Homework 8th edition Chapter 1

Homework 8th edition Chapter 1 - Multiple Choice Questions:...

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Multiple Choice Questions: 1-29. c. 1-30. b. 1-31. c. (assurance services don’t always require a third party) 1-32. d. 1-33. a. 1-34. d. 1-35. b. 1-36. c. 1-37. d. 1-38. a. 1-39. f. 1-42. a. The major objectives of an independent audit are to systematically acquire and evaluate audit evidence to determine the fairness of a company's financial statements (as judged by applicable criteria, such as GAAP) and to communicate that opinion to interested users. An audit may specifically benefit the auditee (Quello) in the following ways: 1. An independent assessment of the fairness of presentation enhances the perceived reliability of the financial report and assists the company in obtaining loans or new capital because the investing and lending public will have confidence in the financial figures. 2. The auditor's expertise in related areas may help the client in (a) Tax planning. (b) Preparing tax returns. (c) Selecting and implementing accounting information systems. (d) Identifying sources of capital or loans. (e) Preparing financial forecasts or analyses that may assist the company in obtaining loans or new capital. (f) Determining the efficiency of existing accounting operations. (g) Observing areas in which efficiency and effectiveness of operations might be improved. 3. The auditor's testing and evaluations of controls may provide insights into areas in which improvements could be made. 4. The independent assessment and testing of transactions represent a management control device because individuals know that their work will be tested and evaluated.
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5. The threat, as well as the performance, of an audit may act to deter potential fraud. 6. The auditor's expertise may lead to improved financial presentations because of the application of accounting principles or improved financial statement disclosure. 7. The auditor's knowledge may lead to improved reporting for regulatory purposes. b. Some of the points that might be discussed by management in determining the nature of the CPA firm to engage to conduct the audit: 1. The audit fees for conducting the audit. 2. The reputation of the auditor in the community and potential impact of auditor reputation in securing loans or capital. 3. The ability of the auditor to assist the firm in expanding the scope of its operations beyond the immediate geographic area. 4.
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This note was uploaded on 09/20/2011 for the course ACCT 4420 taught by Professor Franz during the Spring '11 term at Toledo.

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Homework 8th edition Chapter 1 - Multiple Choice Questions:...

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