,Chapter 1: Auditing: Integral to the Economy
Student:
1. The need for assurance services arises because the interests of the users of
information may be different from that of the interests of those responsible for providing
information.
True False
2. An audit of financial statements is a form of attestation service.
True False
3. Independence is an attribute necessary to perform assurance services.
True False
4. A bank using Milton Company's financial statements to determine the creditworthiness
of a potential loan to Milton is a good example of the need for unbiased reporting.
True False
5. Independence is only required for assurance service providers.
True False
6. A CPA automatically qualifies as an assurance provider in all areas of business.
True False
7. Attestation services are a subset of assurance services and always involve a report
that goes to a third party.
True False
,8. The American Institute of Certified Public Accountants has the primary authority to set
auditing standards for public companies.
True False
9. The audit function is unique because it exists to perform services on a "client" on
behalf of shareholders, directors and other parties.
True False
10. Auditing is the process of attesting to assertions about economic actions and events.
True False
11. Auditing is the process of verifying the accuracy of the financial statements.
True False
12. Internal auditing only provides assurance services to clients.
True False
13. Auditing primarily exists because users need unbiased information on which to
assess management performance and make economic decisions.
True False
14. The degree of confidence that users place on management's financial statements is
higher than that placed on audited financial statements because few users have direct
knowledge of the company's operations and management is the most knowledgeable
about operations.
True False
15. U.S. nonpublic companies will have an audit performed in accordance with generally
accepted auditing standards that have been promulgated by the PCAOB.
True False
, 16. An assertion is a statement about an action, event, condition, or performance over a
specified time period.
True False
17. Management is required to comment on the fairness of the company's financial
presentation. This reduces the auditor's legal responsibility for the opinion rendered on
the financial statements.
True False
18. Audited financial statements should be free from all errors and fraud.
True False
19. Audited financial statements should be presented fairly according to the substance of
GAAP.
True False
20. Audited financial statements should be presented fairly according to the substance of
GAAS.
True False
21. A plan to converge the U.S. generally accepted auditing standards (GAAS) with the
International Standards on Auditing (ISAs) was developed by the .AICPA’s Auditing
Standards Board (ASB).
True False
22. Attestation is confined to an audit of client financial statements.
True False
23. An auditor must have a good understanding of the risks associated with a client's
industry in order to ensure that the financial statements reflect the underlying substance
of accounting transactions and the economic effects of such transactions.
True False
Student:
1. The need for assurance services arises because the interests of the users of
information may be different from that of the interests of those responsible for providing
information.
True False
2. An audit of financial statements is a form of attestation service.
True False
3. Independence is an attribute necessary to perform assurance services.
True False
4. A bank using Milton Company's financial statements to determine the creditworthiness
of a potential loan to Milton is a good example of the need for unbiased reporting.
True False
5. Independence is only required for assurance service providers.
True False
6. A CPA automatically qualifies as an assurance provider in all areas of business.
True False
7. Attestation services are a subset of assurance services and always involve a report
that goes to a third party.
True False
,8. The American Institute of Certified Public Accountants has the primary authority to set
auditing standards for public companies.
True False
9. The audit function is unique because it exists to perform services on a "client" on
behalf of shareholders, directors and other parties.
True False
10. Auditing is the process of attesting to assertions about economic actions and events.
True False
11. Auditing is the process of verifying the accuracy of the financial statements.
True False
12. Internal auditing only provides assurance services to clients.
True False
13. Auditing primarily exists because users need unbiased information on which to
assess management performance and make economic decisions.
True False
14. The degree of confidence that users place on management's financial statements is
higher than that placed on audited financial statements because few users have direct
knowledge of the company's operations and management is the most knowledgeable
about operations.
True False
15. U.S. nonpublic companies will have an audit performed in accordance with generally
accepted auditing standards that have been promulgated by the PCAOB.
True False
, 16. An assertion is a statement about an action, event, condition, or performance over a
specified time period.
True False
17. Management is required to comment on the fairness of the company's financial
presentation. This reduces the auditor's legal responsibility for the opinion rendered on
the financial statements.
True False
18. Audited financial statements should be free from all errors and fraud.
True False
19. Audited financial statements should be presented fairly according to the substance of
GAAP.
True False
20. Audited financial statements should be presented fairly according to the substance of
GAAS.
True False
21. A plan to converge the U.S. generally accepted auditing standards (GAAS) with the
International Standards on Auditing (ISAs) was developed by the .AICPA’s Auditing
Standards Board (ASB).
True False
22. Attestation is confined to an audit of client financial statements.
True False
23. An auditor must have a good understanding of the risks associated with a client's
industry in order to ensure that the financial statements reflect the underlying substance
of accounting transactions and the economic effects of such transactions.
True False
