Test Bank for Auditing & Assurance Services 9th Edition by Timothy
Louwers, Jerry Strawser
Chap 01 9e Answers Included ✅ 5) What type of evidence would provide the highest level of assurance in an attestation
1) The audit objective that all transactions and accounts that should be presented in the financial engagement?
statements are in fact included is related to which of the PCAOB assertions? A) Evidence secured solely from within the entity.
A) Existence B) Evidence obtained from independent sources.
B) Rights and obligations C) Evidence obtained indirectly.
C) Completeness D) Evidence obtained from multiple internal inquiries.
D) Valuation
6) Which of the following management assertions is an auditor most likely testing if the audit
2) Cutoff tests designed to detect purchases made before the end of the year that have been objective states that all inventory on hand is reflected in the ending inventory balance?
recorded in the subsequent year provide assurance about management's assertion of A) The entity has rights to the inventory.
A) presentation and disclosure. B) Inventory is properly valued.
B) completeness. C) Inventory is properly presented in the financial statements.
C) rights and obligations. D) Inventory is complete.
D) existence.
7) An auditor traces the serial numbers on equipment to a nonissuer's subledger. Which of the
3) During an audit of an entity's stockholders' equity accounts, the auditor determines whether following management assertions is supported by this test?
there are restrictions on retained earnings resulting from loans, agreements, or state law. This A) Valuation and allocation
audit procedure most likely is intended to verify management's assertion of B) Completeness
A) existence or occurrence. C) Rights and obligations
B) completeness. D) Presentation and disclosure
C) valuation or allocation.
D) presentation and disclosure.
8) An auditor has substantial doubt about the entity's ability to continue as a going concern for a
reasonable period of time because of negative cash flows and working capital deficiencies.
4) The confirmation of an account payable balance selected from the general ledger provides Under these circumstances, the auditor would be most concerned about the
primary evidence regarding which management assertion? A) control environment factors that affect the organizational structure.
A) Completeness B) correlation of detection risk and inherent risk.
B) Valuation C) effectiveness of the entity's internal control activities.
C) Allocation D) possible effects on the entity's financial statements.
D) Existence
9) Which of the following types of audit evidence provides theleast assurance of reliability?
A) Receivable confirmations received from the client's customers.
B) Prenumbered receiving reports completed by the client's employees.
C) Prior months' bank statements obtained from the client.
D) Municipal property tax bills prepared in the client's name.
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,10) Which of the following is a management assertion regarding account balances at the period 14) An auditor selected items from the client's detailed inventory listing (that agreed to the
end? financial statements). During the physical inventory observation, the auditor then found each
A) Transactions and events that have been recorded have occurred and pertain to the item selected and counted the number of units on hand. Assuming that the amount on hand
entity. was the same as the amount in the client's detailed inventory listing, this procedure most
B) Transactions and events have been recorded in the proper accounts. likely would provide evidence concerning management's assertion of
C) The entity holds or controls the rights to assets, and liabilities are obligations of the A) completeness.
entity. B) valuation.
D) Amounts and other data related to the transactions and events have been recorded C) presentation and disclosure.
appropriately. D) existence.
E) rights and obligations.
11) A practitioner is engaged to express an opinion on management's assertion that the square
footage of a warehouse offered for sale is 150,000 square feet. The practitioner should refer 15) According to PCAOB Auditing Standard No. 2201 ( AS 2201), the auditor should identify
to which of the following sources for professional guidance? significant accounts and disclosures and their relevant assertions. Which of the following
A) Statement of Auditing Standards. financial statement assertions is not explicitly identified in AS 2201?
B) Statements on Standards for Attestation Engagements. A) Completeness
C) Statements on Standards for Accounting and Review Services. B) Valuation or allocation
D) Statements on Standards for Consulting Services. C) Accuracy
D) Existence or occurrence
E) All of these are assertions identified in AS 2201.
12) In auditing the long-term debt account, an auditor's procedures most likely would focus
primarily on management's assertion of
A) existence. 16) When testing the completeness assertion for a liability account, an auditor ordinarily works
B) completeness. from the
C) allocation. A) financial statements to the potentially unrecorded items.
D) rights and obligations. B) potentially unrecorded items to the financial statements.
C) accounting records to the supporting evidence.
D) trial balance to the subsidiary ledger.
13) An auditor selected items for test counts from the client's warehouse during the physical
inventory observation. The auditor then traced these test counts into the detailed inventory
listing that ultimately agreed to the financial statements. This procedure most likely provided 17) If an auditor is performing procedures related to the information that is contained in the
evidence concerning management's assertion of client's pension footnote, he/she is most likely to obtain evidence concerning management's
A) completeness. assertion about
B) valuation. A) rights and obligations.
C) presentation and disclosure. B) existence.
D) existence. C) valuation.
E) rights and obligations. D) presentation and disclosure.
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,18) Which of the following questions would beinappropriate for an auditor to ask a client when 22) What is the term used to identify the risk that the client's financial statements may be
exhibiting an appropriate level of professional skepticism while completing an audit materially false and misleading?
procedure related to the internal control system? A) Business risk
A) What can go wrong in this process? B) Information risk
B) Which of your employees is a fraudster? C) Client risk
C) What else is important to know about this process? D) Risk assessment
D) What happens when a key employee goes on vacation?
23) Which of the following is not a recommendation usually made following the completion of
19) To be proficient as an auditor, a person must first be able to accomplish which of these tasks an operational audit?
in a decision-making process? A) Economic and efficient use of resources.
A) Identify audit evidence relevant to the verification of assertions management makes B) Effective achievement of business objectives.
in its unaudited financial statements and notes. C) Attesting to the fairness of the financial statements.
B) Formulate evidence-gathering procedures (audit plan) designed to obtain sufficient, D) Compliance with company policies.
competent evidence about assertions management makes in financial statements and
notes.
C) Recognize the financial assertions made in management's financial statements and 24) In order to be considered as external auditors with respect to government agencies, GAO
footnotes. auditors must be
D) Evaluate the evidence produced by the performance of procedures and decide A) organizationally independent.
whether management's assertions conform to generally accepted accounting B) empowered as the accounting and auditing agency by the U.S. Congress.
principles and reality. C) funded by the federal government.
D) guided by standards similar to GAAS.
20) Which of the following is an underlying condition that in part creates the demand by users
for reliable information? 25) Which of the following is the essential purpose of the audit function?
A) Economic transactions that are numerous and complex. A) Detection of fraud.
B) Decisions that are time-sensitive. B) Examination of individual transactions to certify as to their validity.
C) Users separated from accounting records by distance and time. C) Determination of whether the client's financial statement assertions are fairly stated.
D) Financial decisions that are important to investors and users. D) Assurance of the consistent application of correct accounting procedures.
E) All of these choices are correct.
26) The audit objective that all the transactions and accounts presented in the financial statements
21) Which of the following is not included in the American Accounting Association (AAA) represent real assets, liabilities, revenues, and expenses is related most closely to which of
definition of auditing? the PCAOB assertions?
A) Potential conflict of interest A) Existence or occurrence
B) Systematic process B) Rights and obligations
C) Assertions about economic actions C) Completeness
D) Established criteria D) Presentation and disclosure
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, 27) The audit objective that all transactions are recorded in the proper period is related most 31) The audit objective that footnotes in the financial statements should be clear and expressed
closely to which of the Audit Standards Board (ASB) assertions about classes of transactions such that the information is easily conveyed to the readers of the financial statements is
and events and related disclosures? related most closely with which of the ASB assertions about account balances and related
A) Occurrence disclosures ?
B) Completeness A) Occurrence
C) Cutoff B) Rights and obligations
D) Accuracy C) Comprehensibility
D) Presentation
28) The audit objective that all transactions are recorded in the proper account is related most
closely to which one of the ASB assertions about classes of transactions and events and 32) The engineering department at Omni Company built a piece of equipment in the company's
related disclosures? own shop for use in the company's operations. The auditor reviewed all work orders that
A) Occurrence were capitalized as part of the equipment costs. Which of the following is the ASB assertion
B) Completeness about classes of transactions and events and related disclosures most closely related to the
C) Accuracy auditor's testing?
D) Classification A) Occurrence
B) Completeness
C) Accuracy
29) The audit objective that all balances include items owned by the client is related most closely D) Classification
to which one of the ASB assertions about account balances and related disclosures?
A) Existence
B) Rights and obligations 33) The engineering department at Omni Company built a piece of equipment in the company's
C) Completeness own shop for use in the company's operations. When looking at the ending balance for the
D) Valuation fixed asset account the auditor examined all work orders, purchased materials, labor cost
reports, and applied overhead that were capitalized as part of the equipment costs. Which of
the following is the ASB assertion about account balances and related disclosures most
30) The audit objective that all balances include all items that should be recorded in that account closely related to the auditor's testing?
is related most closely to which one of the ASB assertions about account balances and related A) Existence
disclosures? B) Completeness
A) Existence C) Rights and obligations
B) Rights and obligations D) Valuation
C) Completeness
D) Valuation
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Louwers, Jerry Strawser
Chap 01 9e Answers Included ✅ 5) What type of evidence would provide the highest level of assurance in an attestation
1) The audit objective that all transactions and accounts that should be presented in the financial engagement?
statements are in fact included is related to which of the PCAOB assertions? A) Evidence secured solely from within the entity.
A) Existence B) Evidence obtained from independent sources.
B) Rights and obligations C) Evidence obtained indirectly.
C) Completeness D) Evidence obtained from multiple internal inquiries.
D) Valuation
6) Which of the following management assertions is an auditor most likely testing if the audit
2) Cutoff tests designed to detect purchases made before the end of the year that have been objective states that all inventory on hand is reflected in the ending inventory balance?
recorded in the subsequent year provide assurance about management's assertion of A) The entity has rights to the inventory.
A) presentation and disclosure. B) Inventory is properly valued.
B) completeness. C) Inventory is properly presented in the financial statements.
C) rights and obligations. D) Inventory is complete.
D) existence.
7) An auditor traces the serial numbers on equipment to a nonissuer's subledger. Which of the
3) During an audit of an entity's stockholders' equity accounts, the auditor determines whether following management assertions is supported by this test?
there are restrictions on retained earnings resulting from loans, agreements, or state law. This A) Valuation and allocation
audit procedure most likely is intended to verify management's assertion of B) Completeness
A) existence or occurrence. C) Rights and obligations
B) completeness. D) Presentation and disclosure
C) valuation or allocation.
D) presentation and disclosure.
8) An auditor has substantial doubt about the entity's ability to continue as a going concern for a
reasonable period of time because of negative cash flows and working capital deficiencies.
4) The confirmation of an account payable balance selected from the general ledger provides Under these circumstances, the auditor would be most concerned about the
primary evidence regarding which management assertion? A) control environment factors that affect the organizational structure.
A) Completeness B) correlation of detection risk and inherent risk.
B) Valuation C) effectiveness of the entity's internal control activities.
C) Allocation D) possible effects on the entity's financial statements.
D) Existence
9) Which of the following types of audit evidence provides theleast assurance of reliability?
A) Receivable confirmations received from the client's customers.
B) Prenumbered receiving reports completed by the client's employees.
C) Prior months' bank statements obtained from the client.
D) Municipal property tax bills prepared in the client's name.
1 2
,10) Which of the following is a management assertion regarding account balances at the period 14) An auditor selected items from the client's detailed inventory listing (that agreed to the
end? financial statements). During the physical inventory observation, the auditor then found each
A) Transactions and events that have been recorded have occurred and pertain to the item selected and counted the number of units on hand. Assuming that the amount on hand
entity. was the same as the amount in the client's detailed inventory listing, this procedure most
B) Transactions and events have been recorded in the proper accounts. likely would provide evidence concerning management's assertion of
C) The entity holds or controls the rights to assets, and liabilities are obligations of the A) completeness.
entity. B) valuation.
D) Amounts and other data related to the transactions and events have been recorded C) presentation and disclosure.
appropriately. D) existence.
E) rights and obligations.
11) A practitioner is engaged to express an opinion on management's assertion that the square
footage of a warehouse offered for sale is 150,000 square feet. The practitioner should refer 15) According to PCAOB Auditing Standard No. 2201 ( AS 2201), the auditor should identify
to which of the following sources for professional guidance? significant accounts and disclosures and their relevant assertions. Which of the following
A) Statement of Auditing Standards. financial statement assertions is not explicitly identified in AS 2201?
B) Statements on Standards for Attestation Engagements. A) Completeness
C) Statements on Standards for Accounting and Review Services. B) Valuation or allocation
D) Statements on Standards for Consulting Services. C) Accuracy
D) Existence or occurrence
E) All of these are assertions identified in AS 2201.
12) In auditing the long-term debt account, an auditor's procedures most likely would focus
primarily on management's assertion of
A) existence. 16) When testing the completeness assertion for a liability account, an auditor ordinarily works
B) completeness. from the
C) allocation. A) financial statements to the potentially unrecorded items.
D) rights and obligations. B) potentially unrecorded items to the financial statements.
C) accounting records to the supporting evidence.
D) trial balance to the subsidiary ledger.
13) An auditor selected items for test counts from the client's warehouse during the physical
inventory observation. The auditor then traced these test counts into the detailed inventory
listing that ultimately agreed to the financial statements. This procedure most likely provided 17) If an auditor is performing procedures related to the information that is contained in the
evidence concerning management's assertion of client's pension footnote, he/she is most likely to obtain evidence concerning management's
A) completeness. assertion about
B) valuation. A) rights and obligations.
C) presentation and disclosure. B) existence.
D) existence. C) valuation.
E) rights and obligations. D) presentation and disclosure.
3 4
,18) Which of the following questions would beinappropriate for an auditor to ask a client when 22) What is the term used to identify the risk that the client's financial statements may be
exhibiting an appropriate level of professional skepticism while completing an audit materially false and misleading?
procedure related to the internal control system? A) Business risk
A) What can go wrong in this process? B) Information risk
B) Which of your employees is a fraudster? C) Client risk
C) What else is important to know about this process? D) Risk assessment
D) What happens when a key employee goes on vacation?
23) Which of the following is not a recommendation usually made following the completion of
19) To be proficient as an auditor, a person must first be able to accomplish which of these tasks an operational audit?
in a decision-making process? A) Economic and efficient use of resources.
A) Identify audit evidence relevant to the verification of assertions management makes B) Effective achievement of business objectives.
in its unaudited financial statements and notes. C) Attesting to the fairness of the financial statements.
B) Formulate evidence-gathering procedures (audit plan) designed to obtain sufficient, D) Compliance with company policies.
competent evidence about assertions management makes in financial statements and
notes.
C) Recognize the financial assertions made in management's financial statements and 24) In order to be considered as external auditors with respect to government agencies, GAO
footnotes. auditors must be
D) Evaluate the evidence produced by the performance of procedures and decide A) organizationally independent.
whether management's assertions conform to generally accepted accounting B) empowered as the accounting and auditing agency by the U.S. Congress.
principles and reality. C) funded by the federal government.
D) guided by standards similar to GAAS.
20) Which of the following is an underlying condition that in part creates the demand by users
for reliable information? 25) Which of the following is the essential purpose of the audit function?
A) Economic transactions that are numerous and complex. A) Detection of fraud.
B) Decisions that are time-sensitive. B) Examination of individual transactions to certify as to their validity.
C) Users separated from accounting records by distance and time. C) Determination of whether the client's financial statement assertions are fairly stated.
D) Financial decisions that are important to investors and users. D) Assurance of the consistent application of correct accounting procedures.
E) All of these choices are correct.
26) The audit objective that all the transactions and accounts presented in the financial statements
21) Which of the following is not included in the American Accounting Association (AAA) represent real assets, liabilities, revenues, and expenses is related most closely to which of
definition of auditing? the PCAOB assertions?
A) Potential conflict of interest A) Existence or occurrence
B) Systematic process B) Rights and obligations
C) Assertions about economic actions C) Completeness
D) Established criteria D) Presentation and disclosure
5 6
, 27) The audit objective that all transactions are recorded in the proper period is related most 31) The audit objective that footnotes in the financial statements should be clear and expressed
closely to which of the Audit Standards Board (ASB) assertions about classes of transactions such that the information is easily conveyed to the readers of the financial statements is
and events and related disclosures? related most closely with which of the ASB assertions about account balances and related
A) Occurrence disclosures ?
B) Completeness A) Occurrence
C) Cutoff B) Rights and obligations
D) Accuracy C) Comprehensibility
D) Presentation
28) The audit objective that all transactions are recorded in the proper account is related most
closely to which one of the ASB assertions about classes of transactions and events and 32) The engineering department at Omni Company built a piece of equipment in the company's
related disclosures? own shop for use in the company's operations. The auditor reviewed all work orders that
A) Occurrence were capitalized as part of the equipment costs. Which of the following is the ASB assertion
B) Completeness about classes of transactions and events and related disclosures most closely related to the
C) Accuracy auditor's testing?
D) Classification A) Occurrence
B) Completeness
C) Accuracy
29) The audit objective that all balances include items owned by the client is related most closely D) Classification
to which one of the ASB assertions about account balances and related disclosures?
A) Existence
B) Rights and obligations 33) The engineering department at Omni Company built a piece of equipment in the company's
C) Completeness own shop for use in the company's operations. When looking at the ending balance for the
D) Valuation fixed asset account the auditor examined all work orders, purchased materials, labor cost
reports, and applied overhead that were capitalized as part of the equipment costs. Which of
the following is the ASB assertion about account balances and related disclosures most
30) The audit objective that all balances include all items that should be recorded in that account closely related to the auditor's testing?
is related most closely to which one of the ASB assertions about account balances and related A) Existence
disclosures? B) Completeness
A) Existence C) Rights and obligations
B) Rights and obligations D) Valuation
C) Completeness
D) Valuation
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