Aren - Chapter 02 The Audit Planning Process Understanding...

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Chapter 02 - The Audit Planning Process: Understanding the Risk of Material Misstatement Chapter 02 The Audit Planning Process: Understanding the Risk of Material Misstatement Answer Key True / False Questions 1. The purpose of the audit is to increase the level of confidence that users of financial statements can place on financial statements. TRUE AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Bloom's: Remember Difficulty: Easy 2. The auditing standards determine how an auditor describes if the procedures for an audit are present. FALSE AACSB: Reflective Thinking AICPA BB: Legal AICPA FN: Decision Making Bloom's: Remember Difficulty: Easy 3. Because client information is confidential (according to many state statutes), the predecessor auditor will not respond to the request for information about the client without the client's written permission. FALSE AACSB: Analytic AICPA BB: Legal AICPA FN: Reporting Bloom's: Remember Difficulty: Easy 2-1
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Chapter 02 - The Audit Planning Process: Understanding the Risk of Material Misstatement 4. Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America or international financial reporting standards. TRUE AACSB: Analytic AICPA BB: Legal AICPA FN: Reporting Bloom's: Remember Difficulty: Easy 5. In the planning stage, one of the objectives of the auditor is to identify and assess the risk of material misstatement. TRUE AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Risk Analysis Bloom's: Remember Difficulty: Easy 6. Relevant assertions are assertions made by the auditor about the financial statements of the company that have a reasonable possibility of containing a misstatement that would cause the statements to be misstated. FALSE AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making Bloom's: Remember Difficulty: Medium 7. A material misstatement is an error or fraud in the financial statements that might cause a user of the financial statements to change his opinion about the company. FALSE AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making Bloom's: Remember Difficulty: Easy 2-2
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Chapter 02 - The Audit Planning Process: Understanding the Risk of Material Misstatement 8. During the planning process, the auditor determines the overall audit strategy for the audit. This strategy establishes the scope, timing, and direction of the audit and guides the auditor when he prepares the audit plan. TRUE AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making Bloom's: Remember Difficulty: Easy 9. The auditor should document the audit strategy in the audit report containing the key decisions about the scope, timing, and conduct of the audit.
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