Testbank forAuditing and Assurance Services, 9th Edition By Timothy Louwers,
Penelope Bagley, Verified answers with questions and rationales
Topic 1: Fundamental Auditing Concepts & Demand (Q1 - Q8)
Q1. Which of the following is the essential purpose of the audit function?
A) Detection of fraud.
B) Examination of individual transactions to certify their validity.
C) Determination of whether the client's financial statement assertions are fairly
stated.
D) Assurance of the consistent application of correct accounting procedures.
Answer: C) Determination of whether the client's financial statement assertions
are fairly stated.
Rationale: The core purpose of an audit is to lend credibility to management's
financial statements by expressing an opinion on whether they are fairly
presented, in all material respects, in accordance with the applicable financial
reporting framework .
,Q2. Which of the following best describes the primary role of the independent
external auditor?
A) Produce a company's annual financial statements.
B) Express an opinion on the fairness of financial statements.
C) Provide business consulting advice.
D) Prepare the company's tax returns.
Answer: B) Express an opinion on the fairness of financial statements.
Rationale: Management prepares the statements; the auditor audits them and
provides an independent opinion on their fairness. This is the fundamental role of
external audit .
Q3. Because of the risk of material misstatement, an audit should be planned and
performed with an attitude of:
A) Objective judgment.
B) Independent integrity.
C) Professional skepticism.
D) Impartial conservatism.
,Answer: C) Professional skepticism.
Rationale: GAAS require the auditor to plan and perform the audit with
professional skepticism, which is an attitude that includes a questioning mind and
a critical assessment of audit evidence .
Q4. Which of the following best describes assurance services?
A) Independent professional services that report on the client's financial
statements.
B) Independent professional services that improve the quality of information for
decision makers.
C) Independent professional services that report on specific written management
assertions.
D) Independent professional services that improve the client's operations.
Answer: B) Independent professional services that improve the quality of
information for decision makers.
Rationale: Assurance services are broader than auditing; they are independent
professional services that improve the quality of information (or its context) for
decision-makers .
Q5. An attestation engagement is one in which a CPA is engaged to:
, A) Issue a report on subject matter or an assertion about the subject matter that
is the responsibility of another party.
B) Provide tax advice or prepare a tax return.
C) Testify as an expert witness.
D) Assemble prospective financial statements without expressing any assurance.
Answer: A) Issue a report on subject matter or an assertion about the subject
matter that is the responsibility of another party.
Rationale: Attestation involves issuing a written conclusion about the reliability of
a written assertion that is the responsibility of another party .
Q6. The Sarbanes-Oxley Act of 2002 requires that company CEOs and CFOs certify
the financial statements. Certification means they must sign a statement
indicating:
A) They have read the financial statements.
B) They are not aware of any false or misleading statements.
C) They believe the financial statements present an accurate picture.
D) All of the above.
Answer: D) All of the above.
Penelope Bagley, Verified answers with questions and rationales
Topic 1: Fundamental Auditing Concepts & Demand (Q1 - Q8)
Q1. Which of the following is the essential purpose of the audit function?
A) Detection of fraud.
B) Examination of individual transactions to certify their validity.
C) Determination of whether the client's financial statement assertions are fairly
stated.
D) Assurance of the consistent application of correct accounting procedures.
Answer: C) Determination of whether the client's financial statement assertions
are fairly stated.
Rationale: The core purpose of an audit is to lend credibility to management's
financial statements by expressing an opinion on whether they are fairly
presented, in all material respects, in accordance with the applicable financial
reporting framework .
,Q2. Which of the following best describes the primary role of the independent
external auditor?
A) Produce a company's annual financial statements.
B) Express an opinion on the fairness of financial statements.
C) Provide business consulting advice.
D) Prepare the company's tax returns.
Answer: B) Express an opinion on the fairness of financial statements.
Rationale: Management prepares the statements; the auditor audits them and
provides an independent opinion on their fairness. This is the fundamental role of
external audit .
Q3. Because of the risk of material misstatement, an audit should be planned and
performed with an attitude of:
A) Objective judgment.
B) Independent integrity.
C) Professional skepticism.
D) Impartial conservatism.
,Answer: C) Professional skepticism.
Rationale: GAAS require the auditor to plan and perform the audit with
professional skepticism, which is an attitude that includes a questioning mind and
a critical assessment of audit evidence .
Q4. Which of the following best describes assurance services?
A) Independent professional services that report on the client's financial
statements.
B) Independent professional services that improve the quality of information for
decision makers.
C) Independent professional services that report on specific written management
assertions.
D) Independent professional services that improve the client's operations.
Answer: B) Independent professional services that improve the quality of
information for decision makers.
Rationale: Assurance services are broader than auditing; they are independent
professional services that improve the quality of information (or its context) for
decision-makers .
Q5. An attestation engagement is one in which a CPA is engaged to:
, A) Issue a report on subject matter or an assertion about the subject matter that
is the responsibility of another party.
B) Provide tax advice or prepare a tax return.
C) Testify as an expert witness.
D) Assemble prospective financial statements without expressing any assurance.
Answer: A) Issue a report on subject matter or an assertion about the subject
matter that is the responsibility of another party.
Rationale: Attestation involves issuing a written conclusion about the reliability of
a written assertion that is the responsibility of another party .
Q6. The Sarbanes-Oxley Act of 2002 requires that company CEOs and CFOs certify
the financial statements. Certification means they must sign a statement
indicating:
A) They have read the financial statements.
B) They are not aware of any false or misleading statements.
C) They believe the financial statements present an accurate picture.
D) All of the above.
Answer: D) All of the above.
