CHAPTER 2: Financial Statement Audits andAuditors’ ResponsibilitiesQUESTIONSTrue/FalseREQUIRED: For each of the following items, indicate whether it is (T) True or (F) False. For those marked “False,” identify the error(s) and indicate the change or changes that are needed to make the statement true. 1.The primary objective of auditing is to add credibility to the financial statements prepared by management. 2.Auditing is not possible in the absence of verifiable data. 3.Compliance with “Statements on Auditing Standards” is mandatory for all auditors. 4.The training called for by the first general standard comes solely from practical experience. 5.The second general standard likens the auditor’s role in an audit to the role of an attorney in a legal case. 6.No provisions exist for meeting the first reporting standard when a company uses a comprehensive basis of accounting other than GAAP. 7.The third general standard requires the auditor to act in good faith and not to be negligent in an audit. 8.The fourth reporting standard requires the auditor to express an opinion either on the financial statements taken as a whole or on selected major components of the financial statements. 9.In most cases, when disclosure in the financial statements is considered inadequate, the auditor’s report must include the necessary information.10.The concepts of materiality and risk affect the application of all ten auditing standards.11.The auditing standards are more applicable to audits of public companies than to audits of nonpublic companies.12.The main purpose of the audit committee is to monitor the competence of the external auditors during the course of the engagement.13.Auditing procedures are the methods used and the acts performed by the auditor during an audit.14.It is permissible under GAAS for the internal auditor to provide direct assistance to the independent auditor.15.The internal auditor is responsible for the preparation of the financial statements.2-1
16.The auditor’s report should make explicit reference to the management responsibility report.17.In the opinion paragraph, reference is made to the listed financial statements, but their names are not repeated.18.A disclaimer of opinion may be substituted for an adverse opinion.
- Fall '13
- Financial audit