Auditingm andm Assurancem Services,m 17em (Arens/Elder/Beasley)mCh
apterm1m ThemDemandmformAuditmandmOthermAssurancemServices
LearningmObjectivem1-1
1) ThemSarbanes-OxleymAct mappliesmtomwhichmof mthemfollowingmcompanies?
A) Allmcompanies
B) Privatelymheld mcompanies
C) Publicmcompanies
D) Allmpublicmcompaniesmand mprivatelymheld mcompaniesmwithmassetsmgreatermthanm$500mmilli
onmAnswer:m C
Terms:m Sarbanes-
OxleymAct mDiff:m Easy
Objective:m LO m1-1
AACSB:mReflectivemthinkingmskillsmT
opic:m SOX
2) Whichmof mthemfollowingmismconsidered maudit mevidence
?mA)
Oralmstatements Written Auditor
madembymmanagement Communications Observation
Y N N
B)
Oralmstatementsmm WrittenmCom Auditorm
adembymmanagement munications Observation
N Y Y
C)
Oralmstatements Written Auditor
madembymmanagement Communications Observation
Y Y Y
D)
Oralmstatements Written Auditor
madembymmanagement Communications Observation
N N Y
Answer:m C
Terms:m Audit mevidencem
Diff:mModeratemObjectiv
e:m LOm1-1
AACSB:m Reflectivemthinkingmskills
1
,3) Evidencemismparamount mtomaudit mand mattestationmengagements.mList mthemfourmbasicmtypesmof mau
dit mevidence.
Answer:m Themfourmtypesmof maudit mand mattestationmevidenceminclude:
1. Electronicmand mdocumentarymdatamabout mtransactions
2. Writtenmand melectronicmcommunicationsmwithmoutsiders
3. Observationsmbymthemauditor
4. Oralmtestimonymof mthemauditeem(client
)mTerms:mBasicmtypesmof maudit mevidenc
emDiff:m Easy
Objective:m LO m1-1
AACSB:m Reflectivemthinkingmskills
4) Themcriteriambymwhichmanmauditormevaluatesmtheminformationmundermaudit mmaymvarymwithmt
heminformationmbeingmaudited.
A) True
B) FalsemA
nswer:mA
Terms:mCriteriamwhichmanmauditormevaluatesminformationm
Diff:m Easy
Objective:m LO m1-1
AACSB:m Reflectivemthinkingmskills
5) Themcriteriamused mbymanmexternalmauditormtomevaluatempublished mfinancialmstatementsmaremkno
wnmasmgenerallymaccepted mauditingmstandards.
A) True
B) FalsemA
nswer:mB
Terms:m Criteriamused mbymexternalmauditormtomevaluatempublished mfinancialmstatementsm
Diff:m Easy
Objective:m LO m1-1
AACSB:m Reflectivemthinkingmskills
6) ThemSarbanes-
OxleymAct mestablishesmstandardsmrelated mtomthemauditsmof mprivatelymheld mcompanies.
A) True
B) FalsemA
nswer:mB
Terms:m Sarbanes-
OxleymAct mDiff:m Easy
Objective:m LO m1-1
AACSB:mReflectivemthinkingmskillsmT
opic:m SOX
2
,7) ThemSarbanes-
OxleymAct mismwidelymviewed masmhavingmushered minmsweepingmchangesmtomauditingmand mfinancialm
reporting.
A) True
B) FalsemA
nswer:mA
Terms:m Sarbanes-
OxleymAct mDiff:m Easy
Objective:m LO m1-1
AACSB:mReflectivemthinkingmskillsmT
opic:m SOX
8) Anmauditormmust mbemcompetent mand mhavemanmindependent mmentalmattitude.
A) True
B) FalsemA
nswer:mA
Terms:m Competencemand mindependent mmentalmattitudemDi
ff:m Easy
Objective:m LO m1-1
AACSB:mReflectivemthinkingmskillsmL
earningmObjectivem1-2
1) Recording,mclassifying,mand msummarizingmeconomicmeventsminmamlogicalm mannermformthempurpo
semof mprovidingmfinancialminformationmformdecisionmmakingmismcommonly mcalled:
A) finance.
B) auditing.
C) accounting.
D) economics.
Answer:m C
Terms:m Recording,mclassifying,mand msummarizingmeconomic meventsm
Diff:m Easy
Objective:m LO m1-2
AACSB:m Reflectivemthinkingmskills
2) Anmaccountant:
A) must mpossessmexpertiseminmthemaccumulationmof maudit mevidence.
B) must mdecidemthemnumbermand mtypesmof mitemsmtomtest.
C) must mhavemanmunderstandingmof mthemprinciplesmand mrulesmthat mprovidemthembasismformpreparingmt
hemaccountingminformation.
D) must mbemamCPA
.
Answer:m C
Terms:m Distinguishesmauditorsmfrommaccountants
mDiff:m Moderate
Objective:m LO m1-2
AACSB:m Reflectivemthinkingmskills
3
, 3) Inm"auditing"mfinancialmaccountingmdata,mthemprimarymconcernmismwith:
A) determiningmwhethermrecorded minformationmproperlymreflectsmthemeconomicmeventsmth
at moccurred mduringmthemaccountingmperiod.
B) determiningmif mfraud mhasmoccurred.
C) determiningmif mtaxablemincomemhasmbeenmcalculated mcorrectly.
D) analyzingmthemfinancialminformationmtombemsuremthat mit mcompliesmwithmgovernment mrequiremen
ts.mAnswer:m A
Terms:m AuditingmfinancialmaccountingmdatamprimarymconcernmD
iff:m Moderate
Objective:m LO m1-2
AACSB:m Reflectivemthinkingmskills
4) Themtrait mthat mdistinguishesmauditorsmfrommaccountantsmismthe:
A) auditor'smabilitymtominterpret maccountingmprinciplesmgenerallymaccepted minmthemUnited mStates.
B) auditor'smeducationmbeyond mthemBachelor'smdegree.
C) auditor'smabilitymtominterpret mFASBmStatements.
D) auditor'smaccumulationmand minterpretationmof mevidencemrelated mtomamcompany'smfinanci
almstatements.
Answer:m D
Terms:m Distinguishesmauditorsmfrommaccountants
mDiff:m Challenging
Objective:m LO m1-2
AACSB:m Reflectivemthinkingmskills
5) Discussmthemdifferencesmand msimilaritiesmbetweenmthemrolesmof maccountantsmand mauditors.mWh
at madditionalmexpertisemmust manmauditormpossessmbeyond mthat mof manmaccountant?
Answer:mThemrolemof maccountantsmismtomrecord,mclassify,mand msummarizemeconomic meventsminma ml
ogicalmmannermformthempurposemof mprovidingmfinancialminformationmformdecisionm making.m Tompro
videmrelevant minformation,maccountantsmmust mhavemamthoroughmunderstandingmof mthemprinciplesma
nd mrulesmthat mprovidemthembasismformpreparingmthemaccountingminformation.mInmaddition,maccounta
ntsmmust mdevelopmamsystemmtomensuremthat mthementity'smeconomicmeventsmaremproperlymrecorded mo
nmamtimelymbasismand mat mamreasonablemcost.
Themrolemof mauditorsmismtomdeterminemwhethermthemrecorded minformationmprepared mbymaccountant
smproperlymreflectsmthemeconomicmeventsmthat moccurred mduringmthemaccountingmperiod.mBecausemU
.S.morminternationalmstandardsmprovidemthemcriteriamformevaluatingmwhethermfinancialminformationm
ismproperlymrecorded,mauditorsmmust mthoroughlymunderstand mthosemaccountingmstandards.mInmaddit
ionmtomunderstandingmaccounting,mthemauditormmust mpossessmexpertiseminmthemaccumulationmand mi
nterpretationmof maudit mevidence.mIt mismthismexpertisemthat mdistinguishesmauditorsmfrommaccountants.
mDeterminingmthempropermaudit mprocedures,mdecidingmthemnumbermand mtypesmof mitemsmtomtest,mand
mevaluatingmthemresultsmaremuniquemtomthemauditor.
Terms:m Rolesmof maccountantsmand mauditorsm
Diff:m Moderate
Objective:m LO m1-2
AACSB:m Reflectivemthinkingmskills
4
apterm1m ThemDemandmformAuditmandmOthermAssurancemServices
LearningmObjectivem1-1
1) ThemSarbanes-OxleymAct mappliesmtomwhichmof mthemfollowingmcompanies?
A) Allmcompanies
B) Privatelymheld mcompanies
C) Publicmcompanies
D) Allmpublicmcompaniesmand mprivatelymheld mcompaniesmwithmassetsmgreatermthanm$500mmilli
onmAnswer:m C
Terms:m Sarbanes-
OxleymAct mDiff:m Easy
Objective:m LO m1-1
AACSB:mReflectivemthinkingmskillsmT
opic:m SOX
2) Whichmof mthemfollowingmismconsidered maudit mevidence
?mA)
Oralmstatements Written Auditor
madembymmanagement Communications Observation
Y N N
B)
Oralmstatementsmm WrittenmCom Auditorm
adembymmanagement munications Observation
N Y Y
C)
Oralmstatements Written Auditor
madembymmanagement Communications Observation
Y Y Y
D)
Oralmstatements Written Auditor
madembymmanagement Communications Observation
N N Y
Answer:m C
Terms:m Audit mevidencem
Diff:mModeratemObjectiv
e:m LOm1-1
AACSB:m Reflectivemthinkingmskills
1
,3) Evidencemismparamount mtomaudit mand mattestationmengagements.mList mthemfourmbasicmtypesmof mau
dit mevidence.
Answer:m Themfourmtypesmof maudit mand mattestationmevidenceminclude:
1. Electronicmand mdocumentarymdatamabout mtransactions
2. Writtenmand melectronicmcommunicationsmwithmoutsiders
3. Observationsmbymthemauditor
4. Oralmtestimonymof mthemauditeem(client
)mTerms:mBasicmtypesmof maudit mevidenc
emDiff:m Easy
Objective:m LO m1-1
AACSB:m Reflectivemthinkingmskills
4) Themcriteriambymwhichmanmauditormevaluatesmtheminformationmundermaudit mmaymvarymwithmt
heminformationmbeingmaudited.
A) True
B) FalsemA
nswer:mA
Terms:mCriteriamwhichmanmauditormevaluatesminformationm
Diff:m Easy
Objective:m LO m1-1
AACSB:m Reflectivemthinkingmskills
5) Themcriteriamused mbymanmexternalmauditormtomevaluatempublished mfinancialmstatementsmaremkno
wnmasmgenerallymaccepted mauditingmstandards.
A) True
B) FalsemA
nswer:mB
Terms:m Criteriamused mbymexternalmauditormtomevaluatempublished mfinancialmstatementsm
Diff:m Easy
Objective:m LO m1-1
AACSB:m Reflectivemthinkingmskills
6) ThemSarbanes-
OxleymAct mestablishesmstandardsmrelated mtomthemauditsmof mprivatelymheld mcompanies.
A) True
B) FalsemA
nswer:mB
Terms:m Sarbanes-
OxleymAct mDiff:m Easy
Objective:m LO m1-1
AACSB:mReflectivemthinkingmskillsmT
opic:m SOX
2
,7) ThemSarbanes-
OxleymAct mismwidelymviewed masmhavingmushered minmsweepingmchangesmtomauditingmand mfinancialm
reporting.
A) True
B) FalsemA
nswer:mA
Terms:m Sarbanes-
OxleymAct mDiff:m Easy
Objective:m LO m1-1
AACSB:mReflectivemthinkingmskillsmT
opic:m SOX
8) Anmauditormmust mbemcompetent mand mhavemanmindependent mmentalmattitude.
A) True
B) FalsemA
nswer:mA
Terms:m Competencemand mindependent mmentalmattitudemDi
ff:m Easy
Objective:m LO m1-1
AACSB:mReflectivemthinkingmskillsmL
earningmObjectivem1-2
1) Recording,mclassifying,mand msummarizingmeconomicmeventsminmamlogicalm mannermformthempurpo
semof mprovidingmfinancialminformationmformdecisionmmakingmismcommonly mcalled:
A) finance.
B) auditing.
C) accounting.
D) economics.
Answer:m C
Terms:m Recording,mclassifying,mand msummarizingmeconomic meventsm
Diff:m Easy
Objective:m LO m1-2
AACSB:m Reflectivemthinkingmskills
2) Anmaccountant:
A) must mpossessmexpertiseminmthemaccumulationmof maudit mevidence.
B) must mdecidemthemnumbermand mtypesmof mitemsmtomtest.
C) must mhavemanmunderstandingmof mthemprinciplesmand mrulesmthat mprovidemthembasismformpreparingmt
hemaccountingminformation.
D) must mbemamCPA
.
Answer:m C
Terms:m Distinguishesmauditorsmfrommaccountants
mDiff:m Moderate
Objective:m LO m1-2
AACSB:m Reflectivemthinkingmskills
3
, 3) Inm"auditing"mfinancialmaccountingmdata,mthemprimarymconcernmismwith:
A) determiningmwhethermrecorded minformationmproperlymreflectsmthemeconomicmeventsmth
at moccurred mduringmthemaccountingmperiod.
B) determiningmif mfraud mhasmoccurred.
C) determiningmif mtaxablemincomemhasmbeenmcalculated mcorrectly.
D) analyzingmthemfinancialminformationmtombemsuremthat mit mcompliesmwithmgovernment mrequiremen
ts.mAnswer:m A
Terms:m AuditingmfinancialmaccountingmdatamprimarymconcernmD
iff:m Moderate
Objective:m LO m1-2
AACSB:m Reflectivemthinkingmskills
4) Themtrait mthat mdistinguishesmauditorsmfrommaccountantsmismthe:
A) auditor'smabilitymtominterpret maccountingmprinciplesmgenerallymaccepted minmthemUnited mStates.
B) auditor'smeducationmbeyond mthemBachelor'smdegree.
C) auditor'smabilitymtominterpret mFASBmStatements.
D) auditor'smaccumulationmand minterpretationmof mevidencemrelated mtomamcompany'smfinanci
almstatements.
Answer:m D
Terms:m Distinguishesmauditorsmfrommaccountants
mDiff:m Challenging
Objective:m LO m1-2
AACSB:m Reflectivemthinkingmskills
5) Discussmthemdifferencesmand msimilaritiesmbetweenmthemrolesmof maccountantsmand mauditors.mWh
at madditionalmexpertisemmust manmauditormpossessmbeyond mthat mof manmaccountant?
Answer:mThemrolemof maccountantsmismtomrecord,mclassify,mand msummarizemeconomic meventsminma ml
ogicalmmannermformthempurposemof mprovidingmfinancialminformationmformdecisionm making.m Tompro
videmrelevant minformation,maccountantsmmust mhavemamthoroughmunderstandingmof mthemprinciplesma
nd mrulesmthat mprovidemthembasismformpreparingmthemaccountingminformation.mInmaddition,maccounta
ntsmmust mdevelopmamsystemmtomensuremthat mthementity'smeconomicmeventsmaremproperlymrecorded mo
nmamtimelymbasismand mat mamreasonablemcost.
Themrolemof mauditorsmismtomdeterminemwhethermthemrecorded minformationmprepared mbymaccountant
smproperlymreflectsmthemeconomicmeventsmthat moccurred mduringmthemaccountingmperiod.mBecausemU
.S.morminternationalmstandardsmprovidemthemcriteriamformevaluatingmwhethermfinancialminformationm
ismproperlymrecorded,mauditorsmmust mthoroughlymunderstand mthosemaccountingmstandards.mInmaddit
ionmtomunderstandingmaccounting,mthemauditormmust mpossessmexpertiseminmthemaccumulationmand mi
nterpretationmof maudit mevidence.mIt mismthismexpertisemthat mdistinguishesmauditorsmfrommaccountants.
mDeterminingmthempropermaudit mprocedures,mdecidingmthemnumbermand mtypesmof mitemsmtomtest,mand
mevaluatingmthemresultsmaremuniquemtomthemauditor.
Terms:m Rolesmof maccountantsmand mauditorsm
Diff:m Moderate
Objective:m LO m1-2
AACSB:m Reflectivemthinkingmskills
4
