Test Bank Auditing & Assurance Services 4th Canadian Edition William Messier
m m m m m m m m m m
Chapter 01 4ce - Messier
m m m m
1) Auditingmfocusesmonmrules,mtechniques,mand mcomputationsmrequired mtompreparemand manaly
zemfinancialminformation.
⊚m true
⊚m false
2) Decisionmmakersmdemand mreliableminformationmthat mismprovided mbymaccountants.
⊚m true
⊚m false
3) Informationmasymmetrymseldommoccurs.
⊚m true
⊚m false
4) Conflictsmof minterest moftenmoccurmbetweenmabsenteemownersmand mmanagers.
⊚m true
⊚m false
5) Auditingmservicesmand mattest mservicesmaremthemsame.
⊚m true
⊚m false
6) Auditingmismamtypemof mattest mservice.
⊚m true
⊚m false
7) Testingmallmtransactionsmthat moccurred mduringmthemperiod mismcost mprohibitive.
⊚m true
⊚m false
1
,8) Whymdomauditorsmgenerallymusemamsamplingmapproachmtomevidencemgathering?
A) Auditorsmaremexpertsmand mdomnot mneed mtomlookmat mmuchmtomknowmwhethermthemfinanc
ialmstatementsmaremcorrect mormnot.
B) Auditorsmmust mbalancemthemcost mof mthemaudit mwithmthemneed mformprecision.
C) Auditorsmmust mlimit mtheirmexposuremtomtheirmauditeemtommaintainmindependence.
D) Themauditor'smrelationshipmwithmthemauditeemismgenerallymadversarial,msomthemauditormw
illmnot mhavemaccessmtomallmof mthemfinancialminformationmof mthemcompany.
9) Whichmof mthemfollowingmstatementsmbest mdescribesmamrelationshipmbetweenmsamplemsizema
nd mothermelementsmof mauditing?
A) If mmaterialitymincreases,msomwillmthemsamplemsize.
B) If mthemdesired mlevelmof massurancemincreases,msamplemsizesmcanmbemsmaller.
C) If mmaterialitymdecreases,msamplemsizemwillmneed mtomincrease.
D) Theremismnomrelationshipmbetweenmsamplemsizemand mmaterialitymormthemdesired mlevelm
of massurance.
10) Whichmof mthemfollowingmstatementsmabout mthemstudymof mauditingmismNOTmtrue?
A) Themstudymof mauditingmcanmbemvaluablemtomfuturemaccountantsmand mbusinessmdecisi
onmmakersmwhethermormnot mtheymplanmtombecomemauditors.
B) Themstudymof mauditingmfocusesmonmlearningmthemanalyticalmand mlogicalmskillsmnecessary
tomevaluatemthemrelevancemand mreliabilitymof minformation.
m
C) Themstudymof mauditingmfocusesmonmlearningmthemrules,mtechniques,mand mcomputatio
nsmrequired mtomanalyzemfinancialmstatements.
D) Themstudymof mauditingmbeginsmwithmthemunderstandingmof mamcoherent mlogicalmframewo
rkmand mtechniquesmusefulmformgatheringmand manalyzingmevidencemabout mothers'masserti
ons.
11) Thembasicmdefinitionmof mauditingmstatesmit mismamprocessmto:
A) detect mfraud.
B) examinemindividualmtransactionsmsomthat mthemauditormmaymcertifymasmtomtheirmvalidity.
C) objectivelymobtainmand mevaluatemevidencemregardingmassertions.
D) assuremthemconsistent mapplicationmof mcorrect maccountingmprocedures.
2
,12) Assurancemservicesmmaymimprovemallmof mthemfollowingmexcept:
A) relevance.
B) credibility.
C) periodicity.
D) reliability.
13) Evidencemismmost mreliablemif mit:
A) signalsmthemtruemstatemof mammanagement massertion.
B) appliesmtomthemperiod mbeingmaudited.
C) relatesmtomthemaudit massertionmbeingmtested.
D) ismsufficient mtomjustifymamconclusion.
14) Whichmof mthemfollowingmbest mdescribesmthemconcept mof maudit mrisk?
A) Themriskmof mthemauditormbeingmsued mbecausemof massociationmwithmanmauditee.
B) Themriskmthat mthemauditormwillmprovidemam"clean"mopinionmonmfinancialmstatementsmt
hat mare,minmfact,mmateriallymmisstated.
C) Themoverallmriskmthat mammaterialmmisstatement mexistsminmthemfinancialmstatements.
D) Themriskmthat mauditorsmusemaudit mproceduresmthat mareminappropriate.
15) Anmauditormwhomacceptsmanmaudit mengagement mand mdoesmnot mpossessmexpertisemwithmrespect
mtomthembusinessmentity'smindustry,mshould:
A) engagemfinancialmexpertsmfamiliarmwithmthemnaturemof mthembusinessmentity.
B) obtainmamknowledgemof mmattersmthat mrelatemtomthemnaturemof mthementity'smbusiness.
C) refermamsubstantialmportionmof mthemaudit mtomanothermCPA,mwhomwillmact masmthemprinci
palmauditor.
D) first minformmmanagement mthat manmunqualified mopinionmcannot mbemissued.
16) Duringmthemclient macceptance/continuancemphasemof manmaudit,mamCPA mmost mlikelymwould:
A) identifymspecificminternalmcontrolmactivitiesmthat maremlikelymtomprevent mfraud.
B) evaluatemthemreasonablenessmof mthemcompany'smaccountingmestimates.
C) evaluatemthemintegritymof mmanagement.
D) inquiremof mthemcompany'smattorneymasmtomwhethermanymunrecorded mclaimsmaremprobab
lemormasserted.
3
, 17) Inmthemcontext mof magencymrelationship,minformationmasymmetrymrefersmtomthemideamthat:
A) informationmcanmvaryminmitsmreliability.
B) informationmcanmvaryminmitsmrelevance.
C) management mhasmmoreminformationmabout mthementity'smtruemfinancialmpositionmthanm
domthemabsenteemownersm(i.e.mstockholders).
D) management mlikelymwillmnot mact minmthembest minterestsmof mthemabsenteemowners.
18) Whichmof mthemfollowingmbest mdescribesmwhymanmindependent mauditormismasked mtomexpressm
anmopinionmonmthemfairmpresentationmof mfinancialmstatements?
A) It mismdifficult mtompreparemfinancialmstatementsmthat mfairlympresent mamcompany'smfinanci
almpositionmand mchangesminmcashmflowsmwithout mthemexpertisemof manmindependent maud
itor.
B) It mismmanagement'smresponsibilitymtomseekmavailablemindependent maid minmthemappraisalm
of mthemfinancialminformationmshownminmitsmfinancialmstatements.
C) Themopinionmof manmindependent mpartymismneeded mbecausemamcompanymismnot mlikelymtom
bemconsidered mobjectivemwithmrespect mtomitsmownmfinancialmstatements.
D) It mismamcustomarymcourtesymthat mallmstockholdersmof mamcompanymreceivemanmindepend
ent mreport monmmanagement'smstewardshipminmmanagingmthemaffairsmof mthembusiness.
19) Whichmof mthemfollowingmbest mdescribesmthemfundamental,munderlyingmreasonmformwhymthere
mismdemand mformanmindependent mauditormtomreport monmfinancialmstatements?
A) A mmanagement mfraud mmaymexist mand mit mismmoremlikelymtombemdetected mbymauditorsmif mt
heymaremindependent.
B) Different minterestsmmaymexist mbetweenmthemcompanympreparingmthemstatementsmand mt
hempartiesmusingmthemstatements.
C) A mmisstatement mof maccount mbalancesmmaymexist mand mit mismthemindependent maudito
r'smresponsibilitymtomensuremthat mfinancialmstatementsmaremnot mmisstated.
D) A mpoorlymdesigned minternalmcontrolmsystemmmaymbeminmplace.
20) Whichmof mthemfollowingmbest mdescribesmwhympublicly-
traded mcorporationsmfollow mthempracticemof mhavingmthemexternalmauditormappointed mbymthemb
oard mof mdirectorsmormelected mbymthemstockholders?
A) Tompromotemanmadversarialmrelationshipmbetweenmthemauditormand mthemcorporation
'smmanagement.
B) Tomenhancemauditormindependencemfrommthemmanagement mof mthemcorporation.
C) Tomencouragemampolicymof mrotationmof mthemindependent mauditors.
D) Tomgivemmanagement mmoremleveragemovermthemauditor'smdecisions.
4
m m m m m m m m m m
Chapter 01 4ce - Messier
m m m m
1) Auditingmfocusesmonmrules,mtechniques,mand mcomputationsmrequired mtompreparemand manaly
zemfinancialminformation.
⊚m true
⊚m false
2) Decisionmmakersmdemand mreliableminformationmthat mismprovided mbymaccountants.
⊚m true
⊚m false
3) Informationmasymmetrymseldommoccurs.
⊚m true
⊚m false
4) Conflictsmof minterest moftenmoccurmbetweenmabsenteemownersmand mmanagers.
⊚m true
⊚m false
5) Auditingmservicesmand mattest mservicesmaremthemsame.
⊚m true
⊚m false
6) Auditingmismamtypemof mattest mservice.
⊚m true
⊚m false
7) Testingmallmtransactionsmthat moccurred mduringmthemperiod mismcost mprohibitive.
⊚m true
⊚m false
1
,8) Whymdomauditorsmgenerallymusemamsamplingmapproachmtomevidencemgathering?
A) Auditorsmaremexpertsmand mdomnot mneed mtomlookmat mmuchmtomknowmwhethermthemfinanc
ialmstatementsmaremcorrect mormnot.
B) Auditorsmmust mbalancemthemcost mof mthemaudit mwithmthemneed mformprecision.
C) Auditorsmmust mlimit mtheirmexposuremtomtheirmauditeemtommaintainmindependence.
D) Themauditor'smrelationshipmwithmthemauditeemismgenerallymadversarial,msomthemauditormw
illmnot mhavemaccessmtomallmof mthemfinancialminformationmof mthemcompany.
9) Whichmof mthemfollowingmstatementsmbest mdescribesmamrelationshipmbetweenmsamplemsizema
nd mothermelementsmof mauditing?
A) If mmaterialitymincreases,msomwillmthemsamplemsize.
B) If mthemdesired mlevelmof massurancemincreases,msamplemsizesmcanmbemsmaller.
C) If mmaterialitymdecreases,msamplemsizemwillmneed mtomincrease.
D) Theremismnomrelationshipmbetweenmsamplemsizemand mmaterialitymormthemdesired mlevelm
of massurance.
10) Whichmof mthemfollowingmstatementsmabout mthemstudymof mauditingmismNOTmtrue?
A) Themstudymof mauditingmcanmbemvaluablemtomfuturemaccountantsmand mbusinessmdecisi
onmmakersmwhethermormnot mtheymplanmtombecomemauditors.
B) Themstudymof mauditingmfocusesmonmlearningmthemanalyticalmand mlogicalmskillsmnecessary
tomevaluatemthemrelevancemand mreliabilitymof minformation.
m
C) Themstudymof mauditingmfocusesmonmlearningmthemrules,mtechniques,mand mcomputatio
nsmrequired mtomanalyzemfinancialmstatements.
D) Themstudymof mauditingmbeginsmwithmthemunderstandingmof mamcoherent mlogicalmframewo
rkmand mtechniquesmusefulmformgatheringmand manalyzingmevidencemabout mothers'masserti
ons.
11) Thembasicmdefinitionmof mauditingmstatesmit mismamprocessmto:
A) detect mfraud.
B) examinemindividualmtransactionsmsomthat mthemauditormmaymcertifymasmtomtheirmvalidity.
C) objectivelymobtainmand mevaluatemevidencemregardingmassertions.
D) assuremthemconsistent mapplicationmof mcorrect maccountingmprocedures.
2
,12) Assurancemservicesmmaymimprovemallmof mthemfollowingmexcept:
A) relevance.
B) credibility.
C) periodicity.
D) reliability.
13) Evidencemismmost mreliablemif mit:
A) signalsmthemtruemstatemof mammanagement massertion.
B) appliesmtomthemperiod mbeingmaudited.
C) relatesmtomthemaudit massertionmbeingmtested.
D) ismsufficient mtomjustifymamconclusion.
14) Whichmof mthemfollowingmbest mdescribesmthemconcept mof maudit mrisk?
A) Themriskmof mthemauditormbeingmsued mbecausemof massociationmwithmanmauditee.
B) Themriskmthat mthemauditormwillmprovidemam"clean"mopinionmonmfinancialmstatementsmt
hat mare,minmfact,mmateriallymmisstated.
C) Themoverallmriskmthat mammaterialmmisstatement mexistsminmthemfinancialmstatements.
D) Themriskmthat mauditorsmusemaudit mproceduresmthat mareminappropriate.
15) Anmauditormwhomacceptsmanmaudit mengagement mand mdoesmnot mpossessmexpertisemwithmrespect
mtomthembusinessmentity'smindustry,mshould:
A) engagemfinancialmexpertsmfamiliarmwithmthemnaturemof mthembusinessmentity.
B) obtainmamknowledgemof mmattersmthat mrelatemtomthemnaturemof mthementity'smbusiness.
C) refermamsubstantialmportionmof mthemaudit mtomanothermCPA,mwhomwillmact masmthemprinci
palmauditor.
D) first minformmmanagement mthat manmunqualified mopinionmcannot mbemissued.
16) Duringmthemclient macceptance/continuancemphasemof manmaudit,mamCPA mmost mlikelymwould:
A) identifymspecificminternalmcontrolmactivitiesmthat maremlikelymtomprevent mfraud.
B) evaluatemthemreasonablenessmof mthemcompany'smaccountingmestimates.
C) evaluatemthemintegritymof mmanagement.
D) inquiremof mthemcompany'smattorneymasmtomwhethermanymunrecorded mclaimsmaremprobab
lemormasserted.
3
, 17) Inmthemcontext mof magencymrelationship,minformationmasymmetrymrefersmtomthemideamthat:
A) informationmcanmvaryminmitsmreliability.
B) informationmcanmvaryminmitsmrelevance.
C) management mhasmmoreminformationmabout mthementity'smtruemfinancialmpositionmthanm
domthemabsenteemownersm(i.e.mstockholders).
D) management mlikelymwillmnot mact minmthembest minterestsmof mthemabsenteemowners.
18) Whichmof mthemfollowingmbest mdescribesmwhymanmindependent mauditormismasked mtomexpressm
anmopinionmonmthemfairmpresentationmof mfinancialmstatements?
A) It mismdifficult mtompreparemfinancialmstatementsmthat mfairlympresent mamcompany'smfinanci
almpositionmand mchangesminmcashmflowsmwithout mthemexpertisemof manmindependent maud
itor.
B) It mismmanagement'smresponsibilitymtomseekmavailablemindependent maid minmthemappraisalm
of mthemfinancialminformationmshownminmitsmfinancialmstatements.
C) Themopinionmof manmindependent mpartymismneeded mbecausemamcompanymismnot mlikelymtom
bemconsidered mobjectivemwithmrespect mtomitsmownmfinancialmstatements.
D) It mismamcustomarymcourtesymthat mallmstockholdersmof mamcompanymreceivemanmindepend
ent mreport monmmanagement'smstewardshipminmmanagingmthemaffairsmof mthembusiness.
19) Whichmof mthemfollowingmbest mdescribesmthemfundamental,munderlyingmreasonmformwhymthere
mismdemand mformanmindependent mauditormtomreport monmfinancialmstatements?
A) A mmanagement mfraud mmaymexist mand mit mismmoremlikelymtombemdetected mbymauditorsmif mt
heymaremindependent.
B) Different minterestsmmaymexist mbetweenmthemcompanympreparingmthemstatementsmand mt
hempartiesmusingmthemstatements.
C) A mmisstatement mof maccount mbalancesmmaymexist mand mit mismthemindependent maudito
r'smresponsibilitymtomensuremthat mfinancialmstatementsmaremnot mmisstated.
D) A mpoorlymdesigned minternalmcontrolmsystemmmaymbeminmplace.
20) Whichmof mthemfollowingmbest mdescribesmwhympublicly-
traded mcorporationsmfollow mthempracticemof mhavingmthemexternalmauditormappointed mbymthemb
oard mof mdirectorsmormelected mbymthemstockholders?
A) Tompromotemanmadversarialmrelationshipmbetweenmthemauditormand mthemcorporation
'smmanagement.
B) Tomenhancemauditormindependencemfrommthemmanagement mof mthemcorporation.
C) Tomencouragemampolicymof mrotationmof mthemindependent mauditors.
D) Tomgivemmanagement mmoremleveragemovermthemauditor'smdecisions.
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