TEST BANK Auditing: A Practical Approach with Data
Analytics 2nd Edition by Laura Davis Wiley, Johnson and
Moroney
All Chapters 1-16
, TABLE OF CONTENTS k9 k9
Chapter 1 Introduction and Overview of Audit and Assurance
k9 k9 k9 k9 k9 k9 k9 k9 k 9
Chapter 2 Professionalism and Professional Responsibilities
k9 k9 k9 k9 k9 k 9
Chapter 3 Risk Assessment Part I: Audit Risk and Audit Strate
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
gy Chapter 4 Risk Assessment Part II: Understanding the Clie
k 9 k9 k9 k9 k9 k9 k9 k9 k9
nt Chapter 5 Audit Evidence
k 9 k9 k9 k9
Chapter 6 Gaining an Understanding of the Client's System of Internal Control
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k
9 Chapter 7 Risk Response: Performing Tests of Controls
k9 k9 k9 k9 k9 k9 k9
Chapter 8 Audit Data Analyticsk9 k9 k9 k9
Chapter 9 Risk Response: Performing Substantive Procedures Ch
k9 k9 k9 k9 k9 k9 k9k 9
apter 10 Risk Response: Audit Sampling for Substantive Procedure
k9 k9 k9 k9 k9 k9 k9 k9
s Chapter11 Auditing the Revenue Process
k 9 k9 k9 k9 k9
Chapter 12 Auditing the Purchasing and Payroll Processes
k9 k9 k9 k9 k9 k9 k9
Chapter 13 Auditing Cash, Inventory and Related Income Statement Accounts
k9 k9 k9 k9 k9 k9 k9 k9 k9 k 9
Chapter 14 Auditing Investing and Financing Activities
k9 k9 k9 k9 k9 k9
Chapter 15 Completing the Audit Ch
k9 k9 k9 k9 k 9
apter 16 Reporting on the Audit
k9 k9 k9 k9 k9
,Questions Type: True or False
k9 k9 k9 k9
Chapter 1 Introduction and Overview of Audit and Assurance
k9 k9 k9 k9 k9 k9 k9 k9
1. GAAP and IFRS are examples of applicable financial reporting framework.
k9 k9 k9 k9 k9 k9 k9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Communication, Lear
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
ning Objective: LO1.1, Solution: The applicable financial reporting framework refers to the set of standards use
k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
d in preparing the historical financial statements, such as GAAP, IFRS or a Federal Income Tax Basis of
k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
Accounting.
2. Review of financial forecastsf alls under attestation services.
k9 k9 k9 k9 k9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
k AACSB: Ethics, Learning Objective: LO1.1, Solution:Attestation services (under the umbrella of assuranc
9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
e services) include review of historical financial statements, review of financial forecasts, and examinatio
k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
n of internal control.
k9 k 9 k9
3. Within a U.S. c ontext, the applicable financial reporting framework is typically Generally Acce
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
pted Accounting Principles (GAAP).
k 9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
k AACSB: Ethics, Learning Objective: LO1.2, Solution: Within a U.S. context, the applicable financial repo
9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
rting framework is typically generally accepted accounting principles (GAAP).
k 9 k9 k9 k9 k9 k9 k9 k9
4. Private companies, or non-
k9 k9 k9
issuers, are not required by the U.S. government to have an annual financial statement aud
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k 9 k9 k9
it
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Analytic, Learning Objec
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
tive: LO1.2, Solution: Private companies, or non-issuers, are not required by the
k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
U.S. government to have an annual financial statement audit, but often other interested users, such as a ban
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
k or lender, may request that a private company provide audited financial statements.
k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
, 5. One of the reasons there is a demand for financial statement audits is that users of fin
k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9
ancial statements often lack accounting and legal knowledge to fully understand compl
k 9 k9 k9 k9 k 9 k 9 k 9 k 9 k 9 k 9 k9
ex accounting and disclosure choices.
k 9 k 9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Comprehension, Difficulty: Easy, AICPA PC: Communication, AACSB: Analytic, L
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
earning Objective: LO1.3, Solution: Complexity: Financial statements are complex, the amounts are often
k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k
affected by significant estimates, and the disclosures often require significant knowledge and experienc
9 k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
e to evaluate. Most financial statement users do not have the accounting and legal knowledge to assess
k9 k9 k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
the reasonableness of complex accounting and disclosure choices being made by the company.
k9 k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9
6. In financial accounting, the balance sheet is a statement of financial position
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Knowledge,Difficulty: Easy, AICPAPC: Communication, AACSB: Analytic, Learning
k9 9k k9 9k k9 k9 9
k k9 k9 k9 k9
k Objective: LO1.3, Solution: In financial accounting, the financial statements include the balance sheet (s
9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
tatement of financial position), income statement (statement of comprehensive income), statement of c
k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
ash flows, statement of changes in equity and accompanying notes.
k9 k 9 k9 k9 k9 k9 k9 k9 k9
7. Business valuation falls within the purviewof non-assurance services.
k9 k9 k9 k9 k9 k9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k
9 AACSB:Analytic, Learning Objective: LO1.4, Solution: Many of these accounting firms provide non-
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
assurance (or non-audit) services as well as assurance services. These non-
k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9
assurance services include management consulting, business valuation, mergers and acquisitions, insolv
k9 k9 k9 k9 k9k 9 k9 k9 k9 k9 k9 k9
ency, tax and accounting services.
k9 k9 k9 k9
Analytics 2nd Edition by Laura Davis Wiley, Johnson and
Moroney
All Chapters 1-16
, TABLE OF CONTENTS k9 k9
Chapter 1 Introduction and Overview of Audit and Assurance
k9 k9 k9 k9 k9 k9 k9 k9 k 9
Chapter 2 Professionalism and Professional Responsibilities
k9 k9 k9 k9 k9 k 9
Chapter 3 Risk Assessment Part I: Audit Risk and Audit Strate
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
gy Chapter 4 Risk Assessment Part II: Understanding the Clie
k 9 k9 k9 k9 k9 k9 k9 k9 k9
nt Chapter 5 Audit Evidence
k 9 k9 k9 k9
Chapter 6 Gaining an Understanding of the Client's System of Internal Control
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k
9 Chapter 7 Risk Response: Performing Tests of Controls
k9 k9 k9 k9 k9 k9 k9
Chapter 8 Audit Data Analyticsk9 k9 k9 k9
Chapter 9 Risk Response: Performing Substantive Procedures Ch
k9 k9 k9 k9 k9 k9 k9k 9
apter 10 Risk Response: Audit Sampling for Substantive Procedure
k9 k9 k9 k9 k9 k9 k9 k9
s Chapter11 Auditing the Revenue Process
k 9 k9 k9 k9 k9
Chapter 12 Auditing the Purchasing and Payroll Processes
k9 k9 k9 k9 k9 k9 k9
Chapter 13 Auditing Cash, Inventory and Related Income Statement Accounts
k9 k9 k9 k9 k9 k9 k9 k9 k9 k 9
Chapter 14 Auditing Investing and Financing Activities
k9 k9 k9 k9 k9 k9
Chapter 15 Completing the Audit Ch
k9 k9 k9 k9 k 9
apter 16 Reporting on the Audit
k9 k9 k9 k9 k9
,Questions Type: True or False
k9 k9 k9 k9
Chapter 1 Introduction and Overview of Audit and Assurance
k9 k9 k9 k9 k9 k9 k9 k9
1. GAAP and IFRS are examples of applicable financial reporting framework.
k9 k9 k9 k9 k9 k9 k9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Communication, Lear
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
ning Objective: LO1.1, Solution: The applicable financial reporting framework refers to the set of standards use
k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
d in preparing the historical financial statements, such as GAAP, IFRS or a Federal Income Tax Basis of
k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
Accounting.
2. Review of financial forecastsf alls under attestation services.
k9 k9 k9 k9 k9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
k AACSB: Ethics, Learning Objective: LO1.1, Solution:Attestation services (under the umbrella of assuranc
9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
e services) include review of historical financial statements, review of financial forecasts, and examinatio
k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
n of internal control.
k9 k 9 k9
3. Within a U.S. c ontext, the applicable financial reporting framework is typically Generally Acce
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
pted Accounting Principles (GAAP).
k 9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
k AACSB: Ethics, Learning Objective: LO1.2, Solution: Within a U.S. context, the applicable financial repo
9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
rting framework is typically generally accepted accounting principles (GAAP).
k 9 k9 k9 k9 k9 k9 k9 k9
4. Private companies, or non-
k9 k9 k9
issuers, are not required by the U.S. government to have an annual financial statement aud
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k 9 k9 k9
it
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Analytic, Learning Objec
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
tive: LO1.2, Solution: Private companies, or non-issuers, are not required by the
k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
U.S. government to have an annual financial statement audit, but often other interested users, such as a ban
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
k or lender, may request that a private company provide audited financial statements.
k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
, 5. One of the reasons there is a demand for financial statement audits is that users of fin
k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9 k 9
ancial statements often lack accounting and legal knowledge to fully understand compl
k 9 k9 k9 k9 k 9 k 9 k 9 k 9 k 9 k 9 k9
ex accounting and disclosure choices.
k 9 k 9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Comprehension, Difficulty: Easy, AICPA PC: Communication, AACSB: Analytic, L
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
earning Objective: LO1.3, Solution: Complexity: Financial statements are complex, the amounts are often
k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k
affected by significant estimates, and the disclosures often require significant knowledge and experienc
9 k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
e to evaluate. Most financial statement users do not have the accounting and legal knowledge to assess
k9 k9 k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
the reasonableness of complex accounting and disclosure choices being made by the company.
k9 k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9
6. In financial accounting, the balance sheet is a statement of financial position
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Knowledge,Difficulty: Easy, AICPAPC: Communication, AACSB: Analytic, Learning
k9 9k k9 9k k9 k9 9
k k9 k9 k9 k9
k Objective: LO1.3, Solution: In financial accounting, the financial statements include the balance sheet (s
9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
tatement of financial position), income statement (statement of comprehensive income), statement of c
k 9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
ash flows, statement of changes in equity and accompanying notes.
k9 k 9 k9 k9 k9 k9 k9 k9 k9
7. Business valuation falls within the purviewof non-assurance services.
k9 k9 k9 k9 k9 k9 k9 k9
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k
9 AACSB:Analytic, Learning Objective: LO1.4, Solution: Many of these accounting firms provide non-
k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9 k9
assurance (or non-audit) services as well as assurance services. These non-
k9 k 9 k9 k9 k9 k9 k9 k9 k9 k9
assurance services include management consulting, business valuation, mergers and acquisitions, insolv
k9 k9 k9 k9 k9k 9 k9 k9 k9 k9 k9 k9
ency, tax and accounting services.
k9 k9 k9 k9
