TEST BANK
AUDITING: THE ART AND SCIENCE OF
ASSURANCE ENGAGEMENTS
, Table Of Contents
1. The Demand For Audit And Other Assurance Services
2. The Public Accounting Profession And Audit Quality
3. Professional Ethics And Legal Liability
4. Audit Responsibilities And Objectives
5. Audit Evidence
6. Client Acceptance, Planning, And Materiality
7. Assessing The Risk Of Material Misstatement
8. Internal Control And Coso Framework
9. Assessing Control Risk And Designing Tests Of Controls
10. Develop Risk Response: Audit Strategy And Audit Program
11. Audit Sampling Concepts
12. Audit Of The Revenue Cycle
13. Audit Of The Acquisition And Payment Cycle
14. Audit Of The Inventory And Distribution Cycle
15. Audit Of The Human Resources And Payroll Cycle
16. Audit Of The Capital Acquisition And Repayment Cycle
17. Audit Of Cash Balance
18. Completing The Audit
19. Audit Reports On Financial Statements
,Auditing, 16e (Arens)
Chapter 1 The Demand For An Auditing And Assurance Profession
1.1 Identify The Components Of An Audit And Explain Why There Is A Demand For Audits
1) Which Of The Following Illustrates The Definition Of Auditing With Respect To The
Evidence Analysis Process?
A) Accumulation And Evaluation Of Evidence About Balance Sheet Accounts
B) Learning About Different Types Of Computing Technology, Such As Mainframes
C) Writing An Operational Audit Report That Is Tailored To The Client's Situation
D) Making Sure That The Auditor Is Competent And Understands Evidence
Gathering Answer: A
Diff: 1 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
2) Auditing Should Be Done By A Qualified
A) Chartered Accountant.
B) Certified Management Accountant.
C) Competent And Independent Person.
D) Professional
Accountant. Answer: C
Diff: 2 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
3) Which Of The Following Illustrates The Definition Of Auditing With Respect To The
Reporting Process?
A) Accumulation And Evaluation Of Evidence About Balance Sheet Accounts
B) Reporting On The Degree Of Correspondence Between Financial Statements And Aspe
C) Writing An Operational Audit Report That Is Tailored To The Client's Situation
D) Making Sure That The Auditor Is Competent And Understands Evidence
Gathering Answer: B
Diff: 2 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
4) In The Audit Of Historical Financial Statements By Pa Firms, The Criteria Used Are
A) Generally Accepted Auditing Standards.
B) Generally Accepted Accounting Principles.
C) Regulations Of The Canada Revenue Agency.
D) Regulations Of The Provincial Securities
Commissions. Answer: B
Diff: 1 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
,5) A Large Pa Firm Has Assessed Evidence Collected During An Engagement. Criteria Used To
Assess The Financial Statements Were International Financial Reporting Standards (Ifrs). A High
Level Of Assurance Was Obtained. The Type Of Engagement Conducted Was A(N)
A) Audit.
B) Review.
C) Management Consulting.
D) Compilation
.
Answer: A
Diff: 2 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
6) The Auditor And The Entities Should Agree On The Criteria To Be Used In The Audit
A) Before The Audit Starts.
B) After The Audit Planning Has Been Done.
C) As They Progress With The Audit As They Can Determine Which Criteria Is More Suitable.
D) At The End Of The
Audit. Answer: A
Diff: 1 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
7) George Had A Conversation With The Accounting Personnel And Documented Information
About How The Accounting Systems Function. He Has Also Placed Copies Of Accounting
Forms In His Files. George Is Performing Which Task?
A) Accounting Procedures
B) Evidence Gathering
C) Tax Audit
D) Audit Report
Preparation Answer: B
Diff: 3 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
8) One Of The Reasons That An Auditor Must Be Competent Is To Be Able To
A) Understand The Engagement Risks And The Criteria Used By The Client.
B) Explain How The Bookkeeping Should Be Done To His Staff.
C) Record The Transactions Properly For The Underlying Records.
D) Capture The Information Properly In The Computer
Files. Answer: A
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
,9) One Of The Reasons That An Auditor Must Be Competent Is To Be Able To
A) Select The Type And Amount Of Evidence To Accumulate.
B) Explain How The Bookkeeping Should Be Done To His Staff.
C) Record The Transactions Properly For The Underlying Records.
D) Capture The Information Properly In The Computer
Files. Answer: A
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
10) It Is Important For The Auditor To Be Independent Because
A) The Auditor Would Not Charge A Fair Rate To The Client.
B) The Auditor Might Not Be As Knowledgeable Of The Subject Matter And The Criteria.
C) This Will Prevent Bias In Accumulating And Evaluating Evidence.
D) The Canadian Tax Authorities Require That The Auditor Be
Independent. Answer: C
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
11) Because An External Auditor Is Paid A Fee By A Client Company, He Or She
A) Is Absolutely Independent And May Conduct An Audit.
B) May Be Sufficiently Independent To Conduct An Audit.
C) Is Never Considered To Be Independent.
D) Must Receive Approval Of The Relevant Provincial Securities Commission Before
Conducting An Audit.
Answer: B
Diff: 1 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
12) The Independent Auditor's Report Is The
A) Communication Of The Result Of The Audit To The Users.
B) Set Of Audited Financial Statements.
C) Invoice Of The Auditor Detailing The Work They Have Performed.
D) Report Presented To Management About The Possible
Improvements. Answer: A
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
,13) In The Audit Of An Individual's Tax Return, The Auditor Should Demonstrate
Competence In The Use Of
A) External Databases That Contain Economic Statistics.
B) Standard Personal And Corporate Tax Preparation Software.
C) The Income Tax Act And Accompanying Regulations.
D) Database Management Software For The Use Of Client Based
Research. Answer: C
Diff: 1 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
14) In The Audit Of An Individual's Tax Return, The Criteria Used Would Be
A) An Accounting Framework.
B) The Income Tax Act.
C) The Client's Policies For Taxable Income.
D) The Auditor's
Judgment. Answer: B
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
15) In The Audit Of A Corporate Tax Return, The Report Provided By The Canada Revenue
Agency Auditor Would Describe
A) An Opinion On The Likelihood Of Tax Return Error.
B) The Likely Accounting Errors That Could Contribute To Tax Errors.
C) Management Issues With Respect To Accurately Reporting Taxes.
D) Corporate Income Tax Overages Or Income Tax Under
Payments. Answer: D
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
16) Joe Is Recording Sales Transactions In The Accounting System So That They Can Be
Summarized In A Logical Manner For The Purpose Of Providing Financial Information For
Decision-Making. Joe Is Performing
A) Accounting.
B) Auditing.
C) Review.
D) Management
Consulting. Answer: A
Diff: 2 Type: Mc Page Ref: 7
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
,17) Which Of The Following Is An Example Of Accounting Rather Than Auditing?
A) Gathering Evidence About The Quality Of Accounts Receivable
B) Entering Sales Transactions Into The Sales Order System
C) Reviewing Sales Invoices To See If They Have Been Calculated Correctly
D) Comparing Bank Deposit Documents To The Recorded Cash
Received Answer: B
Diff: 3 Type: Mc Page Ref: 7
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
18) In "Auditing" Accounting Data, The Concern Is With
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
Diff: 1 Type: Mc Page Ref: 7
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
19) Which Of The Following Is An Example Of Auditing Rather Than Accounting?
A) Recording Purchase Amounts In The Expense Accounts
B) Posting The Daily Sales Totals To The General Ledger
C) Recording Cash Received In The Customer Account Files
D) Evaluating Whether Accounts Receivable Are
Collectible Answer: D
Diff: 2 Type: Mc Page Ref: 7
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
20) An Accountant Records Information. When Conducting An Audit, The Auditor Must Possess
A) An Ability To Interpret Generally Accepted Accounting Frameworks.
B) An Education Beyond The Bachelor's Degree.
C) An Ability To Classify Transactions By Type.
D) An Ability To Organize And Summarize Economic
Events. Answer: A
Diff: 2 Type: Mc Page Ref: 8
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
, 21) How Does A Financial Statement Audit Affect A Bank Manager's Decision In Providing
Loans To A Corporate Client?
A) Information Risk Could Be Reduced, So The Bank Manager May Lower The Interest Rate
Charged.
B) The Bank Manager Will Lower The Risk-Free Interest Rate That Applies To The Corporation.
C) The Business Risk For The Client Will Be Reduced, So The Borrowing Costs Will Decline.
D) The Business Risk For The Client Will Be Increased, So The Borrowing Costs Will Be
Lowered. Answer: A
Diff: 3 Type: Mc Page Ref: 8
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
22) What Is The Most Appropriate Method For An Organization To Lower Information Risk
Related To Its Financial Statements? To Have
A) Good Bookkeeping Work Completed On The Accounts.
B) A High Quality Software Package Keep Track Of Information.
C) An Independent Financial Statement Audit Conducted.
D) An Independent Operational Audit Conducted On
Effectiveness. Answer: C
Diff: 2 Type: Mc Page Ref: 8
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
23) Discuss The Differences And Similarities Between The Roles Of Accountants And
Auditors. What 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 Do This, Accountants Must Have A Sound Understanding Of The Principles And
Rules That Provide The Basis For Preparing The Financial Information. In Addition,
Accountants Are Responsible For Developing Systems To Ensure That The Entity's Economic
Events Are Properly Recorded On A Timely Basis And At A Reasonable Cost.
The Role Of Auditors Is To Determine Whether The Financial Information Prepared By
Accountants Properly Reflects The Economic Events That Occurred. To Do This, The Auditor
Must Not Only Understand The Principles And Rules That Provide The Basis For Preparing
Financial Information, But Must Also Possess Expertise In The Accumulation And Evaluation
Of Audit Evidence. It Is This Latter Expertise That Distinguishes Auditors From Accountants.
Diff: 1 Type: Es Page Ref: 7
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
AUDITING: THE ART AND SCIENCE OF
ASSURANCE ENGAGEMENTS
, Table Of Contents
1. The Demand For Audit And Other Assurance Services
2. The Public Accounting Profession And Audit Quality
3. Professional Ethics And Legal Liability
4. Audit Responsibilities And Objectives
5. Audit Evidence
6. Client Acceptance, Planning, And Materiality
7. Assessing The Risk Of Material Misstatement
8. Internal Control And Coso Framework
9. Assessing Control Risk And Designing Tests Of Controls
10. Develop Risk Response: Audit Strategy And Audit Program
11. Audit Sampling Concepts
12. Audit Of The Revenue Cycle
13. Audit Of The Acquisition And Payment Cycle
14. Audit Of The Inventory And Distribution Cycle
15. Audit Of The Human Resources And Payroll Cycle
16. Audit Of The Capital Acquisition And Repayment Cycle
17. Audit Of Cash Balance
18. Completing The Audit
19. Audit Reports On Financial Statements
,Auditing, 16e (Arens)
Chapter 1 The Demand For An Auditing And Assurance Profession
1.1 Identify The Components Of An Audit And Explain Why There Is A Demand For Audits
1) Which Of The Following Illustrates The Definition Of Auditing With Respect To The
Evidence Analysis Process?
A) Accumulation And Evaluation Of Evidence About Balance Sheet Accounts
B) Learning About Different Types Of Computing Technology, Such As Mainframes
C) Writing An Operational Audit Report That Is Tailored To The Client's Situation
D) Making Sure That The Auditor Is Competent And Understands Evidence
Gathering Answer: A
Diff: 1 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
2) Auditing Should Be Done By A Qualified
A) Chartered Accountant.
B) Certified Management Accountant.
C) Competent And Independent Person.
D) Professional
Accountant. Answer: C
Diff: 2 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
3) Which Of The Following Illustrates The Definition Of Auditing With Respect To The
Reporting Process?
A) Accumulation And Evaluation Of Evidence About Balance Sheet Accounts
B) Reporting On The Degree Of Correspondence Between Financial Statements And Aspe
C) Writing An Operational Audit Report That Is Tailored To The Client's Situation
D) Making Sure That The Auditor Is Competent And Understands Evidence
Gathering Answer: B
Diff: 2 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
4) In The Audit Of Historical Financial Statements By Pa Firms, The Criteria Used Are
A) Generally Accepted Auditing Standards.
B) Generally Accepted Accounting Principles.
C) Regulations Of The Canada Revenue Agency.
D) Regulations Of The Provincial Securities
Commissions. Answer: B
Diff: 1 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
,5) A Large Pa Firm Has Assessed Evidence Collected During An Engagement. Criteria Used To
Assess The Financial Statements Were International Financial Reporting Standards (Ifrs). A High
Level Of Assurance Was Obtained. The Type Of Engagement Conducted Was A(N)
A) Audit.
B) Review.
C) Management Consulting.
D) Compilation
.
Answer: A
Diff: 2 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
6) The Auditor And The Entities Should Agree On The Criteria To Be Used In The Audit
A) Before The Audit Starts.
B) After The Audit Planning Has Been Done.
C) As They Progress With The Audit As They Can Determine Which Criteria Is More Suitable.
D) At The End Of The
Audit. Answer: A
Diff: 1 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
7) George Had A Conversation With The Accounting Personnel And Documented Information
About How The Accounting Systems Function. He Has Also Placed Copies Of Accounting
Forms In His Files. George Is Performing Which Task?
A) Accounting Procedures
B) Evidence Gathering
C) Tax Audit
D) Audit Report
Preparation Answer: B
Diff: 3 Type: Mc Page Ref: 5
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
8) One Of The Reasons That An Auditor Must Be Competent Is To Be Able To
A) Understand The Engagement Risks And The Criteria Used By The Client.
B) Explain How The Bookkeeping Should Be Done To His Staff.
C) Record The Transactions Properly For The Underlying Records.
D) Capture The Information Properly In The Computer
Files. Answer: A
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
,9) One Of The Reasons That An Auditor Must Be Competent Is To Be Able To
A) Select The Type And Amount Of Evidence To Accumulate.
B) Explain How The Bookkeeping Should Be Done To His Staff.
C) Record The Transactions Properly For The Underlying Records.
D) Capture The Information Properly In The Computer
Files. Answer: A
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
10) It Is Important For The Auditor To Be Independent Because
A) The Auditor Would Not Charge A Fair Rate To The Client.
B) The Auditor Might Not Be As Knowledgeable Of The Subject Matter And The Criteria.
C) This Will Prevent Bias In Accumulating And Evaluating Evidence.
D) The Canadian Tax Authorities Require That The Auditor Be
Independent. Answer: C
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
11) Because An External Auditor Is Paid A Fee By A Client Company, He Or She
A) Is Absolutely Independent And May Conduct An Audit.
B) May Be Sufficiently Independent To Conduct An Audit.
C) Is Never Considered To Be Independent.
D) Must Receive Approval Of The Relevant Provincial Securities Commission Before
Conducting An Audit.
Answer: B
Diff: 1 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
12) The Independent Auditor's Report Is The
A) Communication Of The Result Of The Audit To The Users.
B) Set Of Audited Financial Statements.
C) Invoice Of The Auditor Detailing The Work They Have Performed.
D) Report Presented To Management About The Possible
Improvements. Answer: A
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
,13) In The Audit Of An Individual's Tax Return, The Auditor Should Demonstrate
Competence In The Use Of
A) External Databases That Contain Economic Statistics.
B) Standard Personal And Corporate Tax Preparation Software.
C) The Income Tax Act And Accompanying Regulations.
D) Database Management Software For The Use Of Client Based
Research. Answer: C
Diff: 1 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
14) In The Audit Of An Individual's Tax Return, The Criteria Used Would Be
A) An Accounting Framework.
B) The Income Tax Act.
C) The Client's Policies For Taxable Income.
D) The Auditor's
Judgment. Answer: B
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
15) In The Audit Of A Corporate Tax Return, The Report Provided By The Canada Revenue
Agency Auditor Would Describe
A) An Opinion On The Likelihood Of Tax Return Error.
B) The Likely Accounting Errors That Could Contribute To Tax Errors.
C) Management Issues With Respect To Accurately Reporting Taxes.
D) Corporate Income Tax Overages Or Income Tax Under
Payments. Answer: D
Diff: 2 Type: Mc Page Ref: 6
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
16) Joe Is Recording Sales Transactions In The Accounting System So That They Can Be
Summarized In A Logical Manner For The Purpose Of Providing Financial Information For
Decision-Making. Joe Is Performing
A) Accounting.
B) Auditing.
C) Review.
D) Management
Consulting. Answer: A
Diff: 2 Type: Mc Page Ref: 7
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
,17) Which Of The Following Is An Example Of Accounting Rather Than Auditing?
A) Gathering Evidence About The Quality Of Accounts Receivable
B) Entering Sales Transactions Into The Sales Order System
C) Reviewing Sales Invoices To See If They Have Been Calculated Correctly
D) Comparing Bank Deposit Documents To The Recorded Cash
Received Answer: B
Diff: 3 Type: Mc Page Ref: 7
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
18) In "Auditing" Accounting Data, The Concern Is With
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
Diff: 1 Type: Mc Page Ref: 7
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
19) Which Of The Following Is An Example Of Auditing Rather Than Accounting?
A) Recording Purchase Amounts In The Expense Accounts
B) Posting The Daily Sales Totals To The General Ledger
C) Recording Cash Received In The Customer Account Files
D) Evaluating Whether Accounts Receivable Are
Collectible Answer: D
Diff: 2 Type: Mc Page Ref: 7
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
20) An Accountant Records Information. When Conducting An Audit, The Auditor Must Possess
A) An Ability To Interpret Generally Accepted Accounting Frameworks.
B) An Education Beyond The Bachelor's Degree.
C) An Ability To Classify Transactions By Type.
D) An Ability To Organize And Summarize Economic
Events. Answer: A
Diff: 2 Type: Mc Page Ref: 8
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
, 21) How Does A Financial Statement Audit Affect A Bank Manager's Decision In Providing
Loans To A Corporate Client?
A) Information Risk Could Be Reduced, So The Bank Manager May Lower The Interest Rate
Charged.
B) The Bank Manager Will Lower The Risk-Free Interest Rate That Applies To The Corporation.
C) The Business Risk For The Client Will Be Reduced, So The Borrowing Costs Will Decline.
D) The Business Risk For The Client Will Be Increased, So The Borrowing Costs Will Be
Lowered. Answer: A
Diff: 3 Type: Mc Page Ref: 8
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
22) What Is The Most Appropriate Method For An Organization To Lower Information Risk
Related To Its Financial Statements? To Have
A) Good Bookkeeping Work Completed On The Accounts.
B) A High Quality Software Package Keep Track Of Information.
C) An Independent Financial Statement Audit Conducted.
D) An Independent Operational Audit Conducted On
Effectiveness. Answer: C
Diff: 2 Type: Mc Page Ref: 8
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
23) Discuss The Differences And Similarities Between The Roles Of Accountants And
Auditors. What 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 Do This, Accountants Must Have A Sound Understanding Of The Principles And
Rules That Provide The Basis For Preparing The Financial Information. In Addition,
Accountants Are Responsible For Developing Systems To Ensure That The Entity's Economic
Events Are Properly Recorded On A Timely Basis And At A Reasonable Cost.
The Role Of Auditors Is To Determine Whether The Financial Information Prepared By
Accountants Properly Reflects The Economic Events That Occurred. To Do This, The Auditor
Must Not Only Understand The Principles And Rules That Provide The Basis For Preparing
Financial Information, But Must Also Possess Expertise In The Accumulation And Evaluation
Of Audit Evidence. It Is This Latter Expertise That Distinguishes Auditors From Accountants.
Diff: 1 Type: Es Page Ref: 7
Learning Obj.: 1-1 Identify The Components Of An Audit And Explain Why There Is A
Demand For Audits
