Test Bank for Auditing & Assurance Services 7th Edition

Test Bank for Auditing & Assurance Services 7th Edition Auditing & Assurance Services, 7e (Louwers) Chapter 1 Auditing and Assurance Services 1) 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. Answer: C Difficulty: 1 Easy Topic: Management's Financial Statement Assertions Learning Objective: 01-03 Describe and define the assertions that management makes about the recognition, measurement, presentation, and disclosure of the financial statements and explain why auditors use them as the focal point of the audit. Blooms: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 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. Answer: B Difficulty: 2 Medium Topic: Management's Financial Statement Assertions Learning Objective: 01-03 Describe and define the assertions that management makes about the recognition, measurement, presentation, and disclosure of the financial statements and explain why auditors use them as the focal point of the audit. Blooms: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 3 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 procedure most likely is intended to verify management's assertion of: A) existence or occurrence. B) completeness. C) valuation or allocation. D) presentation and disclosure. Answer: D Difficulty: 2 Medium Topic: Management's Financial Statement Assertions Learning Objective: 01-03 Describe and define the assertions that management makes about the recognition, measurement, presentation, and disclosure of the financial statements and explain why auditors use them as the focal point of the audit. Blooms: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 4) The confirmation of an account payable balance selected from the general ledger provides primary evidence regarding which management assertion? A) Completeness. B) Valuation. C) Allocation. D) Existence. Answer: D Difficulty: 2 Medium Topic: Management's Financial Statement Assertions Learning Objective: 01-03 Describe and define the assertions that management makes about the recognition, measurement, presentation, and disclosure of the financial statements and explain why auditors use them as the focal point of the audit. Blooms: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 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. Answer: B Difficulty: 3 Hard Topic: Auditing, Attestation, and Assurance Services Learning Objective: 01-02 Define and contrast financial statement auditing, attestation, and assurance services. Blooms: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 4 6) Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance? A) The entity has rights to the inventory. B) Inventory is properly valued. C) Inventory is properly presented in the financial statements. D) Inventory is complete. Answer: D Difficulty: 3 Hard Topic: Management's Financial Statement Assertions Learning Objective: 01-03 Describe and define the assertions that management makes about the recognition, measurement, presentation, and disclosure of the financial statements and explain why auditors use them as the focal point of the audit. Blooms: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 7) An auditor traces the serial numbers on equipment to a nonissuer's sub-ledger. Which of the following management assertions is supported by this test? A) Valuation and allocation. B) Completeness. C) Rights and obligations. D) Presentation and disclosure. Answer: B Difficulty: 3 Hard Topic: Management's Financial Statement Assertions Learning Objective: 01-03 Describe and define the assertions that management makes about the recognition, measurement, presentation, and disclosure of the financial statements and explain why auditors use them as the focal point of the audit. Blooms: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation