TEST BANK Auditing: A Practical Approach with Data Analytics
2nd Edition by Laura Davis Wiley, Johnson and Moroney
All Chapters 1-16
, TABLE OF CONTENTS
Chapter 1 Introduction and Overview of Audit and Assurance
Chapter 2 Professionalism and Professional Responsibilities
Chapter 3 Risk Assessment Part I: Audit Risk and Audit Strategy
Chapter 4 Risk Assessment Part II: Understanding the Client
Chapter 5 Audit Evidence
Chapter 6 Gaining an Understanding of the Client's System of Internal Control
Chapter 7 Risk Response: Performing Tests of Controls
Chapter 8 Audit Data Analytics
Chapter 9 Risk Response: Performing Substantive Procedures
Chapter 10 Risk Response: Audit Sampling for Substantive Procedures
Chapter11 Auditing the Revenue Process
Chapter 12 Auditing the Purchasing and Payroll Processes
Chapter 13 Auditing Cash, Inventory and Related Income Statement Accounts
Chapter 14 Auditing Investing and Financing Activities
Chapter 15 Completing the Audit
Chapter 16 Reporting on the Audit
,Questions Type: True or False
Chapter 1 Introduction and Overview of Audit and Assurance
1. GAAP and IFRS are examples of applicable financial reporting framework.
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Communication, Learning
Objective: LO1.1, Solution: The applicable financial reporting framework refers to the set of standards used in
preparing the historical financial statements, such as GAAP, IFRS or a Federal Income Tax Basis of Accounting.
2. Review of financial forecasts falls under attestation services.
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
AACSB: Ethics, Learning Objective: LO1.1, Solution: Attestation services (under the umbrella of assurance
services) include review of historical financial statements, review of financial forecasts, and examination of
internal control.
3. Within a U.S. context, the applicable financial reporting framework is typically Generally Accepted
Accounting Principles (GAAP).
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
AACSB: Ethics, Learning Objective: LO1.2, Solution: Within a U.S. context, the applicable financial reporting
framework is typically generally accepted accounting principles (GAAP).
4. Private companies, or non-issuers, are not required by the U.S. government to have an annual
financial statement audit
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Analytic, Learning Objective:
LO1.2, Solution: Private companies, or non-issuers, are not required by the
U.S. government to have an annual financial statement audit, but often other interested users, such as a bank or
lender, may request that a private company provide audited financial statements.
, 5. One of the reasons there is a demand for financial statement audits is that users of financial
statements often lack accounting and legal knowledge to fully understand complex accounting
and disclosure choices.
A. True
B. False
Answer: A, Taxonomy: Comprehension, Difficulty: Easy, AICPA PC: Communication, AACSB: Analytic, Learning
Objective: LO1.3, Solution: Complexity: Financial statements are complex, the amounts are often affected by
significant estimates, and the disclosures often require significant knowledge and experience to evaluate. Most
financial statement users do not have the accounting and legal knowledge to assess the reasonableness of
complex accounting and disclosure choices being made by the company.
6. In financial accounting, the balance sheet is a statement of financial position
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA PC: Communication, AACSB: Analytic, Learning
Objective: LO1.3, Solution: In financial accounting, the financial statements include the balance sheet (statement
of financial position), income statement (statement of comprehensive income), statement of cash flows,
statement of changes in equity and accompanying notes.
7. Business valuation falls within the purview of non-assurance services.
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
AACSB: Analytic, Learning Objective: LO1.4, Solution: Many of these accounting firms provide non-assurance (or
non-audit) services as well as assurance services. These non- assurance services include management
consulting, business valuation, mergers and acquisitions, insolvency, tax and accounting services.
2nd Edition by Laura Davis Wiley, Johnson and Moroney
All Chapters 1-16
, TABLE OF CONTENTS
Chapter 1 Introduction and Overview of Audit and Assurance
Chapter 2 Professionalism and Professional Responsibilities
Chapter 3 Risk Assessment Part I: Audit Risk and Audit Strategy
Chapter 4 Risk Assessment Part II: Understanding the Client
Chapter 5 Audit Evidence
Chapter 6 Gaining an Understanding of the Client's System of Internal Control
Chapter 7 Risk Response: Performing Tests of Controls
Chapter 8 Audit Data Analytics
Chapter 9 Risk Response: Performing Substantive Procedures
Chapter 10 Risk Response: Audit Sampling for Substantive Procedures
Chapter11 Auditing the Revenue Process
Chapter 12 Auditing the Purchasing and Payroll Processes
Chapter 13 Auditing Cash, Inventory and Related Income Statement Accounts
Chapter 14 Auditing Investing and Financing Activities
Chapter 15 Completing the Audit
Chapter 16 Reporting on the Audit
,Questions Type: True or False
Chapter 1 Introduction and Overview of Audit and Assurance
1. GAAP and IFRS are examples of applicable financial reporting framework.
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Communication, Learning
Objective: LO1.1, Solution: The applicable financial reporting framework refers to the set of standards used in
preparing the historical financial statements, such as GAAP, IFRS or a Federal Income Tax Basis of Accounting.
2. Review of financial forecasts falls under attestation services.
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
AACSB: Ethics, Learning Objective: LO1.1, Solution: Attestation services (under the umbrella of assurance
services) include review of historical financial statements, review of financial forecasts, and examination of
internal control.
3. Within a U.S. context, the applicable financial reporting framework is typically Generally Accepted
Accounting Principles (GAAP).
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
AACSB: Ethics, Learning Objective: LO1.2, Solution: Within a U.S. context, the applicable financial reporting
framework is typically generally accepted accounting principles (GAAP).
4. Private companies, or non-issuers, are not required by the U.S. government to have an annual
financial statement audit
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Analytic, Learning Objective:
LO1.2, Solution: Private companies, or non-issuers, are not required by the
U.S. government to have an annual financial statement audit, but often other interested users, such as a bank or
lender, may request that a private company provide audited financial statements.
, 5. One of the reasons there is a demand for financial statement audits is that users of financial
statements often lack accounting and legal knowledge to fully understand complex accounting
and disclosure choices.
A. True
B. False
Answer: A, Taxonomy: Comprehension, Difficulty: Easy, AICPA PC: Communication, AACSB: Analytic, Learning
Objective: LO1.3, Solution: Complexity: Financial statements are complex, the amounts are often affected by
significant estimates, and the disclosures often require significant knowledge and experience to evaluate. Most
financial statement users do not have the accounting and legal knowledge to assess the reasonableness of
complex accounting and disclosure choices being made by the company.
6. In financial accounting, the balance sheet is a statement of financial position
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA PC: Communication, AACSB: Analytic, Learning
Objective: LO1.3, Solution: In financial accounting, the financial statements include the balance sheet (statement
of financial position), income statement (statement of comprehensive income), statement of cash flows,
statement of changes in equity and accompanying notes.
7. Business valuation falls within the purview of non-assurance services.
A. True
B. False
Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and Interpretation,
AACSB: Analytic, Learning Objective: LO1.4, Solution: Many of these accounting firms provide non-assurance (or
non-audit) services as well as assurance services. These non- assurance services include management
consulting, business valuation, mergers and acquisitions, insolvency, tax and accounting services.
