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Auditing and Assurance Services, 18e (Arens)
R
Chapter 1 The Demand for Audit and Other Assurance Services
IF
1.1 Learning Objective 1-1
IE
1) In the auditing process,
D
A) the types and amounts of evidence remain constant from audit to audit.
BR
B) the criteria for evaluating information will not vary depending on the information being
audited.
C) the audit report communicates the auditor's findings to users.
AI
D) records are gathered by the auditor to determine whether the audited information is stated in
accordance with SEC standards.
N
Answer: C
Terms: Audit process
BO
Difficulty: Moderate
Objective: LO 1-1
O
AACSB: Reflective thinking
ST
2) Which of the following is considered audit evidence?
A)
Oral statements
ER
made by Written Auditor
management Communications Observations
Y N N
B)
Oral statements
made by Written Auditor
management Communications Observations
N Y Y
C)
Oral statements
made by Written Auditor
management Communications Observations
Y Y Y
D)
Oral statements
made by Written Auditor
management Communications Observations
N N Y
Answer: C
Terms: Audit evidence
Difficulty: Easy
Objective: LO 1-1
AACSB: Reflective thinking
1
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R
3) Which of the following can be used as a criterion for evaluating information being audited?
IF
A) International Financial Reporting Standards (IFRS)
B) Generally Accepted Accounting Principles (GAAP)
IE
C) Internal Revenue Code (IRC)
D) all of the above
D
Answer: D
BR
Terms: Criteria by which an auditor evaluates information
Difficulty: Moderate
Objective: LO 1-1
AI
AACSB: Reflective thinking
N
4) Auditors do not provide which of the following?
A) assurance on financial statements
BO
B) assurance on the effectiveness of system of internal controls over financial reporting
C) assurance on corporate sustainability reports
O
D) absolute assurance on the financial statements including assuming responsibility for them
Answer: D
ST
Terms: Nature of Objectives of Auditing
Difficulty: Moderate
Objective: LO 1-1
ER
AACSB: Reflective thinking
5) The accumulation and evaluation of evidence about information to determine and report on
the degree of correspondence between the information and some established criteria is defined as
A) accounting.
B) financial reporting.
C) tax reporting.
D) auditing.
Answer: D
Terms: Definition of auditing
Difficulty: Moderate
Objective: LO 1-1
AACSB: Reflective thinking
6) The criteria by which an auditor evaluates the information under audit may vary with the
information being audited.
Answer: TRUE
Terms: Criteria by which an auditor evaluates information
Difficulty: Easy
Objective: LO 1-1
AACSB: Reflective thinking
2
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7) One criterion used by an external auditor to evaluate published financial statements is known
R
as generally accepted auditing standards.
IF
Answer: FALSE
Terms: Criteria used by external auditor to evaluate published financial statements
IE
Difficulty: Easy
Objective: LO 1-1
D
AACSB: Reflective thinking
BR
8) Auditors strive to maintain a high level of independence to keep the confidence of users
relying on their reports.
AI
Answer: TRUE
Terms: Independence
N
Difficulty: Easy
Objective: LO 1-1
BO
AACSB: Reflective thinking
O
9) To perform an audit, there must be information in a verifiable form and some criteria by
which the auditor can evaluate the information.
ST
Answer: TRUE
Terms: Independence
Difficulty: Easy
ER
Objective: LO 1-1
AACSB: Reflective thinking
10) An auditor must be competent and have an independent mental attitude.
Answer: TRUE
Terms: Criteria used by external auditor to evaluate published financial statements
Difficulty: Easy
Objective: LO 1-1
AACSB: Reflective thinking
11) Auditors are not allowed to audit subjective information like the effectiveness of computer
controls or the efficiency of manufacturing-related operations.
Answer: FALSE
Terms: Information and Established Criteria for the Performance of Audits
Difficulty: Moderate
Objective: LO 1-1
AACSB: Reflective thinking
12) In an audit of system of internal controls over financial reporting, the auditor may rely upon
the Internal Control - Integrated Framework issued by COSO.
Answer: TRUE
Terms: Information and Established Criteria for the Performance of Audits
Difficulty: Moderate
Objective: LO 1-1
AACSB: Reflective thinking
3
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13) In circumstances where the auditor is being asked to audit subjective types of information,
R
typically, the auditor and the entities being audited should agree in writing about the criteria
IF
being audited after the audit starts.
Answer: FALSE
IE
Terms: Information and Established Criteria for the Performance of Audits
Difficulty: Moderate
D
Objective: LO 1-1
BR
AACSB: Reflective thinking
14) Evidence is paramount to audit and attestation engagements. List the four basic types of audit
AI
evidence.
Answer: The four types of audit and attestation evidence include
N
1. Electronic and documentary data about transactions
2. Written and electronic communications with outsiders
BO
3. Observations by the auditor
4. Oral testimony of the auditee (client)
O
Terms: Basic types of audit evidence
Difficulty: Easy
ST
Objective: LO 1-1
AACSB: Reflective thinking
ER
1.2 Learning Objective 1-2
1) Recording, classifying, and summarizing economic events in a logical manner for the purpose
of providing financial information for decision making is commonly called
A) finance.
B) auditing.
C) accounting.
D) economics.
Answer: C
Terms: Recording, classifying, and summarizing economic events
Difficulty: Easy
Objective: LO 1-2
AACSB: Reflective thinking
2) An accountant
A) must possess expertise in the accumulation of audit evidence.
B) must decide the number and types of items to test.
C) must have an understanding of the principles and rules that provide the basis for preparing the
accounting information.
D) must be a CPA.
Answer: C
Terms: Distinguishes auditors from accountants
Difficulty: Moderate
Objective: LO 1-2
AACSB: Reflective thinking
4
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VE
Auditing and Assurance Services, 18e (Arens)
R
Chapter 1 The Demand for Audit and Other Assurance Services
IF
1.1 Learning Objective 1-1
IE
1) In the auditing process,
D
A) the types and amounts of evidence remain constant from audit to audit.
BR
B) the criteria for evaluating information will not vary depending on the information being
audited.
C) the audit report communicates the auditor's findings to users.
AI
D) records are gathered by the auditor to determine whether the audited information is stated in
accordance with SEC standards.
N
Answer: C
Terms: Audit process
BO
Difficulty: Moderate
Objective: LO 1-1
O
AACSB: Reflective thinking
ST
2) Which of the following is considered audit evidence?
A)
Oral statements
ER
made by Written Auditor
management Communications Observations
Y N N
B)
Oral statements
made by Written Auditor
management Communications Observations
N Y Y
C)
Oral statements
made by Written Auditor
management Communications Observations
Y Y Y
D)
Oral statements
made by Written Auditor
management Communications Observations
N N Y
Answer: C
Terms: Audit evidence
Difficulty: Easy
Objective: LO 1-1
AACSB: Reflective thinking
1
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R
3) Which of the following can be used as a criterion for evaluating information being audited?
IF
A) International Financial Reporting Standards (IFRS)
B) Generally Accepted Accounting Principles (GAAP)
IE
C) Internal Revenue Code (IRC)
D) all of the above
D
Answer: D
BR
Terms: Criteria by which an auditor evaluates information
Difficulty: Moderate
Objective: LO 1-1
AI
AACSB: Reflective thinking
N
4) Auditors do not provide which of the following?
A) assurance on financial statements
BO
B) assurance on the effectiveness of system of internal controls over financial reporting
C) assurance on corporate sustainability reports
O
D) absolute assurance on the financial statements including assuming responsibility for them
Answer: D
ST
Terms: Nature of Objectives of Auditing
Difficulty: Moderate
Objective: LO 1-1
ER
AACSB: Reflective thinking
5) The accumulation and evaluation of evidence about information to determine and report on
the degree of correspondence between the information and some established criteria is defined as
A) accounting.
B) financial reporting.
C) tax reporting.
D) auditing.
Answer: D
Terms: Definition of auditing
Difficulty: Moderate
Objective: LO 1-1
AACSB: Reflective thinking
6) The criteria by which an auditor evaluates the information under audit may vary with the
information being audited.
Answer: TRUE
Terms: Criteria by which an auditor evaluates information
Difficulty: Easy
Objective: LO 1-1
AACSB: Reflective thinking
2
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VE
7) One criterion used by an external auditor to evaluate published financial statements is known
R
as generally accepted auditing standards.
IF
Answer: FALSE
Terms: Criteria used by external auditor to evaluate published financial statements
IE
Difficulty: Easy
Objective: LO 1-1
D
AACSB: Reflective thinking
BR
8) Auditors strive to maintain a high level of independence to keep the confidence of users
relying on their reports.
AI
Answer: TRUE
Terms: Independence
N
Difficulty: Easy
Objective: LO 1-1
BO
AACSB: Reflective thinking
O
9) To perform an audit, there must be information in a verifiable form and some criteria by
which the auditor can evaluate the information.
ST
Answer: TRUE
Terms: Independence
Difficulty: Easy
ER
Objective: LO 1-1
AACSB: Reflective thinking
10) An auditor must be competent and have an independent mental attitude.
Answer: TRUE
Terms: Criteria used by external auditor to evaluate published financial statements
Difficulty: Easy
Objective: LO 1-1
AACSB: Reflective thinking
11) Auditors are not allowed to audit subjective information like the effectiveness of computer
controls or the efficiency of manufacturing-related operations.
Answer: FALSE
Terms: Information and Established Criteria for the Performance of Audits
Difficulty: Moderate
Objective: LO 1-1
AACSB: Reflective thinking
12) In an audit of system of internal controls over financial reporting, the auditor may rely upon
the Internal Control - Integrated Framework issued by COSO.
Answer: TRUE
Terms: Information and Established Criteria for the Performance of Audits
Difficulty: Moderate
Objective: LO 1-1
AACSB: Reflective thinking
3
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VE
13) In circumstances where the auditor is being asked to audit subjective types of information,
R
typically, the auditor and the entities being audited should agree in writing about the criteria
IF
being audited after the audit starts.
Answer: FALSE
IE
Terms: Information and Established Criteria for the Performance of Audits
Difficulty: Moderate
D
Objective: LO 1-1
BR
AACSB: Reflective thinking
14) Evidence is paramount to audit and attestation engagements. List the four basic types of audit
AI
evidence.
Answer: The four types of audit and attestation evidence include
N
1. Electronic and documentary data about transactions
2. Written and electronic communications with outsiders
BO
3. Observations by the auditor
4. Oral testimony of the auditee (client)
O
Terms: Basic types of audit evidence
Difficulty: Easy
ST
Objective: LO 1-1
AACSB: Reflective thinking
ER
1.2 Learning Objective 1-2
1) Recording, classifying, and summarizing economic events in a logical manner for the purpose
of providing financial information for decision making is commonly called
A) finance.
B) auditing.
C) accounting.
D) economics.
Answer: C
Terms: Recording, classifying, and summarizing economic events
Difficulty: Easy
Objective: LO 1-2
AACSB: Reflective thinking
2) An accountant
A) must possess expertise in the accumulation of audit evidence.
B) must decide the number and types of items to test.
C) must have an understanding of the principles and rules that provide the basis for preparing the
accounting information.
D) must be a CPA.
Answer: C
Terms: Distinguishes auditors from accountants
Difficulty: Moderate
Objective: LO 1-2
AACSB: Reflective thinking
4
Copyright © 2023 Pearson Education, Inc.
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