Auditing and Assurance Services (Messier...) Questions with Answers
The fact that errors and/or omissions in certain relatively insignificant account balances would not affect
an auditor's decision when reporting on the financial statements as a whole relates most closely to
which major audit concept? - correct answers Materiality
Audit evidence - correct answers Can be gathered from many sources and is not limited to the
underlying accounting data.
Audit risk - correct answers Is the risk that a "clean" opinion will be issued when, in reality, the financial
statements are materially misstated.
The examination of all of a client's transactions would make an audit very costly. Thus, auditors rely
heavily on sampling as a way to obtain evidence. Which of the following would result in a smaller
sample? - correct answers A decrease in the desired level of assurance.
Which of the following audit phases would generally be conducted before all of the others listed below?
- correct answers Gaining an understanding of the client's industry.
An auditor's evaluation of the reasonableness of a client's loan loss reserve would normally be made
during which phase of the audit? - correct answers Auditing business processes and related accounts
Gaining an understanding of the client and its environment includes all of the following areas except -
correct answers The audit fee and timeline for completion of the work.
The most favorable type of audit report opinion for the client to receive is - correct answers Unqualified.
The study and practice of auditing is unlike other areas in accounting because it - correct answer
sRequires common sense and some creativity
The Public Company Accounting Oversight Board [PCAOB] derives its authority to set and enforce
auditing standards for public company audits from - correct answers An Act of Congress
,Which of the following is generally not considered one of the five business processes or cycles? - correct
answersInformation technology
The five business processes are - correct answersFinancing, Purchasing, Human Resource Management,
Inventory Management, and Revenue process
Which of the following is NOT a typical responsibility for an associate and/or staff level auditor? - correct
answersAssisting in the development of the audit plan.
Prior to the Sarbanes-Oxley Act of 2002, the _________ was responsible for creating all new auditing
standards in the United States. Today, for publicly-held companies, that responsibility rests with the
_____________. - correct answersAICPA Auditing Standards Board [ASB] prior to 2002; PCAOB today.
To exercise due professional care, an auditor should - correct answersCritically review the work
performed and judgment exercised by those assisting in the audit
What is the essential meaning of the generally accepted auditing standard that requires that the auditor
be independent? - correct answersThe auditor must be without bias with respect to the client under
audit.
The principles underlying an audit conducted in accordance with GAAS as developed by the ASB and the
IAASB include all of the following except - correct answersThe auditor should plan and conduct the audit
to obtain assurance that the financial statements are free of any misstatement.
The responsibility for implementing sound accounting practices and principles, maintaining an adequate
internal control structure, and making fair representations in the financial statements rests primarily
with the - correct answersSenior management.
Which of the following is considered an example of a compliance audit? - correct answersThe
examination of a company's adherence to government-mandated safety provisions.
Which of the following best describes the relationship between management and the board of
directors? - correct answersManagement reports to the board of directors.
, Which of the following best describes the roles of the AICPA and the PCAOB in establishing auditing
standards? - correct answersAll of them, 1 Auditing standards issued by the AICPA and the PCAOB are
considered minimum standards of performance. 2 AICPA sets auditing standards for use in non-public
entities. 3 PCAOB sets auditing standards for use in publicly held companies.
"Mid-tier" firms - correct answersAre national in their practices and have international affiliates.
Which of the following organizations affect the environment that CPAs work in? - correct answersAll of
the above which includes AICPA, SEC, and PCAOB
Which of the following primarily shapes the context in which auditing takes place? - correct answersThe
client's business environment.
An "integrated audit" includes - correct answersA financial statement audit and an audit of internal
control over financial reporting.
What are Statements on Auditing Standards (SASs)? - correct answersPronouncements issued by the
Auditing Standards Board of the AICPA that serve as interpretations of GAAS (applicable to audits of
"non-issuers").
List the three field work standards for Generally Accepted Auditing Standards (GAAS). think PIE - correct
answers1 P for Planning and supervision
2 I for Internal control
3 E for Evidence.
List the four reporting standards for Generally Accepted Auditing Standards (GAAS). think GCDO - correct
answers1 G for GAAP
2 C for Consistency
3 D for Disclosure
4 O for Opinion
List the three general standards for Generally Accepted Auditing Standards (GAAS). think TID - correct
answers1 T for Training
The fact that errors and/or omissions in certain relatively insignificant account balances would not affect
an auditor's decision when reporting on the financial statements as a whole relates most closely to
which major audit concept? - correct answers Materiality
Audit evidence - correct answers Can be gathered from many sources and is not limited to the
underlying accounting data.
Audit risk - correct answers Is the risk that a "clean" opinion will be issued when, in reality, the financial
statements are materially misstated.
The examination of all of a client's transactions would make an audit very costly. Thus, auditors rely
heavily on sampling as a way to obtain evidence. Which of the following would result in a smaller
sample? - correct answers A decrease in the desired level of assurance.
Which of the following audit phases would generally be conducted before all of the others listed below?
- correct answers Gaining an understanding of the client's industry.
An auditor's evaluation of the reasonableness of a client's loan loss reserve would normally be made
during which phase of the audit? - correct answers Auditing business processes and related accounts
Gaining an understanding of the client and its environment includes all of the following areas except -
correct answers The audit fee and timeline for completion of the work.
The most favorable type of audit report opinion for the client to receive is - correct answers Unqualified.
The study and practice of auditing is unlike other areas in accounting because it - correct answer
sRequires common sense and some creativity
The Public Company Accounting Oversight Board [PCAOB] derives its authority to set and enforce
auditing standards for public company audits from - correct answers An Act of Congress
,Which of the following is generally not considered one of the five business processes or cycles? - correct
answersInformation technology
The five business processes are - correct answersFinancing, Purchasing, Human Resource Management,
Inventory Management, and Revenue process
Which of the following is NOT a typical responsibility for an associate and/or staff level auditor? - correct
answersAssisting in the development of the audit plan.
Prior to the Sarbanes-Oxley Act of 2002, the _________ was responsible for creating all new auditing
standards in the United States. Today, for publicly-held companies, that responsibility rests with the
_____________. - correct answersAICPA Auditing Standards Board [ASB] prior to 2002; PCAOB today.
To exercise due professional care, an auditor should - correct answersCritically review the work
performed and judgment exercised by those assisting in the audit
What is the essential meaning of the generally accepted auditing standard that requires that the auditor
be independent? - correct answersThe auditor must be without bias with respect to the client under
audit.
The principles underlying an audit conducted in accordance with GAAS as developed by the ASB and the
IAASB include all of the following except - correct answersThe auditor should plan and conduct the audit
to obtain assurance that the financial statements are free of any misstatement.
The responsibility for implementing sound accounting practices and principles, maintaining an adequate
internal control structure, and making fair representations in the financial statements rests primarily
with the - correct answersSenior management.
Which of the following is considered an example of a compliance audit? - correct answersThe
examination of a company's adherence to government-mandated safety provisions.
Which of the following best describes the relationship between management and the board of
directors? - correct answersManagement reports to the board of directors.
, Which of the following best describes the roles of the AICPA and the PCAOB in establishing auditing
standards? - correct answersAll of them, 1 Auditing standards issued by the AICPA and the PCAOB are
considered minimum standards of performance. 2 AICPA sets auditing standards for use in non-public
entities. 3 PCAOB sets auditing standards for use in publicly held companies.
"Mid-tier" firms - correct answersAre national in their practices and have international affiliates.
Which of the following organizations affect the environment that CPAs work in? - correct answersAll of
the above which includes AICPA, SEC, and PCAOB
Which of the following primarily shapes the context in which auditing takes place? - correct answersThe
client's business environment.
An "integrated audit" includes - correct answersA financial statement audit and an audit of internal
control over financial reporting.
What are Statements on Auditing Standards (SASs)? - correct answersPronouncements issued by the
Auditing Standards Board of the AICPA that serve as interpretations of GAAS (applicable to audits of
"non-issuers").
List the three field work standards for Generally Accepted Auditing Standards (GAAS). think PIE - correct
answers1 P for Planning and supervision
2 I for Internal control
3 E for Evidence.
List the four reporting standards for Generally Accepted Auditing Standards (GAAS). think GCDO - correct
answers1 G for GAAP
2 C for Consistency
3 D for Disclosure
4 O for Opinion
List the three general standards for Generally Accepted Auditing Standards (GAAS). think TID - correct
answers1 T for Training
