Test Bank for Auditing & Assurance Services 9th Edition by
= = = = = = = = = =
Timothy Louwers, Jerry Strawser
= = =
Chap 01 9e = = = Answers Included
= =
The=audit=objective=that=all=transactions=and=accounts=that=should=be=presented=in=the=financial=statements=are=in
=fact=included=is=related=to=which=of=the=PCAOB=assertions?=
A) Existence=
B) Rights=and=obligations=
C) Completeness=
D) Valuation=
=
=
2) Cutoff=tests=designed=to=detect=purchases=made=before=the=end=of=the=year=that=have=been=recorded
in=the=subsequent=year=provide=assurance=about=management's=assertion=of=
=
A)presentation=and=disclosure.=
B) completeness.=
C) rights=and=obligations.=
D) existence.=
=
=
3) During=an=audit=of=an=entity's=stockholders'=equity=accounts,=the=auditor=determines=whether=there=
are=restrictions=on=retained=earnings=resulting=from=loans,=agreements,=or=state=law.=This=audit=pro
cedure=most=likely=is=intended=to=verify=management's=assertion=of=A)=existence=or=occurrence.=
B) completeness.=
C) valuation=or=allocation.=
D) presentation=and=disclosure.=
=
=
4) The=confirmation=of=an=account=payable=balance=selected=from=the=general=ledger=provides=primar
y=evidence=regarding=which=management=assertion?=
A) Completeness=
B) Valuation=
C) Allocation=
D) Existence=
=
=
5) What=type=of=evidence=would=provide=the=highest=level=of=assurance=in=an=attestation=engagement
?=
A) Evidence=secured=solely=from=within=the=entity.=
B) Evidence=obtained=from=independent=sources.=
C) Evidence=obtained=indirectly.=
D) Evidence=obtained=from=multiple=internal=inquiries.=
=
=
1
,6) Which=of=the=following=management=assertions=is=an=auditor=most=likely=testing=if=the=audit=obj
ective=states=that=all=inventory=on=hand=is=reflected=in=the=ending=inventory=balance?=A)=The=entit
y=has=rights=to=the=inventory.=
B) Inventory=is=properly=valued.=
C) Inventory=is=properly=presented=in=the=financial=statements.=
D) Inventory=is=complete.=
=
=
7) An=auditor=traces=the=serial=numbers=on=equipment=to=a=nonissuer's=subledger.=Which=of=the=foll
owing=management=assertions=is=supported=by=this=test?=
A) Valuation=and=allocation=
B) Completeness=
C) Rights=and=obligations=
D) Presentation=and=disclosure=
=
=
8) An=auditor=has=substantial=doubt=about=the=entity's=ability=to=continue=as=a=going=concern=for=a=r
easonable=period=of=time=because=of=negative=cash=flows=and=working=capital=deficiencies.=
Under=these=circumstances,=the=auditor=would=be=most=concerned=about=the=A)
=control=environment=factors=that=affect=the=organizational=structure.=
B) correlation=of=detection=risk=and=inherent=risk.=
C) effectiveness=of=the=entity's=internal=control=activities.=
D) possible=effects=on=the=entity's=financial=statements.=
=
=
9) Which=of=the=following=types=of=audit=evidence=provides=theleast=assurance=of=reliability?=A)=Re
ceivable=confirmations=received=from=the=client's=customers.=
B) Prenumbered=receiving=reports=completed=by=the=client's=employees.=
C) Prior=months'=bank=statements=obtained=from=the=client.=
D) Municipal=property=tax=bills=prepared=in=the=client's=name.=
=
=
10) Which=of=the=following=is=a=management=assertion=regarding=account=balances=at=the=period=end
?=
A) Transactions=and=events=that=have=been=recorded=have=occurred=and=pertain=to=the=entity.=
B) Transactions=and=events=have=been=recorded=in=the=proper=accounts.=
C) The=entity=holds=or=controls=the=rights=to=assets,=and=liabilities=are=obligations=of=the=entity.
=
D) Amounts=and=other=data=related=to=the=transactions=and=events=have=been=recorded=appropr
iately.=
=
=
11) A=practitioner=is=engaged=to=express=an=opinion=on=management's=assertion=that=the=square=foot
age=of=a=warehouse=offered=for=sale=is=150,000=square=feet.=The=practitioner=should=refer=to=whic
h=of=the=following=sources=for=professional=guidance?=A)=Statement=of=Auditing=Standards.=
B) Statements=on=Standards=for=Attestation=Engagements.=
C) Statements=on=Standards=for=Accounting=and=Review=Services.=
2
, D) Statements=on=Standards=for=Consulting=Services.=
=
=
12) In=auditing=the=long-
term=debt=account,=an=auditor's=procedures=most=likely=would=focus=primarily=on=management's=
assertion=of=A)=existence.=
B) completeness.=
C) allocation.=
D) rights=and=obligations.=
=
=
13) An=auditor=selected=items=for=test=counts=from=the=client's=warehouse=during=the=physical=invent
ory=observation.=The=auditor=then=traced=these=test=counts=into=the=detailed=inventory=listing=that
=ultimately=agreed=to=the=financial=statements.=This=procedure=most=likely=provided=evidence=co
ncerning=management's=assertion=of=A)=completeness.=
B) valuation.=
C) presentation=and=disclosure.=
D) existence.=
E) rights=and=obligations.=
=
=
14) An=auditor=selected=items=from=the=client's=detailed=inventory=listing=(that=agreed=to=the=financia
l=statements).=During=the=physical=inventory=observation,=the=auditor=then=found=each=item=selec
ted=and=counted=the=number=of=units=on=hand.=Assuming=that=the=amount=on=hand=was=the=same=
as=the=amount=in=the=client's=detailed=inventory=listing,=this=procedure=most=likely=would=provid
e=evidence=concerning=management's=assertion=of=A)=completeness.=
B) valuation.=
C) presentation=and=disclosure.=
D) existence.=
E) rights=and=obligations.=
=
=
15) According=to=PCAOB=Auditing=Standard=No.=2201=(=AS=2201),=the=auditor=should=identify=sign
ificant=accounts=and=disclosures=and=their=relevant=assertions.=Which=of=the=following=financial=
statement=assertions=is=not=explicitly=identified=in=AS=2201?=A)=Completeness=
B) Valuation=or=allocation=
C) Accuracy=
D) Existence=or=occurrence=
E) All=of=these=are=assertions=identified=in=AS=2201.=
=
=
16) When=testing=the=completeness=assertion=for=a=liability=account,=an=auditor=ordinarily=works=fro
m=the=
A) financial=statements=to=the=potentially=unrecorded=items.=
B) potentially=unrecorded=items=to=the=financial=statements.=
C) accounting=records=to=the=supporting=evidence.=
3
, D) trial=balance=to=the=subsidiary=ledger.=
=
=
17) If=an=auditor=is=performing=procedures=related=to=the=information=that=is=contained=in=the=client's
=pension=footnote,=he/she=is=most=likely=to=obtain=evidence=concerning=management's=assertion=
about=
A) rights=and=obligations.=
B) existence.=C)=valuation.=
D)=presentation=and=disclosure.=
=
=
18) Which=of=the=following=questions=would=beinappropriate=for=an=auditor=to=ask=a=client=when=e
xhibiting=an=appropriate=level=of=professional=skepticism=while=completing=an=audit=procedure=r
elated=to=the=internal=control=system?=A)=What=can=go=wrong=in=this=process?=
B) Which=of=your=employees=is=a=fraudster?=
C) What=else=is=important=to=know=about=this=process?=
D) What=happens=when=a=key=employee=goes=on=vacation?=
=
=
19) To=be=proficient=as=an=auditor,=a=person=must=first=be=able=to=accomplish=which=of=these=tasks=in=
a=decision-making=process?=
A) Identify=audit=evidence=relevant=to=the=verification=of=assertions=management=makes=in=its=
unaudited=financial=statements=and=notes.=
B) Formulate=evidence-
gathering=procedures=(audit=plan)=designed=to=obtain=sufficient,=competent=evidence=about=
assertions=management=makes=in=financial=statements=and=notes.=
C) Recognize=the=financial=assertions=made=in=management's=financial=statements=and=footnot
es.=
D) Evaluate=the=evidence=produced=by=the=performance=of=procedures=and=decide=whether=ma
nagement's=assertions=conform=to=generally=accepted=accounting=principles=and=reality.=
=
=
20) Which=of=the=following=is=an=underlying=condition=that=in=part=creates=the=demand=by=users=for=r
eliable=information?=
A) Economic=transactions=that=are=numerous=and=complex.=
B) Decisions=that=are=time-sensitive.=
C) Users=separated=from=accounting=records=by=distance=and=time.=
D) Financial=decisions=that=are=important=to=investors=and=users.=
E) All=of=these=choices=are=correct.=
=
=
21) Which=of=the=following=is=not=included=in=the=American=Accounting=Association=(AAA)=definit
ion=of=auditing?=
A) Potential=conflict=of=interest=
B) Systematic=process=
C) Assertions=about=economic=actions=
4
= = = = = = = = = =
Timothy Louwers, Jerry Strawser
= = =
Chap 01 9e = = = Answers Included
= =
The=audit=objective=that=all=transactions=and=accounts=that=should=be=presented=in=the=financial=statements=are=in
=fact=included=is=related=to=which=of=the=PCAOB=assertions?=
A) Existence=
B) Rights=and=obligations=
C) Completeness=
D) Valuation=
=
=
2) Cutoff=tests=designed=to=detect=purchases=made=before=the=end=of=the=year=that=have=been=recorded
in=the=subsequent=year=provide=assurance=about=management's=assertion=of=
=
A)presentation=and=disclosure.=
B) completeness.=
C) rights=and=obligations.=
D) existence.=
=
=
3) During=an=audit=of=an=entity's=stockholders'=equity=accounts,=the=auditor=determines=whether=there=
are=restrictions=on=retained=earnings=resulting=from=loans,=agreements,=or=state=law.=This=audit=pro
cedure=most=likely=is=intended=to=verify=management's=assertion=of=A)=existence=or=occurrence.=
B) completeness.=
C) valuation=or=allocation.=
D) presentation=and=disclosure.=
=
=
4) The=confirmation=of=an=account=payable=balance=selected=from=the=general=ledger=provides=primar
y=evidence=regarding=which=management=assertion?=
A) Completeness=
B) Valuation=
C) Allocation=
D) Existence=
=
=
5) What=type=of=evidence=would=provide=the=highest=level=of=assurance=in=an=attestation=engagement
?=
A) Evidence=secured=solely=from=within=the=entity.=
B) Evidence=obtained=from=independent=sources.=
C) Evidence=obtained=indirectly.=
D) Evidence=obtained=from=multiple=internal=inquiries.=
=
=
1
,6) Which=of=the=following=management=assertions=is=an=auditor=most=likely=testing=if=the=audit=obj
ective=states=that=all=inventory=on=hand=is=reflected=in=the=ending=inventory=balance?=A)=The=entit
y=has=rights=to=the=inventory.=
B) Inventory=is=properly=valued.=
C) Inventory=is=properly=presented=in=the=financial=statements.=
D) Inventory=is=complete.=
=
=
7) An=auditor=traces=the=serial=numbers=on=equipment=to=a=nonissuer's=subledger.=Which=of=the=foll
owing=management=assertions=is=supported=by=this=test?=
A) Valuation=and=allocation=
B) Completeness=
C) Rights=and=obligations=
D) Presentation=and=disclosure=
=
=
8) An=auditor=has=substantial=doubt=about=the=entity's=ability=to=continue=as=a=going=concern=for=a=r
easonable=period=of=time=because=of=negative=cash=flows=and=working=capital=deficiencies.=
Under=these=circumstances,=the=auditor=would=be=most=concerned=about=the=A)
=control=environment=factors=that=affect=the=organizational=structure.=
B) correlation=of=detection=risk=and=inherent=risk.=
C) effectiveness=of=the=entity's=internal=control=activities.=
D) possible=effects=on=the=entity's=financial=statements.=
=
=
9) Which=of=the=following=types=of=audit=evidence=provides=theleast=assurance=of=reliability?=A)=Re
ceivable=confirmations=received=from=the=client's=customers.=
B) Prenumbered=receiving=reports=completed=by=the=client's=employees.=
C) Prior=months'=bank=statements=obtained=from=the=client.=
D) Municipal=property=tax=bills=prepared=in=the=client's=name.=
=
=
10) Which=of=the=following=is=a=management=assertion=regarding=account=balances=at=the=period=end
?=
A) Transactions=and=events=that=have=been=recorded=have=occurred=and=pertain=to=the=entity.=
B) Transactions=and=events=have=been=recorded=in=the=proper=accounts.=
C) The=entity=holds=or=controls=the=rights=to=assets,=and=liabilities=are=obligations=of=the=entity.
=
D) Amounts=and=other=data=related=to=the=transactions=and=events=have=been=recorded=appropr
iately.=
=
=
11) A=practitioner=is=engaged=to=express=an=opinion=on=management's=assertion=that=the=square=foot
age=of=a=warehouse=offered=for=sale=is=150,000=square=feet.=The=practitioner=should=refer=to=whic
h=of=the=following=sources=for=professional=guidance?=A)=Statement=of=Auditing=Standards.=
B) Statements=on=Standards=for=Attestation=Engagements.=
C) Statements=on=Standards=for=Accounting=and=Review=Services.=
2
, D) Statements=on=Standards=for=Consulting=Services.=
=
=
12) In=auditing=the=long-
term=debt=account,=an=auditor's=procedures=most=likely=would=focus=primarily=on=management's=
assertion=of=A)=existence.=
B) completeness.=
C) allocation.=
D) rights=and=obligations.=
=
=
13) An=auditor=selected=items=for=test=counts=from=the=client's=warehouse=during=the=physical=invent
ory=observation.=The=auditor=then=traced=these=test=counts=into=the=detailed=inventory=listing=that
=ultimately=agreed=to=the=financial=statements.=This=procedure=most=likely=provided=evidence=co
ncerning=management's=assertion=of=A)=completeness.=
B) valuation.=
C) presentation=and=disclosure.=
D) existence.=
E) rights=and=obligations.=
=
=
14) An=auditor=selected=items=from=the=client's=detailed=inventory=listing=(that=agreed=to=the=financia
l=statements).=During=the=physical=inventory=observation,=the=auditor=then=found=each=item=selec
ted=and=counted=the=number=of=units=on=hand.=Assuming=that=the=amount=on=hand=was=the=same=
as=the=amount=in=the=client's=detailed=inventory=listing,=this=procedure=most=likely=would=provid
e=evidence=concerning=management's=assertion=of=A)=completeness.=
B) valuation.=
C) presentation=and=disclosure.=
D) existence.=
E) rights=and=obligations.=
=
=
15) According=to=PCAOB=Auditing=Standard=No.=2201=(=AS=2201),=the=auditor=should=identify=sign
ificant=accounts=and=disclosures=and=their=relevant=assertions.=Which=of=the=following=financial=
statement=assertions=is=not=explicitly=identified=in=AS=2201?=A)=Completeness=
B) Valuation=or=allocation=
C) Accuracy=
D) Existence=or=occurrence=
E) All=of=these=are=assertions=identified=in=AS=2201.=
=
=
16) When=testing=the=completeness=assertion=for=a=liability=account,=an=auditor=ordinarily=works=fro
m=the=
A) financial=statements=to=the=potentially=unrecorded=items.=
B) potentially=unrecorded=items=to=the=financial=statements.=
C) accounting=records=to=the=supporting=evidence.=
3
, D) trial=balance=to=the=subsidiary=ledger.=
=
=
17) If=an=auditor=is=performing=procedures=related=to=the=information=that=is=contained=in=the=client's
=pension=footnote,=he/she=is=most=likely=to=obtain=evidence=concerning=management's=assertion=
about=
A) rights=and=obligations.=
B) existence.=C)=valuation.=
D)=presentation=and=disclosure.=
=
=
18) Which=of=the=following=questions=would=beinappropriate=for=an=auditor=to=ask=a=client=when=e
xhibiting=an=appropriate=level=of=professional=skepticism=while=completing=an=audit=procedure=r
elated=to=the=internal=control=system?=A)=What=can=go=wrong=in=this=process?=
B) Which=of=your=employees=is=a=fraudster?=
C) What=else=is=important=to=know=about=this=process?=
D) What=happens=when=a=key=employee=goes=on=vacation?=
=
=
19) To=be=proficient=as=an=auditor,=a=person=must=first=be=able=to=accomplish=which=of=these=tasks=in=
a=decision-making=process?=
A) Identify=audit=evidence=relevant=to=the=verification=of=assertions=management=makes=in=its=
unaudited=financial=statements=and=notes.=
B) Formulate=evidence-
gathering=procedures=(audit=plan)=designed=to=obtain=sufficient,=competent=evidence=about=
assertions=management=makes=in=financial=statements=and=notes.=
C) Recognize=the=financial=assertions=made=in=management's=financial=statements=and=footnot
es.=
D) Evaluate=the=evidence=produced=by=the=performance=of=procedures=and=decide=whether=ma
nagement's=assertions=conform=to=generally=accepted=accounting=principles=and=reality.=
=
=
20) Which=of=the=following=is=an=underlying=condition=that=in=part=creates=the=demand=by=users=for=r
eliable=information?=
A) Economic=transactions=that=are=numerous=and=complex.=
B) Decisions=that=are=time-sensitive.=
C) Users=separated=from=accounting=records=by=distance=and=time.=
D) Financial=decisions=that=are=important=to=investors=and=users.=
E) All=of=these=choices=are=correct.=
=
=
21) Which=of=the=following=is=not=included=in=the=American=Accounting=Association=(AAA)=definit
ion=of=auditing?=
A) Potential=conflict=of=interest=
B) Systematic=process=
C) Assertions=about=economic=actions=
4
