AUDITING UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS COMPLETE
STUDY GUIDE
●● What has led to the increased demand for auditing and assurance
services?
Answer: The development of the corporate form of business and the
expanding world economy over the last 200 years.
●● What is the principal-agent relationship in a public company?
Answer: Stockholders (principals) have a relationship with management
(agents) who may not share the same goals.
●● What role does auditing play in the principal-agent relationship?
Answer: Auditing helps overcome information asymmetry between
stockholders and management by providing assurance.
●● What qualities do auditors (CPAs) possess that are essential for their
role?
Answer: Independence, integrity, and objectivity.
●● What are management assertions in auditing?
, Answer: Claims made by management regarding the accuracy and
completeness of financial statements.
●● What is the assertion of 'Occurrence' in auditing?
Answer: Transactions and events that have been recorded or disclosed
have occurred and pertain to the entity.
●● What does the 'Completeness' assertion entail?
Answer: All transactions and events that should have been recorded have
been recorded.
●● What is the significance of the 'Authorization' assertion?
Answer: All transactions and events have been properly authorized.
●● What does the 'Accuracy' assertion refer to?
Answer: Amounts and data relating to recorded transactions have been
recorded appropriately.
●● What does the 'Cutoff' assertion ensure?
Answer: Transactions and events have been recorded in the correct
accounting period.
●● What does the 'Classification' assertion verify?
AND CORRECT ANSWERS COMPLETE
STUDY GUIDE
●● What has led to the increased demand for auditing and assurance
services?
Answer: The development of the corporate form of business and the
expanding world economy over the last 200 years.
●● What is the principal-agent relationship in a public company?
Answer: Stockholders (principals) have a relationship with management
(agents) who may not share the same goals.
●● What role does auditing play in the principal-agent relationship?
Answer: Auditing helps overcome information asymmetry between
stockholders and management by providing assurance.
●● What qualities do auditors (CPAs) possess that are essential for their
role?
Answer: Independence, integrity, and objectivity.
●● What are management assertions in auditing?
, Answer: Claims made by management regarding the accuracy and
completeness of financial statements.
●● What is the assertion of 'Occurrence' in auditing?
Answer: Transactions and events that have been recorded or disclosed
have occurred and pertain to the entity.
●● What does the 'Completeness' assertion entail?
Answer: All transactions and events that should have been recorded have
been recorded.
●● What is the significance of the 'Authorization' assertion?
Answer: All transactions and events have been properly authorized.
●● What does the 'Accuracy' assertion refer to?
Answer: Amounts and data relating to recorded transactions have been
recorded appropriately.
●● What does the 'Cutoff' assertion ensure?
Answer: Transactions and events have been recorded in the correct
accounting period.
●● What does the 'Classification' assertion verify?
