Audit exam #2

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Chapter 6 Multiple-Choice Questions 1. The objective of the ordinary audit of financial statements is the expression of an opinion on: easy a. the fairness of the financial statements. a b. the accuracy of the financial statements. c. the accuracy of the annual report. d. the balance sheet and income statement. 2. easy If the auditor believes that the financial statements are not fairly stated or is unable to reach an conclusion because of insufficient evidence, the auditor: c a. should withdraw from the engagement. b. should request an increase in audit fees so that more resources can be used to conduct the audit. c. has the responsibility of notifying financial statement users through the auditor’s report. d. should notify regulators of the circumstances. 3. Auditors accumulate evidence to: easy a. defend themselves in the event of a lawsuit. d b. justify the conclusions they have otherwise reached. c. satisfy the requirements of the Securities Acts of 1933 and 1934. d. enable them to reach conclusions about the fairness of the financial statements. 4. The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with the: easy a. board of directors. b b. company management. c. financial statement auditor. d. company’s internal audit department. 5. The auditor’s best defense when material misstatements are not uncovered is to have conducted the audit: easy a. in accordance with auditing standards. A b. as effectively as reasonably possible. c. in a timely manner. d. only after an adequate investigation of the management team. 6. easy If management insists on financial statement disclosures that the auditor finds unacceptable, the auditor can: A Issue an adverse audit report Issue a qualified audit report a. b. c. d. Yes No Yes No Yes No No Yes 7. easy If management insists on financial statement disclosures that the auditor finds unacceptable, the auditor can do all but which of the following? B a. Issue an adverse audit report. b. Issue a disclaimer of opinion. c. Withdraw from the engagement. d. Issue a qualified audit report. 8. Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements? easy a. The auditor commonly examines a sample, rather than the entire population of transactions. D b. Accounting presentations contain complex estimates which involve uncertainty. c. Fraudulently prepared financial statements are often difficult to detect. d. Auditors believe that reasonable assurance is sufficient in the vast majority of cases. 9. hard In certifying their annual financial statements, the CEO and CFO of a public company certify that the financial statements comply with the requirements of: C a. GAAP. b.
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