TEST BANK
, 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.
, 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.
