Auditing Final Test Bank
Which of the following is the essential purpose of the audit function?
A. Detection of fraud.
B. Examination of individual transactions to certify their validity.
C. Determination of whether the client's financial statement assertions are fairly stated.
D. Assurance of the consistent application of correct accounting procedures - (correct Answer) - C.
Determination of whether the client's financial statement assertions are fairly stated.
Which of the following best describes the primary role and responsibility of the independent
external auditor?
A. Produce a company's annual financial statements and notes.
B. Express an opinion on the fairness of a company's annual financial statements and
footnotes.
C. Provide business consulting advice to audit clients.
D. Obtain an understanding of the client's internal control structure and give management a
report about control problems and deficiencies. - (correct Answer) - B. Express an opinion on the fairness
of a company's annual financial statements and
footnotes.
Because of the risk of material misstatement, an audit of financial statements in accordance
with generally accepted auditing standards should be planned and performed with an attitude
of
A. Objective judgment.
B. Independent integrity.
C. Professional skepticism.
D. Impartial conservatism. - (correct Answer) - C. Professional skepticism
Which of the following best describes assurance services?
,A. Independent professional services that report on the client's financial statements.
B. Independent professional services that improve the quality of information for decision
makers.
C. Independent professional services that report on specific written management assertions.
D. Independent professional services that improve the client's operations. - (correct Answer) - B.
Independent professional services that improve the quality of information for decision
makers.
An attestation engagement is one in which a CPA is engaged to
A. Issue a report on subject matter or an assertion about the subject matter that is the
responsibility of another party.
B. Provide tax advice or prepare a tax return based on financial information the CPA has not
audited or reviewed.
C. Testify as an expert witness in accounting, auditing, or tax matters, given certain
stipulated facts.
D. Assemble prospective financial statements based on the assumptions of the entity's
management without expressing any assurance. - (correct Answer) - A. Issue a report on subject matter
or an assertion about the subject matter that is the
responsibility of another party.
The Sarbanes-Oxley Act of 2002 requires that the key company officials certify the financial
statements. Certification means that the company CEO and CFO must sign a statement
indicating
A. They have read the financial statements.
B. They are not aware of any false or misleading statements (or any key omitted disclosures)
C. They believe that the financial statements present an accurate picture of the company's
financial condition.
D. All of the above. - (correct Answer) - D. All of the above.
The four basic requirements for becoming a CPA in most states relate to
A. Education, the CPA Examination, experience, and substantial equivalency.
, B. The CPA Examination, experience, continuing professional education, and a state
certificate.
C. Continuing professional education, the CPA Examination, experience, and an AICPA
certificate.
D. Education, the CPA Examination, experience, and a state certificate. - (correct Answer) - D. Education,
the CPA Examination, experience, and a state certificate.
An important role of the Public Company Accounting Oversight Board is to oversee the
A. Issuance of statements by the Financial Accounting Standards Board.
B. Preparation and grading of the Uniform CPA Examination.
C. Peer review of member firms of the Private Companies Practice Section.
D. Regulation of firms that audit public entities. - (correct Answer) - D. Regulation of firms that audit
public entities.
Audit evidence is usually considered sufficient when
A. It is reliable.
B. There is enough quantity to afford a reasonable basis for an opinion on financial
statements.
C. It has the qualities of being relevant, objective, and free from unknown bias.
D. It has been obtained through random selection methods. - (correct Answer) - B. There is enough
quantity to afford a reasonable basis for an opinion on financial
Auditors try to achieve independence in appearance in order to:
A. Maintain public confidence in the profession.
B. Become independent in fact.
C. Comply with the responsibilities principle.
D. Maintain an unbiased mental attitude. - (correct Answer) - A. Maintain public confidence in the
profession.
Internal evidence
A. Is obtained directly from third parties independent of the client.
B. Originates outside the client's system but has been received and processed by the client.
C. Consists of documents that are produced, used, and stored within the client's information
Which of the following is the essential purpose of the audit function?
A. Detection of fraud.
B. Examination of individual transactions to certify their validity.
C. Determination of whether the client's financial statement assertions are fairly stated.
D. Assurance of the consistent application of correct accounting procedures - (correct Answer) - C.
Determination of whether the client's financial statement assertions are fairly stated.
Which of the following best describes the primary role and responsibility of the independent
external auditor?
A. Produce a company's annual financial statements and notes.
B. Express an opinion on the fairness of a company's annual financial statements and
footnotes.
C. Provide business consulting advice to audit clients.
D. Obtain an understanding of the client's internal control structure and give management a
report about control problems and deficiencies. - (correct Answer) - B. Express an opinion on the fairness
of a company's annual financial statements and
footnotes.
Because of the risk of material misstatement, an audit of financial statements in accordance
with generally accepted auditing standards should be planned and performed with an attitude
of
A. Objective judgment.
B. Independent integrity.
C. Professional skepticism.
D. Impartial conservatism. - (correct Answer) - C. Professional skepticism
Which of the following best describes assurance services?
,A. Independent professional services that report on the client's financial statements.
B. Independent professional services that improve the quality of information for decision
makers.
C. Independent professional services that report on specific written management assertions.
D. Independent professional services that improve the client's operations. - (correct Answer) - B.
Independent professional services that improve the quality of information for decision
makers.
An attestation engagement is one in which a CPA is engaged to
A. Issue a report on subject matter or an assertion about the subject matter that is the
responsibility of another party.
B. Provide tax advice or prepare a tax return based on financial information the CPA has not
audited or reviewed.
C. Testify as an expert witness in accounting, auditing, or tax matters, given certain
stipulated facts.
D. Assemble prospective financial statements based on the assumptions of the entity's
management without expressing any assurance. - (correct Answer) - A. Issue a report on subject matter
or an assertion about the subject matter that is the
responsibility of another party.
The Sarbanes-Oxley Act of 2002 requires that the key company officials certify the financial
statements. Certification means that the company CEO and CFO must sign a statement
indicating
A. They have read the financial statements.
B. They are not aware of any false or misleading statements (or any key omitted disclosures)
C. They believe that the financial statements present an accurate picture of the company's
financial condition.
D. All of the above. - (correct Answer) - D. All of the above.
The four basic requirements for becoming a CPA in most states relate to
A. Education, the CPA Examination, experience, and substantial equivalency.
, B. The CPA Examination, experience, continuing professional education, and a state
certificate.
C. Continuing professional education, the CPA Examination, experience, and an AICPA
certificate.
D. Education, the CPA Examination, experience, and a state certificate. - (correct Answer) - D. Education,
the CPA Examination, experience, and a state certificate.
An important role of the Public Company Accounting Oversight Board is to oversee the
A. Issuance of statements by the Financial Accounting Standards Board.
B. Preparation and grading of the Uniform CPA Examination.
C. Peer review of member firms of the Private Companies Practice Section.
D. Regulation of firms that audit public entities. - (correct Answer) - D. Regulation of firms that audit
public entities.
Audit evidence is usually considered sufficient when
A. It is reliable.
B. There is enough quantity to afford a reasonable basis for an opinion on financial
statements.
C. It has the qualities of being relevant, objective, and free from unknown bias.
D. It has been obtained through random selection methods. - (correct Answer) - B. There is enough
quantity to afford a reasonable basis for an opinion on financial
Auditors try to achieve independence in appearance in order to:
A. Maintain public confidence in the profession.
B. Become independent in fact.
C. Comply with the responsibilities principle.
D. Maintain an unbiased mental attitude. - (correct Answer) - A. Maintain public confidence in the
profession.
Internal evidence
A. Is obtained directly from third parties independent of the client.
B. Originates outside the client's system but has been received and processed by the client.
C. Consists of documents that are produced, used, and stored within the client's information
