Auditing: Integral to the Economy Key 1. The need for assurance services arises because the interests of the users of information may be different from that of the interests of those responsible for providing information. TRUE 2. An audit of financial sta

Auditing: Integral to the
Economy Test Bank

,Auditing: Integral to the Economy

Student:

1. The need for assurance services arises because the interests of the users of information may be different from
that of the interests of those responsible for providing information.
True False



2. An audit of financial statements is a form of attestation service.
True False



3. Independence is an attribute necessary to perform assurance services.
True False



4. A bank using Milton Company's financial statements to determine the creditworthiness of a potential loan to
Milton is a good example of the need for unbiased reporting.
True False



5. Independence is only required for assurance service providers.
True False



6. A CPA automatically qualifies as an assurance provider in all areas of business.
True False



7. Attestation services are a subset of assurance services and always involve a report that goes to a third party.
True False



8. The American Institute of Certified Public Accountants has the primary authority to set auditing standards for
public companies.
True False

,9. The audit function is unique because it exists to perform services on a "client" on behalf of shareholders,
directors and other parties.
True False



10. Auditing is the process of attesting to assertions about economic actions and events.
True False



11. Auditing is the process of verifying the accuracy of the financial statements.
True False



12. Internal auditing only provides assurance services to clients.
True False



13. Auditing primarily exists because users need unbiased information on which to assess management
performance and make economic decisions.
True False



14. The degree of confidence that users place on management's financial statements is higher than that placed
on audited financial statements because few users have direct knowledge of the company's operations and
management is the most knowledgeable about operations.
True False



15. U.S. nonpublic companies will have an audit performed in accordance with generally accepted auditing
standards that have been promulgated by the PCAOB.
True False



16. An assertion is a statement about an action, event, condition, or performance over a specified time period.
True False



17. Management is required to comment on the fairness of the company's financial presentation. This reduces
the auditor's legal responsibility for the opinion rendered on the financial statements.
True False

, 18. Audited financial statements should be free from all errors and fraud.
True False



19. Audited financial statements should be presented fairly according to the substance of GAAP.
True False



20. Audited financial statements should be presented fairly according to the substance of GAAS.
True False



21. A plan to converge the U.S. generally accepted auditing standards (GAAS) with the International Standards
on Auditing (ISAs) was developed by the .AICPA’s Auditing Standards Board (ASB).
True False



22. Attestation is confined to an audit of client financial statements.
True False



23. An auditor must have a good understanding of the risks associated with a client's industry in order to ensure
that the financial statements reflect the underlying substance of accounting transactions and the economic
effects of such transactions.
True False



24. Public Company Accounting Oversight Board provides the criteria against which the auditor measures the
fairness of financial statement presentation for public companies.
True False



25. Generally accepted accounting principles provide the criteria against which the auditor measures the
fairness of financial statement presentation.
True False



26. Businesses that use independent auditors do not need the use of internal auditors.
True False