ACC 406 Test 1 Practice Questions and
Answers|2025 Update | 100% Correct-
Toronto Metropolitan University
information asymmetry - ✔✔ANSWER✔✔->>the manager generally
has more information about the "true" financial position and results
of operations of the entity than does the absentee owner, there is a
natural conflict of interest
public company - ✔✔ANSWER✔✔->>sells its stocks or bonds to the
public
information asymmetry and conflict of interest lead to ... -
✔✔ANSWER✔✔->>information risk
thus, to lower this information risk and add credibility to the financial
statements, the auditor is hired
Auditing saves companies money because... - ✔✔ANSWER✔✔-
>>they can get lower interest rates on loans and more shareholder's
equity
, The Two Management Assertion Categories - ✔✔ANSWER✔✔->>-
assertions about classes of transactions and events (and related
disclosures) for the period under audit
- assertions about account balances (and related disclosures) at the
period end
Assertions about classes of transactions and events -
✔✔ANSWER✔✔->>Occurrence, Completeness, Authorization,
Accuracy, Cutoff, Classification, Presentation
Occurrence: Assertions about classes of transactions and events -
✔✔ANSWER✔✔->>Transactions or events that have been accounted
or disclosed have occurred, and such transactions/events pertain to
the entity
Completeness: Assertions about classes of transactions and events -
✔✔ANSWER✔✔->>All transactions and events that should have
been recorded have been recorded, and all related disclosures that
should have been included in the financial statements have been
included
Authorization: Assertions about classes of transactions and events -
✔✔ANSWER✔✔->>All transactions and events have been properly
authorized
Accuracy: Assertions about classes of transactions and events -
✔✔ANSWER✔✔->>Amounts and other data relating to recorded
Answers|2025 Update | 100% Correct-
Toronto Metropolitan University
information asymmetry - ✔✔ANSWER✔✔->>the manager generally
has more information about the "true" financial position and results
of operations of the entity than does the absentee owner, there is a
natural conflict of interest
public company - ✔✔ANSWER✔✔->>sells its stocks or bonds to the
public
information asymmetry and conflict of interest lead to ... -
✔✔ANSWER✔✔->>information risk
thus, to lower this information risk and add credibility to the financial
statements, the auditor is hired
Auditing saves companies money because... - ✔✔ANSWER✔✔-
>>they can get lower interest rates on loans and more shareholder's
equity
, The Two Management Assertion Categories - ✔✔ANSWER✔✔->>-
assertions about classes of transactions and events (and related
disclosures) for the period under audit
- assertions about account balances (and related disclosures) at the
period end
Assertions about classes of transactions and events -
✔✔ANSWER✔✔->>Occurrence, Completeness, Authorization,
Accuracy, Cutoff, Classification, Presentation
Occurrence: Assertions about classes of transactions and events -
✔✔ANSWER✔✔->>Transactions or events that have been accounted
or disclosed have occurred, and such transactions/events pertain to
the entity
Completeness: Assertions about classes of transactions and events -
✔✔ANSWER✔✔->>All transactions and events that should have
been recorded have been recorded, and all related disclosures that
should have been included in the financial statements have been
included
Authorization: Assertions about classes of transactions and events -
✔✔ANSWER✔✔->>All transactions and events have been properly
authorized
Accuracy: Assertions about classes of transactions and events -
✔✔ANSWER✔✔->>Amounts and other data relating to recorded
