BYU ACC 406 AUDITING MIDTERM 1
EXAM 2025/2026 QUESTIONS AND
ANSWERS 100% PASS
CH 1: Introduction to Assurance and Financial Statement Auditing
The role of auditing - ANS Study figure 1-1 on p. 7
Assertions about classes of transactions and events for the period under audit: - ANS •
Occurrence
• Completeness
• Authorization
• Accuracy
• Cutoff
• Classification
Assertions about account balances at the period end: - ANS • Existence
• Rights and obligations
• Completeness
• Valuation and allocation
Assertions about presentation and disclosure: - ANS • Occurrence and rights and obligations
• Completeness
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,• Classification and understandability
• Accuracy and valuation
Auditing definition - ANS A systematic process of objectively obtaining and evaluating
evidence regarding assertions about economic actions and events to ascertain the degree of
correspondence between those assertions and established criteria and communicating the
results to interested users
Attestation - ANS occur when a practitioner is engaged to issue...a report on subject matter,
or an assertion about subject matter, that is the responsibility of another party
Assurance - ANS Independent professional services that improve the quality of information,
or its context, for decision makers
Materiality - ANS A set of financial statements could be misstated without affecting the
judgment of reasonable people
Information is material if omitting it or misstating it could influence decision that users make on
the basis of financial information of a specific reporting entity.
Different opinion on an audit report - ANS - Unqualified
- Qualified
- Adverse
Major phases of an audit: - ANS 1. Client acceptance/continuance
2. Preliminary engagement activities
3. Plan the audit
4. Consider and audit internal control
5. Audit business processes and related accounts
6. Complete the audit
7. Evaluate results and issue audit report
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, 1. Client acceptance/continuance - ANS • Review available financial information (annual
reports, financial statements, tax returns, etc.)
• Inquire of 3rd parties about client's integrity
• Communicate with predecessor auditor (with client's permission)
• Consider special circumstances - litigation or going concern
• Determine independence
• Determine firm's technical skills and knowledge of industry
2. Preliminary engagement - ANS • Determine the audit engagement team requirements
(training and proficiency)
• Ensure the audit team and firm comply with ethical and independence requirements
• Establish an understanding with the client (engagement letter, use of work of internal
auditors, role of audit committee)
3. Plan the audit - ANS • Risk assessment procedures (inquire of mgt, required preliminary
analytical procedures for assessing risk, observation/inspection) - AR, IR, CR, etc.; materiality:
planning materiality & tolerable misstatement
• Determine audit steps (reliance vs. Substantive approach); auditing standards require the
auditor obtain an understanding of internal control in order to plan an audit; inquire,
inspections of docs/reports, observation of activities/operations
4. Consider and audit internal control - ANS • Test of controls: audit procedures to test the
operating effectiveness of controls in preventing or detecting & correcting material
misstatements; management assertion; evidence; public companies: ICFR - internal control over
financial reporting
5. Audit business processes and related accounts - ANS • Substantive tests:
1. Test of details ( test of transactions and test of balances)
2. Substantive analytical procedures to management assertions
• Evidence: sampling for test of account balances
• Audit a cycle
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
EXAM 2025/2026 QUESTIONS AND
ANSWERS 100% PASS
CH 1: Introduction to Assurance and Financial Statement Auditing
The role of auditing - ANS Study figure 1-1 on p. 7
Assertions about classes of transactions and events for the period under audit: - ANS •
Occurrence
• Completeness
• Authorization
• Accuracy
• Cutoff
• Classification
Assertions about account balances at the period end: - ANS • Existence
• Rights and obligations
• Completeness
• Valuation and allocation
Assertions about presentation and disclosure: - ANS • Occurrence and rights and obligations
• Completeness
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,• Classification and understandability
• Accuracy and valuation
Auditing definition - ANS A systematic process of objectively obtaining and evaluating
evidence regarding assertions about economic actions and events to ascertain the degree of
correspondence between those assertions and established criteria and communicating the
results to interested users
Attestation - ANS occur when a practitioner is engaged to issue...a report on subject matter,
or an assertion about subject matter, that is the responsibility of another party
Assurance - ANS Independent professional services that improve the quality of information,
or its context, for decision makers
Materiality - ANS A set of financial statements could be misstated without affecting the
judgment of reasonable people
Information is material if omitting it or misstating it could influence decision that users make on
the basis of financial information of a specific reporting entity.
Different opinion on an audit report - ANS - Unqualified
- Qualified
- Adverse
Major phases of an audit: - ANS 1. Client acceptance/continuance
2. Preliminary engagement activities
3. Plan the audit
4. Consider and audit internal control
5. Audit business processes and related accounts
6. Complete the audit
7. Evaluate results and issue audit report
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, 1. Client acceptance/continuance - ANS • Review available financial information (annual
reports, financial statements, tax returns, etc.)
• Inquire of 3rd parties about client's integrity
• Communicate with predecessor auditor (with client's permission)
• Consider special circumstances - litigation or going concern
• Determine independence
• Determine firm's technical skills and knowledge of industry
2. Preliminary engagement - ANS • Determine the audit engagement team requirements
(training and proficiency)
• Ensure the audit team and firm comply with ethical and independence requirements
• Establish an understanding with the client (engagement letter, use of work of internal
auditors, role of audit committee)
3. Plan the audit - ANS • Risk assessment procedures (inquire of mgt, required preliminary
analytical procedures for assessing risk, observation/inspection) - AR, IR, CR, etc.; materiality:
planning materiality & tolerable misstatement
• Determine audit steps (reliance vs. Substantive approach); auditing standards require the
auditor obtain an understanding of internal control in order to plan an audit; inquire,
inspections of docs/reports, observation of activities/operations
4. Consider and audit internal control - ANS • Test of controls: audit procedures to test the
operating effectiveness of controls in preventing or detecting & correcting material
misstatements; management assertion; evidence; public companies: ICFR - internal control over
financial reporting
5. Audit business processes and related accounts - ANS • Substantive tests:
1. Test of details ( test of transactions and test of balances)
2. Substantive analytical procedures to management assertions
• Evidence: sampling for test of account balances
• Audit a cycle
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
