ch1 - auditing and assurance 1 Student 1 The essence of a...

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auditing and assurance 1 Student: ___________________________________________________________________________ 1. The essence of a financial statement audit is to A. Detect fraud. B. Examine individual transactions so that the auditor may certify as to their validity. C. Determine whether the client's financial statements are fairly stated. D. Assure the consistent application of correct accounting procedures. 2. Which of the following is not considered to be a value added to information reported on by assurance services? A. Relevance. B. Timeliness. C. Periodicity. D. Reliability. 3. Evidence is reliable if it A. Signals the true state of an assertion. B. Applies to the period being audited. C. Relates to the audit objective being tested. D. Corroborates management's assertions. 4. Which of the following best describes the concept of audit risk? A. The risk of the auditor being sued because of association with an audit client. B. The risk that the auditor will provide an unqualified opinion on materially misstated financial statements. C. The overall risk that a material misstatement exists in the financial statements. D. The risk that auditors use audit procedures that are inappropriate. 5. An auditor who accepts an audit engagement and does not possess expertise of the business entity's industry, should A. Engage financial experts familiar with the nature of the business entity. B. Obtain a knowledge of matters that relate to the nature of the entity's business. C. Refer a substantial portion of the audit to another CPA, who will act as the principal auditor. D. First inform management that an unqualified opinion can not be issued. 6. For publicly-held companies, the external auditor is required to audit which of the following: A. budgetary information. B. the company's internal controls. C. management forecasts. D. interim financial statements. 7. During the initial planning phase of an audit, a CPA most likely would A. Identify specific internal control activities that are likely to prevent fraud. B. Evaluate the reasonableness of the client's accounting estimates. C. Discuss the timing of the audit procedures with the client's management. D. Inquire of the client's attorney as to whether any unrecorded claims are probable or asserted. 1
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8. In the context of agency theory, information asymmetry refers to the idea that A. Information can vary in its reliability. B. Information can vary in its relevance. C. Management has more information about the entity's true financial position than do the absentee owners. D. Management likely will not act in the best interests of the absentee owners. 9. Which of the following best describes why an independent auditor is asked to express an opinion on the fair presentation of financial statements? A. It is difficult to prepare financial statements that fairly present a company's financial position and
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This note was uploaded on 03/01/2011 for the course ACC 111 taught by Professor S during the Spring '11 term at CUNY Baruch.

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ch1 - auditing and assurance 1 Student 1 The essence of a...

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