[TEST BANK] AUDITING AND ASSURANCE SERVICES, 16TH EDITION BY ARENS, ELDER, BEASLEY, HOGAN.

https://www.stuvia.com/[TEST BANK] AUDITING AND ASSURANCE SERVICES, 16TH EDITION BY ARENS, ELDER, BEASLEY, HOGAN Page 1
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Chapter 1 The Demand for Audit and Other Assurance Services
Learning Objective 1-1
1) The Sarbanes-Oxley Act applies to which of the following companies?
A) All companies
B) Privately held companies
C) Public companies
D) All public companies and privately held companies with assets greater than $500 million
Answer: C
Terms: Sarbanes-Oxley Act
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Topic: SOX
2) Which of the following is considered audit evidence?
A) Oral statements made by managementWritten CommunicationsAuditor
Observation
Y N N
B) Oral statements made by managementWritten CommunicationsAuditor
Observation
N Y Y
C) Oral statements made by managementWritten CommunicationsAuditor
Observation
Y Y Y
D) Oral statements made by managementWritten CommunicationsAuditor
Observation
N N Y
Answer: C
Terms: Audit evidence
Diff: Moderate
Objective: LO 1-1
AACSB: Reflective thinking skills
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https://www.stuvia.com/ https://www.stuvia.com/3) Evidence is paramount to audit and attestation engagements. List the four basic types of audit evidence.
Answer: The four types of audit and attestation evidence include:
1. Electronic and documentary data about transactions
2. Written and electronic communications with outsiders 3. Observations by the auditor
4. Oral testimony of the auditee (client)
Terms: Basic types of audit evidence
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
4) The criteria by which an auditor evaluates the information under audit may vary with the information being audited.
A) True
B) False
Answer: A
Terms: Criteria which an auditor evaluates information
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
5) The criteria used by an external auditor to evaluate published financial statements are known as generally accepted auditing standards.
A) True
B) False
Answer: B
Terms: Criteria used by external auditor to evaluate published financial statements
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
6) The Sarbanes-Oxley Act establishes standards related to the audits of privately held companies.
A) True
B) False
Answer: B
Terms: Sarbanes-Oxley Act
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Topic: SOX
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https://www.stuvia.com/ https://www.stuvia.com/7) The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to auditing and financial reporting.
A) True
B) False
Answer: A
Terms: Sarbanes-Oxley Act
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Topic: SOX
8) An auditor must be competent and have an independent mental attitude.
A) True
B) False
Answer: A
Terms: Competence and independent mental attitude
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Learning Objective 1-2
1) Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:
A) finance.
B) auditing.
C) accounting.
D) economics.
Answer: C
Terms: Recording, classifying, and summarizing economic events
Diff: Easy
Objective: LO 1-2
AACSB: Reflective thinking skills
2) An accountant:
A) must possess expertise in the accumulation of audit evidence.
B) must decide the number and types of items to test.
C) must have an understanding of the principles and rules that provide the basis for preparing the
accounting information.
D) must be a CPA.
Answer: C
Terms: Distinguishes auditors from accountants
Diff: Moderate
Objective: LO 1-2
AACSB: Reflective thinking skills
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