,DOWNLOAD THE Test Bank for Auditing Practical Approach with DataAnaly
f f f f f f f f f f
tics 2nd Edition Johnsonf f f
Johnson Auditing,f2E Chapterf 1
Chapter 1 Introduction f f f
and Overview of Audit
f f f
and Assurance f
QuestionfType:fTrueforfFalse
1. GAAPfandfIFRSf arefexamplesfoffapplicableffinancialfreportingfframework.
A. True
B. False
Ans:fA,fLO:f1,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fCommunication,fAICPAfFC:fReporting
Solution:fThefapplicableffinancialfreportingfframeworkfrefersftofthefsetfoffstandardsfusedfinfpreparingfthefhi
storicalffinancialfstatements,fsuchfasfGAAP,fIFRSforfafFederalfIncomefTaxfBasisfoffAccounting.
2. Reviewfofffinancialfforecastsffallsfunderfattestationfservices.
A. True
B. False
Ans:fA,fLO:f1,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfFC:fMeasurementfAnalysisfandfInterpre
tation
Solution:fAttestationfservicesf(underfthefumbrellafoff assurancefservices)fincludefreviewfoffhistoricalffinanci
alfstatements,freviewfofffinancialfforecasts,fandfexaminationfoffinternalfcontrol.
3. WithinfafU.S.fcontext,fthefapplicableffinancialfreportingfframeworkfisftypicallyfGe
nerallyfAcceptedfAccountingfPrinciplesf(GAAP).
A. True
B. False
Ans:fA,fLO:f2,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfFC:fMeasurementfAnalysisfandfInterpre
tation
Solution:fWithinfafU.S.fcontext,fthefapplicableffinancialfreportingfframeworkfisftypicallyfgenerallyfac
ceptedfaccountingfprinciplesf(GAAP).
4. Privatefcompanies,forfnon-
issuers,farefnotfrequiredfbyfthefU.S.fgovernmentftofhavefanfannualffinancialfstatementf
audit
A. True
B. False
Ans:fA,fLO:f2,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fAnalytic,fAICPAfFC:fReporting
Copyrightf©f2022fWILEY TestfBank (ForfInstructorfUsef Only) 1-1
mynursytest.store
,DOWNLOAD THE Test Bank for Auditing Practical Approach with DataAnaly
f f f f f f f f f f
tics 2nd Edition Johnson
f f f
Johnson Auditing,f2E Chapterf1
Solution:fPrivatefcompanies,forfnon-
issuers,farefnotfrequiredfbyfthefU.S.fgovernmentftofhavefanfannualffinancialfstatementfaudit,fbutfoft
enfotherfinterestedfusers,fsuchfasfafbankforflender,fmayfrequestfthatfafprivatefcompanyfprovidefaudi
tedffinancialfstatements.
5. Onefoffthefreasonsftherefisfafdemandfforffinancialfstatementfauditsfisfthatfusersfofffinan
cialfstatementsfoftenflackfaccountingfandflegalfknowledgeftoffullyfunderstandfcomplexf
accountingfandfdisclosurefchoices.
A. True
B. False
Ans:fA,fLO:f3,fBloom:fC,fDifficulty:fEasy,fMin:f1,fAACSB:fAnalytic,fAICPAfPC:fCommunication
Solution:fFinancialfstatementsfarefcomplex,fthefamountsfarefoftenfaffectedfbyfsignificantfestimates,fandft
hefdisclosuresfoftenfrequirefsignificantfknowledgefandfexperienceftofevaluate.fMostffinancialfstatementfu
sersfdofnotfhavefthefaccountingfandflegalfknowledgeftofassessfthefreasonablenessfoffcomplexfaccounting
fandfdisclosurefchoicesfbeingfmadefbyfthefcompany.
6. Inffinancialfaccounting,fthefbalancefsheetfisfafstatementfofffinancialfposition
A. True
B. False
Ans:fA,fLO:f3,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fAnalytic,fAICPAfPC:fCommunicationfSolution:fIn
ffinancialfaccounting,ftheffinancialfstatementsfincludefthefbalancefsheetf(statementfof
financialfposition),fincomefstatementf(statementfoffcomprehensivefincome),fstatementfoffcashfflows,
statementfoffchangesfinfequityfandfaccompanyingfnotes.
7. Businessfvaluationffallsfwithinfthefpurviewfoffnon-assurancefservices.
A. True
B. False
Ans:fA,fLO:f4,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fAnalytic,fAICPAfFC:fMeasurementfAnalysisfandfInterpretation
Solution:fManyfoffthesefaccountingffirmsfprovidefnon-assurancef(orfnon-
audit)fservicesfasfwellfasfassurancefservices.fThesefnon-
assurancefservicesfincludefmanagementfconsulting,fbusinessfvaluation,fmergersfandfacquisitions,finsolven
cy,ftaxfandfaccountingfservices.
8. SecuritiesfExchangefActfoff1934fregulatesfthefongoingftradingfoffsecuritiesfafterfthefiniti
alfpublicfofferingfandfrequiresfthefannualfauditfoffafpublicfcompany’sffinancialfstateme
nts.
A. True
B. False
Ans:fA,fLO:f5,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfBB:fGovernancefPerspectivefSolution:f
ThefSecuritiesfExchangefActfoff1934fregulatesfthefongoingftradingfoffsecuritiesfafterfthe
initialfpublicfofferingfandfrequiresfthefannualfauditfoffafpublicfcompany’sffinancialfstatements.
Copyrightf©f2022fWILEY TestfBank (ForfInstructorfUsef Only) 1-2
mynursytest.store
, DOWNLOAD THE Test Bank for Auditing Practical Approach with DataAnaly
f f f f f f f f f f
tics 2nd Edition Johnson f f f
Johnson Auditing,f2E Chapterf1
9. ThefSecuritiesfActfoff1933fenhancesfannualffinancialfdisclosuresfforfpublicfco
mpaniesfandfplacedfmorefemphasisfonfcorporatefresponsibility.
A. True
B. False
Ans:fB,fLO:f5,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfBB:fGovernancefPerspectivefSolution:f
ThefSecuritiesfActfoff1933fregulatesfthefdisclosurefofffinancialfinformationfinfafcompany’s
initialfpublicfofferingfoffstockfandfrequiresfthatftheffinancialfinformationfbefaudited.
10. Neitherfclientfcharacteristicsfnorfactionsfoffthefauditorfaffectfthefauditfrisk.
A. True
B. False
Ans:fB,fLO:f6,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfFC:fReportingfSolution:fA
uditfriskfisfaffectedfbyfclientfcharacteristicsfasfwellfasfactionsfoffthefauditor.
11. Materialityfisfafrelativefconcept,f andfitfdiffersffromfcompanyftofcompanyfandffromfyear
ftofyearfforfafgivenfcompany.
A. True
B. False
Ans:fA,fLO:f6,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfFC:fReporting
Solution:fMaterialityfisfafrelativefconcept,fandfitfdiffersffromfcompanyftofcompanyfandffromfyearftofyearffo
rfafgivenfcompany.fAuditorsfdesignfanfauditftofprovidefreasonablefassurancefthatftheffinancialfstatements
fare ffreefoffmaterialfmisstatement.fHowever,fauditorsfdof notf designfanfauditftoflookfforfimmaterialf misstate
mentsfbecauseftheyfwouldfnotfinfluencefaffinancialfstatementfuser.
12. Whenf auditorsf determinef thatftheffinancialfstatementsfoffaf publicf companyfarefpre
sentedffairlyfinfaccordancefwithfthefapplicableffinancialfreportingfframework,ftheyf
issuefaftypefoffreportfthatfPCAOBfstandardsfcallf“thefstandardfcleanfreport.”
A. True
B. False
Ans:fB,fLO:f6,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfFC:fReporting
Solution:f Iffauditorsf havefdeterminedftheffinancialfstatementsf arefpresentedffairlyfinfaccordancefwithfthefa
pplicablef financialfreportingf framework,f theyfissuefthef standardf unqualifiedf report.f Thef PCAOBfstandardsf
useftheftermf“unqualified”freport.
13. Infanfunqualifiedfauditfreportfonftheffinancialfstatementsfoffafpublicfcompany,fthefconcl
udingfstatementfoffthef Basisfforf Opinionf paragraphf mentionsfreasonablef basisfforfthefa
uditffirm’sfopinion.
A. True
B. False
Copyrightf©f2022fWILEY TestfBank (ForfInstructorfUsef Only) 1-3
mynursytest.store
f f f f f f f f f f
tics 2nd Edition Johnsonf f f
Johnson Auditing,f2E Chapterf 1
Chapter 1 Introduction f f f
and Overview of Audit
f f f
and Assurance f
QuestionfType:fTrueforfFalse
1. GAAPfandfIFRSf arefexamplesfoffapplicableffinancialfreportingfframework.
A. True
B. False
Ans:fA,fLO:f1,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fCommunication,fAICPAfFC:fReporting
Solution:fThefapplicableffinancialfreportingfframeworkfrefersftofthefsetfoffstandardsfusedfinfpreparingfthefhi
storicalffinancialfstatements,fsuchfasfGAAP,fIFRSforfafFederalfIncomefTaxfBasisfoffAccounting.
2. Reviewfofffinancialfforecastsffallsfunderfattestationfservices.
A. True
B. False
Ans:fA,fLO:f1,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfFC:fMeasurementfAnalysisfandfInterpre
tation
Solution:fAttestationfservicesf(underfthefumbrellafoff assurancefservices)fincludefreviewfoffhistoricalffinanci
alfstatements,freviewfofffinancialfforecasts,fandfexaminationfoffinternalfcontrol.
3. WithinfafU.S.fcontext,fthefapplicableffinancialfreportingfframeworkfisftypicallyfGe
nerallyfAcceptedfAccountingfPrinciplesf(GAAP).
A. True
B. False
Ans:fA,fLO:f2,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfFC:fMeasurementfAnalysisfandfInterpre
tation
Solution:fWithinfafU.S.fcontext,fthefapplicableffinancialfreportingfframeworkfisftypicallyfgenerallyfac
ceptedfaccountingfprinciplesf(GAAP).
4. Privatefcompanies,forfnon-
issuers,farefnotfrequiredfbyfthefU.S.fgovernmentftofhavefanfannualffinancialfstatementf
audit
A. True
B. False
Ans:fA,fLO:f2,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fAnalytic,fAICPAfFC:fReporting
Copyrightf©f2022fWILEY TestfBank (ForfInstructorfUsef Only) 1-1
mynursytest.store
,DOWNLOAD THE Test Bank for Auditing Practical Approach with DataAnaly
f f f f f f f f f f
tics 2nd Edition Johnson
f f f
Johnson Auditing,f2E Chapterf1
Solution:fPrivatefcompanies,forfnon-
issuers,farefnotfrequiredfbyfthefU.S.fgovernmentftofhavefanfannualffinancialfstatementfaudit,fbutfoft
enfotherfinterestedfusers,fsuchfasfafbankforflender,fmayfrequestfthatfafprivatefcompanyfprovidefaudi
tedffinancialfstatements.
5. Onefoffthefreasonsftherefisfafdemandfforffinancialfstatementfauditsfisfthatfusersfofffinan
cialfstatementsfoftenflackfaccountingfandflegalfknowledgeftoffullyfunderstandfcomplexf
accountingfandfdisclosurefchoices.
A. True
B. False
Ans:fA,fLO:f3,fBloom:fC,fDifficulty:fEasy,fMin:f1,fAACSB:fAnalytic,fAICPAfPC:fCommunication
Solution:fFinancialfstatementsfarefcomplex,fthefamountsfarefoftenfaffectedfbyfsignificantfestimates,fandft
hefdisclosuresfoftenfrequirefsignificantfknowledgefandfexperienceftofevaluate.fMostffinancialfstatementfu
sersfdofnotfhavefthefaccountingfandflegalfknowledgeftofassessfthefreasonablenessfoffcomplexfaccounting
fandfdisclosurefchoicesfbeingfmadefbyfthefcompany.
6. Inffinancialfaccounting,fthefbalancefsheetfisfafstatementfofffinancialfposition
A. True
B. False
Ans:fA,fLO:f3,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fAnalytic,fAICPAfPC:fCommunicationfSolution:fIn
ffinancialfaccounting,ftheffinancialfstatementsfincludefthefbalancefsheetf(statementfof
financialfposition),fincomefstatementf(statementfoffcomprehensivefincome),fstatementfoffcashfflows,
statementfoffchangesfinfequityfandfaccompanyingfnotes.
7. Businessfvaluationffallsfwithinfthefpurviewfoffnon-assurancefservices.
A. True
B. False
Ans:fA,fLO:f4,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fAnalytic,fAICPAfFC:fMeasurementfAnalysisfandfInterpretation
Solution:fManyfoffthesefaccountingffirmsfprovidefnon-assurancef(orfnon-
audit)fservicesfasfwellfasfassurancefservices.fThesefnon-
assurancefservicesfincludefmanagementfconsulting,fbusinessfvaluation,fmergersfandfacquisitions,finsolven
cy,ftaxfandfaccountingfservices.
8. SecuritiesfExchangefActfoff1934fregulatesfthefongoingftradingfoffsecuritiesfafterfthefiniti
alfpublicfofferingfandfrequiresfthefannualfauditfoffafpublicfcompany’sffinancialfstateme
nts.
A. True
B. False
Ans:fA,fLO:f5,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfBB:fGovernancefPerspectivefSolution:f
ThefSecuritiesfExchangefActfoff1934fregulatesfthefongoingftradingfoffsecuritiesfafterfthe
initialfpublicfofferingfandfrequiresfthefannualfauditfoffafpublicfcompany’sffinancialfstatements.
Copyrightf©f2022fWILEY TestfBank (ForfInstructorfUsef Only) 1-2
mynursytest.store
, DOWNLOAD THE Test Bank for Auditing Practical Approach with DataAnaly
f f f f f f f f f f
tics 2nd Edition Johnson f f f
Johnson Auditing,f2E Chapterf1
9. ThefSecuritiesfActfoff1933fenhancesfannualffinancialfdisclosuresfforfpublicfco
mpaniesfandfplacedfmorefemphasisfonfcorporatefresponsibility.
A. True
B. False
Ans:fB,fLO:f5,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfBB:fGovernancefPerspectivefSolution:f
ThefSecuritiesfActfoff1933fregulatesfthefdisclosurefofffinancialfinformationfinfafcompany’s
initialfpublicfofferingfoffstockfandfrequiresfthatftheffinancialfinformationfbefaudited.
10. Neitherfclientfcharacteristicsfnorfactionsfoffthefauditorfaffectfthefauditfrisk.
A. True
B. False
Ans:fB,fLO:f6,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfFC:fReportingfSolution:fA
uditfriskfisfaffectedfbyfclientfcharacteristicsfasfwellfasfactionsfoffthefauditor.
11. Materialityfisfafrelativefconcept,f andfitfdiffersffromfcompanyftofcompanyfandffromfyear
ftofyearfforfafgivenfcompany.
A. True
B. False
Ans:fA,fLO:f6,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfFC:fReporting
Solution:fMaterialityfisfafrelativefconcept,fandfitfdiffersffromfcompanyftofcompanyfandffromfyearftofyearffo
rfafgivenfcompany.fAuditorsfdesignfanfauditftofprovidefreasonablefassurancefthatftheffinancialfstatements
fare ffreefoffmaterialfmisstatement.fHowever,fauditorsfdof notf designfanfauditftoflookfforfimmaterialf misstate
mentsfbecauseftheyfwouldfnotfinfluencefaffinancialfstatementfuser.
12. Whenf auditorsf determinef thatftheffinancialfstatementsfoffaf publicf companyfarefpre
sentedffairlyfinfaccordancefwithfthefapplicableffinancialfreportingfframework,ftheyf
issuefaftypefoffreportfthatfPCAOBfstandardsfcallf“thefstandardfcleanfreport.”
A. True
B. False
Ans:fB,fLO:f6,fBloom:fK,fDifficulty:fEasy,fMin:f1,fAACSB:fEthics,fAICPAfFC:fReporting
Solution:f Iffauditorsf havefdeterminedftheffinancialfstatementsf arefpresentedffairlyfinfaccordancefwithfthefa
pplicablef financialfreportingf framework,f theyfissuefthef standardf unqualifiedf report.f Thef PCAOBfstandardsf
useftheftermf“unqualified”freport.
13. Infanfunqualifiedfauditfreportfonftheffinancialfstatementsfoffafpublicfcompany,fthefconcl
udingfstatementfoffthef Basisfforf Opinionf paragraphf mentionsfreasonablef basisfforfthefa
uditffirm’sfopinion.
A. True
B. False
Copyrightf©f2022fWILEY TestfBank (ForfInstructorfUsef Only) 1-3
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