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Auditing chapter 5 homework

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Auditing chapter 5 homework
Kayla Harbaugh
Quiz by Kayla Harbaugh, updated more than 1 year ago
Kayla Harbaugh
Created by Kayla Harbaugh over 3 years ago
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Question 1

Question
The PCAOB’s General Auditing Standards requires that an audit be performed by which type of person?
Answer
  • An auditor with seasoned judgment in varying degrees of supervision and review
  • An auditor having the appropriate professional qualifications
  • An auditor with adequate technical and leadership skills
  • All of the above

Question 2

Question
Which auditing standards apply to private companies?
Answer
  • The AICPA Standards
  • The IASSB Standards
  • The Standards of the PCAOB
  • All of the above

Question 3

Question
The AICPA Principles Governing an Audit include which of the following categories that guide the conduct of an audit?
Answer
  • Purpose of an audit and premise upon which an audit is conducted
  • Responsibilities
  • Performance
  • All of the above

Question 4

Question
What is the scope of applicability of the auditing standards of the AICPA?
Answer
  • Public companies traded in the U.S.
  • Public companies traded in non-U.S. markets
  • Nonpublic companies in the U.S.
  • Nonpublic companies traded in non-U.S. markets

Question 5

Question
Which of the following organizations provides auditing standards for public companies?
Answer
  • GAO
  • AICPA
  • GAAP
  • PCAOB

Question 6

Question
Which of the following factors has the greatest effect on the reliability of financial statements?
Answer
  • The industry of the client
  • The client's internal control structure
  • The client's trend of earnings
  • The size of the client

Question 7

Question
What is management’s responsibility with respect to the conduct of an audit?
Answer
  • Preparing financial statements
  • Maintaining internal control over financial reporting
  • Providing the auditor with relevant information and access to personnel
  • All of the above

Question 8

Question
Which of the following assertions address whether accounts have been included in the financial statements at appropriate amounts?
Answer
  • Completeness assertion
  • Valuation or allocation assertion
  • Rights and obligations assertion
  • None of the above

Question 9

Question
Which of the following is the primary assertion related to testing inventory on hand to see if it includes consignment goods?
Answer
  • Rights and Obligations
  • Valuation
  • Existence
  • Completeness

Question 10

Question
Which assertion is most closely related to the determination of the adequacy of the allowance for doubtful accounts?
Answer
  • Rights and Obligations
  • Presentation and Disclosure
  • Valuation
  • Existence

Question 11

Question
Which assertion addresses whether all transactions and accounts that should be included in the financial statements are included?
Answer
  • Existence
  • Completeness
  • Rights and Obligations
  • Valuation

Question 12

Question
Which assertion addresses whether the financial statement items are properly classified in the financial statements?
Answer
  • Valuation
  • Presentation and Disclosure
  • Existence
  • Completeness

Question 13

Question
Which of the following is a procedure that requests a direct written response to the auditor from a third party?
Answer
  • Inspection
  • Inquiry
  • Confirmation
  • Observation

Question 14

Question
Which of the following is a procedure which analyzes plausible relationships among financial and nonfinancial data?
Answer
  • Analytical procedures
  • Observation
  • Scanning
  • Reviewing

Question 15

Question
Which of the following terms describes procedures designed to detect material misstatements in accounts?
Answer
  • Control tests
  • Substantive procedures
  • Business risk procedures
  • Risk assessment procedures

Question 16

Question
Which of the following statements accurately describes the auditor’s reporting responsibility for a financial statement audit?
Answer
  • The auditor will identify in the auditor’s report those circumstances in which auditing principles have not been consistently observed in the current period in comparison to the preceding period.
  • The auditor will state explicitly whether the financial statements are fairly presented in accordance with the applicable financial reporting framework.
  • The auditor will review adjusting journal entries for accuracy, and if the auditor concludes those entries are not reasonably accurate, the auditor must so state in the auditor’s report.
  • The auditor will express an unqualified opinion on the financial statements or will conduct additional audit procedures until such an opinion can be expressed.

Question 17

Question
Which of the following is a reason why an auditor needs an understanding of internal controls?
Answer
  • To provide individual comments on internal control non-compliance
  • To assess the risk of possible misstatements in the financial statements
  • To become comfortable that the client will pay its audit bills
  • To asses materiality

Question 18

Question
Which of the following is not a typical accounting cycle?
Answer
  • Inventory
  • Revenue
  • Internal controls
  • Cash

Question 19

Question
Which of the following statements about assertions is true?
Answer
  • All assertions are equally important for all accounts
  • The importance of an assertion depends on the account
  • Assertions are not related to accounts
  • None of the above

Question 20

Question
Which of the following assertions would the auditor usually consider most relevant for accounts payable?
Answer
  • Completeness
  • Valuation
  • Existence
  • Disclosure

Question 21

Question
Which of the following is a use of audit documentation?
Answer
  • Assisting the engagement team in planning and performing the audit
  • Assisting members of the engagement team responsible for supervising and reviewing the audit work
  • Retaining a record of matters of continuing significance to future audits of the same organization
  • All of the above

Question 22

Question
Which of the following factors influence the risk of material misstatement?
Answer
  • Business risks
  • Management incentives
  • IT risks
  • All of the above

Question 23

Question
What does business risk include?
Answer
  • Economic factors
  • Competitive factors
  • Regulatory risk
  • All of the above

Question 24

Question
What does the effectiveness of internal controls influence?
Answer
  • Inherent risk
  • Control risk
  • Risk of material misstatement
  • Both B and C

Question 25

Question
Which statement is true concerning materiality?
Answer
  • Materiality guidelines are specifically prescribed by the PCAOB
  • Materiality is not a useful concept in assessing internal control effectiveness
  • Materiality is a concept applied to financial statement presentation but not to disclosures
  • Misstatements are material if they could reasonably be expected to influence the decisions of users of the financial statements

Question 26

Question
Which of the following statements is true regarding client acceptance or continuance decisions?
Answer
  • The client acceptance/continuance decision is one of the most important factors in audit quality.
  • Potential audit fees are not a valid consideration in the acceptance or continuance decision.
  • Audit firms are not permitted to conduct background checks on the management of a potential client.
  • An audit firm cannot discontinue providing audit services to a client without just cause.

Question 27

Question
Which of the following factors affect the substantive procedures performed in an audit?
Answer
  • The subjectivity of the accounting process
  • Size of the account
  • Effectiveness of the relevant controls
  • All of the above affect the substantive procedures that are performed

Question 28

Question
If the auditor’s assessment of the materiality of the account balance is high, what would be the respective effect on (1) the extent of substantive testing and (2) the nature of procedures performed?
Answer
  • (1) More (2) More rigorous
  • (1) Less (2) Less rigorous
  • (1) Less (2) More rigorous
  • (1) More (2) Less rigorous

Question 29

Question
An auditor gathers evidence on internal controls for which respective time periods for the purposes of expressing an opinion on (1) control effectiveness and for (2) testing controls in the financial statement period? Control Effectiveness Financial Statement
Answer
  • (1) Throughout the year (2) Throughout the year
  • (1) Throughout the year (2) As of year end
  • (1) As of year end (2) As of year end
  • (1) As of year end (2) Throughout the year

Question 30

Question
Which of the following would not be a factor in whether a control weakness would be considered to be a material weakness as opposed to a significant deficiency?
Answer
  • The materiality of the related balance
  • The volume of transactions affected
  • The nature of the client's industry
  • The subjectivity of the account balance
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