Auditing and Assurance Services 16th Edition Arens Test Bank, Questions and Answers - All Chapters

Auditing and Assurance Services, 16e (Arens/Elder/Beasley)
Chapter 1 The Demand for Audit and Other Assurance Services

1.1 Learning Objective 1-1

1) In the auditing process
A) the types and amounts of evidence remain constant from audit to audit.
B) the criteria for evaluating information will not vary depending on the information being
audited.
C) the audit report communicates the auditor's findings to users.
D) records are gathered by the auditor to determine whether the audited information is stated in
accordance with SEC standards.




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Answer: C
Terms: Audit process




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Diff: Moderate
Objective: LO 1-1




VE
AACSB: Reflective thinking

2) Which of the following is considered audit evidence?
A)
Oral statements
made by management
Written
Communications
IE
Auditor
Observation
H
Y N N
AC

B)
Oral statements Written Auditor
made by management Communications Observation
N Y Y
M



C)
EA




Oral statements Written Auditor
made by management Communications Observation
Y Y Y
R




D)
Oral statements Written Auditor
D




made by management Communications Observation
N N Y

Answer: C
Terms: Audit evidence
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking



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,3) Which of the following can be used as a criteria for evaluating information being audited?
A) International Financial Reporting Standards (IFRS)
B) Generally Accepted Accounting Principles (GAAP)
C) Internal Revenue Code (IRC)
D) all of the above
Answer: D
Terms: Criteria by which an auditor evaluates information
Diff: Moderate
Objective: LO 1-1
AACSB: Reflective thinking

4) Evidence is paramount to audit and attestation engagements. List the four basic types of audit




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evidence.
Answer: The four types of audit and attestation evidence include




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1. Electronic and documentary data about transactions
2. Written and electronic communications with outsiders




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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
IE
H
5) The criteria by which an auditor evaluates the information under audit may vary with the
AC

information being audited.
Answer: TRUE
Terms: Criteria by which an auditor evaluates information
Diff: Easy
M



Objective: LO 1-1
AACSB: Reflective thinking
EA




6) One criteria used by an external auditor to evaluate published financial statements is known as
generally accepted auditing standards.
Answer: FALSE
R




Terms: Criteria used by external auditor to evaluate published financial statements
Diff: Easy
D




Objective: LO 1-1
AACSB: Reflective thinking

7) Auditors strive to maintain a high level of independence to keep the confidence of users
relying on their reports.
Answer: TRUE
Terms: Independence
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking


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,8) To perform an audit, there must be information in a verifiable form and some criteria by
which the auditor can evaluate the information.
Answer: TRUE
Terms: Independence
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking

9) An auditor must be competent and have an independent mental attitude.
Answer: TRUE
Terms: Criteria used by external auditor to evaluate published financial statements
Diff: Easy




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Objective: LO 1-1
AACSB: Reflective thinking




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1.2 Learning Objective 1-2




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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.
IE
H
D) economics.
Answer: C
AC

Terms: Recording, classifying, and summarizing economic events
Diff: Easy
Objective: LO 1-2
AACSB: Reflective thinking
M



2) An accountant
A) must possess expertise in the accumulation of audit evidence.
EA




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.
R




D) must be a CPA.
Answer: C
D




Terms: Distinguishes auditors from accountants
Diff: Moderate
Objective: LO 1-2
AACSB: Reflective thinking




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, 3) When auditing accounting data, auditors focus on
A) determining whether recorded information properly reflects the economic events that
occurred during the accounting period.
B) determining if fraud has occurred.
C) determining if taxable income has been calculated correctly.
D) analyzing the financial information to be sure that it complies with government requirements.
Answer: A
Terms: Auditing financial accounting data primary concern
Diff: Moderate
Objective: LO 1-2
AACSB: Reflective thinking




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4) The trait that distinguishes auditors from accountants is the
A) auditor's ability to interpret accounting principles generally accepted in the United States.




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B) auditor's education beyond the bachelor's degree.
C) auditor's ability to interpret FASB Statements.




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D) auditor's expertise in the accumulation and interpretation of audit evidence.
Answer: D
Terms: Distinguishes auditors from accountants
Diff: Challenging
Objective: LO 1-2
AACSB: Reflective thinking
IE
H
5) Discuss the differences and similarities between the roles of accountants and auditors. What
AC

additional expertise must an auditor possess beyond that of an accountant?
Answer: The role of accountants is to record, classify, and summarize economic events in a
logical manner for the purpose of providing financial information for decision making. To
provide relevant information, accountants must have a thorough understanding of the principles
M



and rules that provide the basis for preparing the accounting information. In addition,
accountants must develop a system to ensure that the entity's economic events are properly
recorded on a timely basis and at a reasonable cost.
EA




The role of auditors is to determine whether the recorded information prepared by accountants
properly reflects the economic events that occurred during the accounting period. Because U.S.
R




or international accounting standards provide the criteria for evaluating whether financial
information is properly recorded, auditors must thoroughly understand those accounting
D




standards. In addition to understanding accounting, the auditor must possess expertise in the
accumulation and interpretation of audit evidence. It is this expertise that distinguishes auditors
from accountants. Determining the proper audit procedures, deciding the number and types of
items to test, and evaluating the results are unique to the auditor.
Terms: Roles of accountants and auditors
Diff: Moderate
Objective: LO 1-2
AACSB: Reflective thinking




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