AUDITING THEORY QUESTIONS AND
CORRECT SOLUTIONS
An audit of financial statements is conducted to determine if the ANSW✅✅overall financial
statement statements are stated in accordance with the applicable financial reporting framework.
Inherent limitations in an audit stem from the following except ANSW✅✅incompetence of the
auditor.
In order to have an assurance engagement, there must be an accountability relationship, where the
accountable party is answerable to another party for the subject matter. Which of the following is
responsible for the fair presentation of the financial statements? ANSW✅✅A. the external auditor
B.the external users of the financial information
C. the client's management
D. The entity's accountant
An attitude of professional skepticism means that the auditor ANSW✅✅A. should assess critically
with a questioning mind the validity of evidence obtained.
B. should recognize that circumstances may exist that can cause the subject matter information to
be materially misstated
C. is alert to evidence that makes the evidence questionable as to the reliability of representations
by the client
D. is expected to reduce the audit risk to an acceptably low level.
The independent audit is important to users of financial statements because it ANSW✅✅involves
objective examination of and reporting of management-prepared financial statements.
CORRECT SOLUTIONS
An audit of financial statements is conducted to determine if the ANSW✅✅overall financial
statement statements are stated in accordance with the applicable financial reporting framework.
Inherent limitations in an audit stem from the following except ANSW✅✅incompetence of the
auditor.
In order to have an assurance engagement, there must be an accountability relationship, where the
accountable party is answerable to another party for the subject matter. Which of the following is
responsible for the fair presentation of the financial statements? ANSW✅✅A. the external auditor
B.the external users of the financial information
C. the client's management
D. The entity's accountant
An attitude of professional skepticism means that the auditor ANSW✅✅A. should assess critically
with a questioning mind the validity of evidence obtained.
B. should recognize that circumstances may exist that can cause the subject matter information to
be materially misstated
C. is alert to evidence that makes the evidence questionable as to the reliability of representations
by the client
D. is expected to reduce the audit risk to an acceptably low level.
The independent audit is important to users of financial statements because it ANSW✅✅involves
objective examination of and reporting of management-prepared financial statements.
