ACCT 401 Unit 16 fully solved &
updated
The objective of the audit of GAAP-based financial statements is to
a. Make suggestions as to the form or content of the financial
statements or to draft them in whole or in part
b. Express an opinion on the fairness with which the statements
present financial position, results of operations, and cash flows in
accordance with generally accepted accounting principles
c. Ensure adoption of sound accounting policies and the
establishment and maintenance of internal control
d. Express an opinion on the accuracy with which the statements
present financial position, results of operations, and cash flows in
accordance with generally accepted accounting principles - answer
b. Express an opinion on the fairness with which the statements
present financial position, results of operations, and cash flows in
accordance with generally accepted accounting principles
The objective of an audit
Which of the following statements best describes the distinction
between the auditor's responsibilities and management's
responsibilities?
a. Management has responsibility for maintaining and adopting
sound accounting policies, and the auditor has responsibility for
internal control
b. Management has responsibility for the basic data underlying
financial statements, and the auditor has responsibility for drafting
the financial statements
c. The auditor's responsibility is confined to the audited portion of
the financial statements, and management's responsibility is
confined to the unaudited portions
,d. The auditor's responsibility is confined to expressing an opinion,
but the financial statements remain the responsibility of
management - answer d. The auditor's responsibility is confined to
expressing an opinion, but the financial statements remain the
responsibility of management
The statement that best distinguishes between the auditor's and
management's responsibilities for audited financial statements
The evaluation of fairness in determining the appropriate opinion to
express should include consideration of the qualitative aspects of
the entity's accounting practices, including whether
a. Indicators of possible bias exist in management's judgments
b. The accounting principles used are the most conservative
available
c. Management and those charged with governance agree with all
the standards used in the reporting process
d. The auditor and management agree with all the standards used in
the reporting process - answer a. Indicators of possible bias exist in
management's judgments
The qualitative assessment that the auditor should make
Which of the following best describes why an independent auditor is
asked to express an opinion on the fair presentation of financial
statements?
a. It is difficult to prepare financial statements that fairly present a
company's financial position, results of operations, and cash flows
without the expertise of an independent auditor
b. It is management's responsibility to seek available independent
aid in the appraisal of the financial information shown in its financial
statements
,c. The opinion of an independent party is needed because a
company may not be objective with respect to its own financial
statements
d. It is a customary courtesy that all shareholders of a company
receive an independent report on management's stewardship in
managing the affairs of the business - answer c. The opinion of an
independent party is needed because a company may not be
objective with respect to its own financial statements
The best reason for an independent auditor's opinion
If a company's external auditor expresses an unmodified opinion as
a result of the audit of the company's financial statements, readers
of the audit report can assume that
a. The external auditor found no fraud
b. The company is financially sound and the financial statements are
accurate
c. Internal control is effective
d. Material issues about the application of accounting principles
were resolved to the satisfaction of the external auditor - answer d.
Material issues about the application of accounting principles were
resolved to the satisfaction of the external auditor
The assumption made about an external auditor's unmodified
opinion
A major purpose of the auditor's report on financial statements is to
a. Assure investors of the complete accuracy of the financial
statements
b. Clarify for the public the nature of the auditor's responsibility and
performance
, c. Deter creditors from extending loans in high-risk situations
d. Describe the specific auditing procedures undertaken to gather
evidence for the opinion - answer b. Clarify for the public the nature
of the auditor's responsibility and performance
The purpose of the auditor's report
The securities of Donley Corporation are listed on a regional stock
exchange and registered with the SEC. The management of Donley
engages a CPA to perform an independent audit of Donley's financial
statements. The primary objective of this audit is to provide
assurance to the
a. Regional stock exchange
b. Securities and Exchange Commission
c. Board of directors of Donley
d. Investors in Donley securities - answer d. Investors in Donley
securities
The primary users of an issuer's audit
The auditor's judgement concerning the overall fairness of the
presentation of financial position, results of operations, and cash
flows is applied within the framework of
a. Quality control
b. Generally accepted auditing standards, which include the concept
of materiality
c. The auditor's assessment of the risk of material misstatement
d. Generally accepted accounting principles - answer d. Generally
accepted accounting principles
updated
The objective of the audit of GAAP-based financial statements is to
a. Make suggestions as to the form or content of the financial
statements or to draft them in whole or in part
b. Express an opinion on the fairness with which the statements
present financial position, results of operations, and cash flows in
accordance with generally accepted accounting principles
c. Ensure adoption of sound accounting policies and the
establishment and maintenance of internal control
d. Express an opinion on the accuracy with which the statements
present financial position, results of operations, and cash flows in
accordance with generally accepted accounting principles - answer
b. Express an opinion on the fairness with which the statements
present financial position, results of operations, and cash flows in
accordance with generally accepted accounting principles
The objective of an audit
Which of the following statements best describes the distinction
between the auditor's responsibilities and management's
responsibilities?
a. Management has responsibility for maintaining and adopting
sound accounting policies, and the auditor has responsibility for
internal control
b. Management has responsibility for the basic data underlying
financial statements, and the auditor has responsibility for drafting
the financial statements
c. The auditor's responsibility is confined to the audited portion of
the financial statements, and management's responsibility is
confined to the unaudited portions
,d. The auditor's responsibility is confined to expressing an opinion,
but the financial statements remain the responsibility of
management - answer d. The auditor's responsibility is confined to
expressing an opinion, but the financial statements remain the
responsibility of management
The statement that best distinguishes between the auditor's and
management's responsibilities for audited financial statements
The evaluation of fairness in determining the appropriate opinion to
express should include consideration of the qualitative aspects of
the entity's accounting practices, including whether
a. Indicators of possible bias exist in management's judgments
b. The accounting principles used are the most conservative
available
c. Management and those charged with governance agree with all
the standards used in the reporting process
d. The auditor and management agree with all the standards used in
the reporting process - answer a. Indicators of possible bias exist in
management's judgments
The qualitative assessment that the auditor should make
Which of the following best describes why an independent auditor is
asked to express an opinion on the fair presentation of financial
statements?
a. It is difficult to prepare financial statements that fairly present a
company's financial position, results of operations, and cash flows
without the expertise of an independent auditor
b. It is management's responsibility to seek available independent
aid in the appraisal of the financial information shown in its financial
statements
,c. The opinion of an independent party is needed because a
company may not be objective with respect to its own financial
statements
d. It is a customary courtesy that all shareholders of a company
receive an independent report on management's stewardship in
managing the affairs of the business - answer c. The opinion of an
independent party is needed because a company may not be
objective with respect to its own financial statements
The best reason for an independent auditor's opinion
If a company's external auditor expresses an unmodified opinion as
a result of the audit of the company's financial statements, readers
of the audit report can assume that
a. The external auditor found no fraud
b. The company is financially sound and the financial statements are
accurate
c. Internal control is effective
d. Material issues about the application of accounting principles
were resolved to the satisfaction of the external auditor - answer d.
Material issues about the application of accounting principles were
resolved to the satisfaction of the external auditor
The assumption made about an external auditor's unmodified
opinion
A major purpose of the auditor's report on financial statements is to
a. Assure investors of the complete accuracy of the financial
statements
b. Clarify for the public the nature of the auditor's responsibility and
performance
, c. Deter creditors from extending loans in high-risk situations
d. Describe the specific auditing procedures undertaken to gather
evidence for the opinion - answer b. Clarify for the public the nature
of the auditor's responsibility and performance
The purpose of the auditor's report
The securities of Donley Corporation are listed on a regional stock
exchange and registered with the SEC. The management of Donley
engages a CPA to perform an independent audit of Donley's financial
statements. The primary objective of this audit is to provide
assurance to the
a. Regional stock exchange
b. Securities and Exchange Commission
c. Board of directors of Donley
d. Investors in Donley securities - answer d. Investors in Donley
securities
The primary users of an issuer's audit
The auditor's judgement concerning the overall fairness of the
presentation of financial position, results of operations, and cash
flows is applied within the framework of
a. Quality control
b. Generally accepted auditing standards, which include the concept
of materiality
c. The auditor's assessment of the risk of material misstatement
d. Generally accepted accounting principles - answer d. Generally
accepted accounting principles
