TEST BANK for Auditing & Assurance Services: A
Systematic Approach 12TH Edition, by Douglas F.
PrawittWilliamF.MessierJr,StevenM.Glover
AllChaptersCovered1-21|ExpertVerifiedQuestions&Correct Answers
for ExamPreparations|A+GRADEASSURED
AllAnswersareattheEndofEachChapter
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, Chapter_01
1) Why_do_ auditors_ often_ use_ a_ sampling_ approach_to_ evidence_ gathering?
A) Auditors_are_experts_and_do_not_need_to_look_at_much_to_know_whether_the_financial_state
me_nts_are_correct_or_not.
B) Auditors_must_balance_the_cost_of_the_audit_with_the_need_for_precision_and_for_some_types
_of_evidence,_computer_data_analytic_approaches_can‘t_be_used.
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_
ha_ve_access_to_all_of_the_financial_information_of_the_company.
2) Which_of_the_following_statements_best_describes_a_relationship_between_sample_size_and_
ot_her_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.
3) 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_wh
et_her_or_not_they_plan_to_become_auditors.
B) The_study_of_auditing_focuses_on_learning_the_analytical_and_logical_skills_necessary_to_eva
lu_ate_the_relevance_and_reliability_of_information.
C) The_study_of_auditing_focuses_on_learning_the_rules,_techniques,_and_computations_requir
ed_to_analyze_financial_statements_for_making_investment_recommendations.
D) The_study_of_auditing_begins_with_the_understanding_of_a_coherent_logical_framework
_a_nd_techniques_useful_for_gathering_and_analyzing_evidence_about_others‘_assertions.
4) The_ basic_ definition_ of_ auditing_essentially_indicates_ that,_ overall,_ auditing_ is_ a_ process_ to:
A) detect_ fraud.
B) examine_individual_ transactions_ so_ that_ the_ auditor_ may_ certify_ as_ to_ their_ validity.
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,C) objectively_obtain_ and_ evaluate_ evidence_ regarding_ assertions_made_ by_another_ party.
D) assure_the_ consistent_ application_ of_ correct_ accounting_ procedures.
5) Assurance_services_ may_ improve_ all_ of_ the_ following_except:
A) relevance.
B) credibility.
C) periodicity.
D) reliability.
6) Evidence_ is_ reliable_ if_ it:
A) signals_the_true_ state_ of_ a_ management_ assertion.
B) applies_to_ the_ period_ being_ audited.
C) relates_ to_ the_ audit_ assertion_ being_ tested.
D) is_ sufficient_ to_justify_ a_ conclusion.
7) Which_of_ the_ following_ best_ describes_ the_ concept_ of_ audit_ risk?
A) The_risk_ of_ the_ auditor_ being_ sued_ because_ of_ association_ with_ an_ auditee.
B) The_risk_that_the_auditor_will_provide_an_inappropriate_opinion_on_financial_statements_that_ar
e,_ in_fact,_materially_misstated.
C) The_overall_ risk_that_ a_ material_ misstatement_ exists_ in_the_ financial_ statements.
D) The_risk_ that_ auditors_ use_ audit_ procedures_ that_ are_ inappropriate.
8) An_auditor_who_accepts_an_audit_engagement_and_does_not_possess_expertise_with_respect_to_t
he_business_entity‘s_industry_at_that_point,_should:
A) engage_financial_ experts_ familiar_ with_the_ nature_ of_ the_ business_ entity.
B) obtain_a_knowledge_of_matters_that_relate_to_the_nature_of_the_entity‘s_business_and_the_industry
_in_which_it_operates.
C) refer_a_ substantial_ portion_ of_ the_ audit_to_ another_ CPA,_ who_ will_ act_ as_ the_ principal_ auditor.
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, D) first_inform_management_ that_ an_ unqualified_ opinion_ cannot_ be_ issued.
9) For_ publicly-
held_companies,_ which_ of_ the_ following_ is_ integrated_ with_ the_ audit_ of_ financial_ statements?
A) budgetary_information_ audit
B) the_ audit_ of_ internal_ controls
C) audit_ of_ management_ forecasts
D) audit_ of_ interim_financial_ statements
10) During_the_ first_ phase_ of_ an_ audit,_ a_ CPA_most_ likely_ would:
A) identify_ specific_internal_ control_ activities_that_ are_ likely_to_ prevent_fraud.
B) evaluate_the_reasonableness_of_ the_company‘s_ accounting_ estimates.
C) evaluate_ the_ integrity_ of_ management.
D) inquire_of_ the_ company's_ attorney_ as_ to_ whether_ any_ unrecorded_ claims_ are_ probable_ or_ asserted.
11) In_ the_ context_ of_ agency_ theory,_ information_ asymmetry_refers_ to_ the_ idea_ that:
A) information_ can_ vary_ in_ its_ reliability.
B) information_ can_ vary_ in_ its_ relevance.
C) management_has_more_information_about_the_entity‘s_true_financial_results_and_position_th
an_do_the_absentee_owners_(i.e._stockholders).
D) management_likely_ will_ not_ act_in_ the_ best_ interests_ of_ the_ absentee_ owners.
12) Which_of_the_following_best_describes_why_an_independent_auditor_is_engaged_to_express_an_opi
ni_on_on_the_fair_presentation_of_financial_statements?
A) It_is_difficult_to_prepare_financial_statements_that_fairly_present_a_company‘s_financial_position_a
nd_changes_in_cash_flows_without_the_expertise_of_an_independent_auditor.
B) It_is_management‘s_responsibility_to_seek_available_independent_aid_in_the_appraisal_of
_t_he_financial_information_shown_in_its_financial_statements.
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Systematic Approach 12TH Edition, by Douglas F.
PrawittWilliamF.MessierJr,StevenM.Glover
AllChaptersCovered1-21|ExpertVerifiedQuestions&Correct Answers
for ExamPreparations|A+GRADEASSURED
AllAnswersareattheEndofEachChapter
1
_ |_ P_ a_ g_
e
, Chapter_01
1) Why_do_ auditors_ often_ use_ a_ sampling_ approach_to_ evidence_ gathering?
A) Auditors_are_experts_and_do_not_need_to_look_at_much_to_know_whether_the_financial_state
me_nts_are_correct_or_not.
B) Auditors_must_balance_the_cost_of_the_audit_with_the_need_for_precision_and_for_some_types
_of_evidence,_computer_data_analytic_approaches_can‘t_be_used.
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_
ha_ve_access_to_all_of_the_financial_information_of_the_company.
2) Which_of_the_following_statements_best_describes_a_relationship_between_sample_size_and_
ot_her_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.
3) 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_wh
et_her_or_not_they_plan_to_become_auditors.
B) The_study_of_auditing_focuses_on_learning_the_analytical_and_logical_skills_necessary_to_eva
lu_ate_the_relevance_and_reliability_of_information.
C) The_study_of_auditing_focuses_on_learning_the_rules,_techniques,_and_computations_requir
ed_to_analyze_financial_statements_for_making_investment_recommendations.
D) The_study_of_auditing_begins_with_the_understanding_of_a_coherent_logical_framework
_a_nd_techniques_useful_for_gathering_and_analyzing_evidence_about_others‘_assertions.
4) The_ basic_ definition_ of_ auditing_essentially_indicates_ that,_ overall,_ auditing_ is_ a_ process_ to:
A) detect_ fraud.
B) examine_individual_ transactions_ so_ that_ the_ auditor_ may_ certify_ as_ to_ their_ validity.
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,C) objectively_obtain_ and_ evaluate_ evidence_ regarding_ assertions_made_ by_another_ party.
D) assure_the_ consistent_ application_ of_ correct_ accounting_ procedures.
5) Assurance_services_ may_ improve_ all_ of_ the_ following_except:
A) relevance.
B) credibility.
C) periodicity.
D) reliability.
6) Evidence_ is_ reliable_ if_ it:
A) signals_the_true_ state_ of_ a_ management_ assertion.
B) applies_to_ the_ period_ being_ audited.
C) relates_ to_ the_ audit_ assertion_ being_ tested.
D) is_ sufficient_ to_justify_ a_ conclusion.
7) Which_of_ the_ following_ best_ describes_ the_ concept_ of_ audit_ risk?
A) The_risk_ of_ the_ auditor_ being_ sued_ because_ of_ association_ with_ an_ auditee.
B) The_risk_that_the_auditor_will_provide_an_inappropriate_opinion_on_financial_statements_that_ar
e,_ in_fact,_materially_misstated.
C) The_overall_ risk_that_ a_ material_ misstatement_ exists_ in_the_ financial_ statements.
D) The_risk_ that_ auditors_ use_ audit_ procedures_ that_ are_ inappropriate.
8) An_auditor_who_accepts_an_audit_engagement_and_does_not_possess_expertise_with_respect_to_t
he_business_entity‘s_industry_at_that_point,_should:
A) engage_financial_ experts_ familiar_ with_the_ nature_ of_ the_ business_ entity.
B) obtain_a_knowledge_of_matters_that_relate_to_the_nature_of_the_entity‘s_business_and_the_industry
_in_which_it_operates.
C) refer_a_ substantial_ portion_ of_ the_ audit_to_ another_ CPA,_ who_ will_ act_ as_ the_ principal_ auditor.
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, D) first_inform_management_ that_ an_ unqualified_ opinion_ cannot_ be_ issued.
9) For_ publicly-
held_companies,_ which_ of_ the_ following_ is_ integrated_ with_ the_ audit_ of_ financial_ statements?
A) budgetary_information_ audit
B) the_ audit_ of_ internal_ controls
C) audit_ of_ management_ forecasts
D) audit_ of_ interim_financial_ statements
10) During_the_ first_ phase_ of_ an_ audit,_ a_ CPA_most_ likely_ would:
A) identify_ specific_internal_ control_ activities_that_ are_ likely_to_ prevent_fraud.
B) evaluate_the_reasonableness_of_ the_company‘s_ accounting_ estimates.
C) evaluate_ the_ integrity_ of_ management.
D) inquire_of_ the_ company's_ attorney_ as_ to_ whether_ any_ unrecorded_ claims_ are_ probable_ or_ asserted.
11) In_ the_ context_ of_ agency_ theory,_ information_ asymmetry_refers_ to_ the_ idea_ that:
A) information_ can_ vary_ in_ its_ reliability.
B) information_ can_ vary_ in_ its_ relevance.
C) management_has_more_information_about_the_entity‘s_true_financial_results_and_position_th
an_do_the_absentee_owners_(i.e._stockholders).
D) management_likely_ will_ not_ act_in_ the_ best_ interests_ of_ the_ absentee_ owners.
12) Which_of_the_following_best_describes_why_an_independent_auditor_is_engaged_to_express_an_opi
ni_on_on_the_fair_presentation_of_financial_statements?
A) It_is_difficult_to_prepare_financial_statements_that_fairly_present_a_company‘s_financial_position_a
nd_changes_in_cash_flows_without_the_expertise_of_an_independent_auditor.
B) It_is_management‘s_responsibility_to_seek_available_independent_aid_in_the_appraisal_of
_t_he_financial_information_shown_in_its_financial_statements.
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