvperiodbvbeingbvaudited.
C) relatesbvtobvthebvauditbvassertionbvbeingbvtested.
D) isbvsufficientbvtobvjustifybvabvconclusion.
7) Whichbvofbvthebvfollowingbvbestbvdescribesbvthebvconceptbvofbvauditbvrisk?
A) Thebvriskbvofbvthebvauditorbvbeingbvsuedbvbecausebvofbvassociationbvwithbvanbvauditee.
B) Thebvriskbvthatbvthebvauditorbvwillbvprovidebvanbvinappropriatebvopinionbvonbvfinancialbvstatementsbvt
hatbvare,bvinbvfact,bvmateriallybvmisstated.
C) Thebvoverallbvriskbvthatbvabvmaterialbvmisstatementbvexistsbvinbvthebvfinancialbvstatements.
D) Thebvriskbvthatbvauditorsbvusebvauditbvproceduresbvthatbvarebvinappropriate.
8) Anbvauditorbvwhobvacceptsbvanbvauditbvengagementbvandbvdoesbvnotbvpossessbvexpertisebvwithbvrespectbvtobvthe
businessbventity‘sbvindustrybvatbvthatbvpoint,bvshould:
A) engagebvfinancialbvexpertsbvfamiliarbvwithbvthebvnaturebvofbvthebvbusinessbventity.
B) obtainbvabvknowledgebvofbvmattersbvthatbvrelatebvtobvthebvnaturebvofbvthebventity‘sbvbusinessbvandbvthebvindustrybv
in
whichbvitbvoperates.
C) referbvabvsubstantialbvportionbvofbvthebvauditbvtobvanotherbvCPA,bvwhobvwillbvactbvasbvthebvprincipalbvauditor.
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, D) firstbvinformbvmanagementbvthatbvanbvunqualifiedbvopinionbvcannotbvbebvissued.
9) Forbvpublicly-
heldbvcompanies,bvwhichbvofbvthebvfollowingbvisbvintegratedbvwithbvthebvauditbvofbvfinancialbvstatem
ents?
A) budgetarybvinformationbvaudit
B) thebvauditbvofbvinternalbvcontrols
C) auditbvofbvmanagementbvforecasts
D) auditbvofbvinterimbvfinancialbvstatements
10) Duringbvthebvfirstbvphasebvofbvanbvaudit,bvabvCPAbvmostbvlikelybvwould:
A) identifybvspecificbvinternalbvcontrolbvactivitiesbvthatbvarebvlikelybvtobvpreventbvfraud.
B) evaluatebvthebvreasonablenessbvofbvthebvcompany‘sbvaccountingbvestimates.
C) evaluatebvthebvintegritybvofbvmanagement.
D) inquirebvofbvthebvcompany'sbvattorneybvasbvtobvwhetherbvanybvunrecordedbvclaimsbvarebvprobablebvorbvasserted.
11) Inbvthebvcontextbvofbvagencybvtheory,bvinformationbvasymmetrybvrefersbvtobvthebvideabvthat:
A) informationbvcanbvvarybvinbvitsbvreliability.
B) informationbvcanbvvarybvinbvitsbvrelevance.
C) managementbvhasbvmorebvinformationbvaboutbvthebventity‘sbvtruebvfinancialbvresultsbvandbvpositionb
vthanbvdobvthebvabsenteebvownersbv(i.e.bvstockholders).
D) managementbvlikelybvwillbvnotbvactbvinbvthebvbestbvinterestsbvofbvthebvabsenteebvowners.
12) Whichbvofbvthebvfollowingbvbestbvdescribesbvwhybvanbvindependentbvauditorbvisbvengagedbvtobvexpressbva
nbvopinionbvonbvthebvfairbvpresentationbvofbvfinancialbvstatements?
A) Itbvisbvdifficultbvtobvpreparebvfinancialbvstatementsbvthatbvfairlybvpresentbvabvcompany‘sbvfinancialbvpositionbvan
d
changesbvinbvcashbvflowsbvwithoutbvthebvexpertisebvofbvanbvindependentbvauditor.
B) Itbvisbvmanagement‘sbvresponsibilitybvtobvseekbvavailablebvindependentbvaidbvinbvthebvapprais
albvofbvthebvfinancialbvinformationbvshownbvinbvitsbvfinancialbvstatements.
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