Auditing and Assurance Services Chapter 1 - 4 Multiple Choice

e. All of the above. - correct answer Which of the following would be considered an assurance engagement? a. Giving an opinion on a prize promoter's claims about the amount of sweepstakes prizes awarded in the past. b. Giving an opinion on the conformity of the financial statements of a university with generally accepted accounting principles. c. Giving an opinion on the fair presentation of a newspaper's circulation data. d. Giving assurance about the average drive length achieved by golfers with a client's golf balls. e. All of the above. a. A potential conflict of interest always exists between the auditor and the management of the enterprise under audit. - correct answer It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that a. A potential conflict of interest always exists between the auditor and the management of the enterprise under audit. b. In audits of financial statements, the auditor acts exclusively in the capacity of an auditor. c. The professional status of the independent auditor imposes commensurate professional obligations. d. Financial statements and financial data are verifiable. b. Prepare a written report containing a conclusion about the reliability of a management assertion. - correct answer In an attestation engagement, a CPA practitioner is engaged to a. Compile a company's financial forecast based on management's assumptions without expressing any form of assurance. b. Prepare a written report containing a conclusion about the reliability of a management assertion. c. Prepare a tax return using information the CPA has not audited or reviewed. d. Give expert testimony in court on particular facts in a corporate income tax controversy. d. Operational auditing - correct answer A determination of cost savings obtained by outsourcing cafeteria services is most likely to be an objective of a. Environmental auditing. b. Financial auditing. c. Compliance auditing. d. Operational auditing. b. The operational auditor is seeking to help management use resources in the most effective manner possible. - correct answer The primary difference between operational auditing and financial auditing is that in operational auditing a. The operational auditor is not concerned with whether the audited activity is generating information in compliance with financial accounting standards. b. The operational auditor is seeking to help management use resources in the most effective manner possible. c. The operational auditor starts with the financial statements of an activity being audited and works backward to the basic processes involved in producing them. d. The operational auditor can use analytical skills and tools that are not necessary in financial auditing a. Enhance the degree of confidence that intended users can place in the financial statements - correct answer According to the AICPA, the purpose of an audit of financial statements is to a. Enhance the degree of confidence that intended users can place in the financial statements. b. Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the Financial Accounting Standards Board. c. Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the U.S. Securities and Exchange Commission. d. Obtain systematic and objective evidence about financial assertions and report the results to interested users. d. They generally see a potential conflict of interest between company mangers who want to get loans and the bank's needs for reliable financial statements. - correct answer Bankers who are processing loan applications from companies seeking large loans will probably ask for financial statements audited by an independent CPA because a. Financial statements are too complex for the bankers to analyze themselves. b. They are too far away from company headquarters to perform accounting and auditing themselves. c. The consequences of making a bad loan are very undesirable. d. They generally see a potential conflict of interest between company managers who want to get loans and the bank's needs for reliable financial statements. d. All of the above - correct answer The Sarbanes-Oxley Act of 2002 prohibits public accounting firms from providing which of the following services to an audit client? a. Bookkeeping services. b. Internal auditing services. c. Valuation services. d. All of the above. b. Information risk faced by investors - correct answer Independent auditors of financial statements perform audits that reduce a. Business risks faced by investors. b. Information risk faced by investors. c. Complexity of financial statements. d. Timeliness of financial statements. d. Determine whether client personnel are following laws, rules, regulations, and policies. - correct answer The primary objective of compliance auditing is to a. Give an opinion on financial statements. b. Develop a basis for a report on internal control. c. Perform a study of effective and efficient use of resources. d. Determine whether client personnel are following laws, rules, regulations, and policies. d. All of the above - correct answer What requirements are usually necessary to become licensed as a certified public accountant? a. Successful completion of the Uniform CPA Examination. b. Experience in the accounting field. c. Education. d. All of the above. d. Government Accountability Office (GAO) - correct answer The organization primarily responsible for ensuring that public officials are using public funds efficiently, economically, and effectively is the a. Governmental Internal Audit Agency (GIAA). b. Central Internal Auditors (CIA). c. Secu