Test bank for auditing and assurance a business risk approach 3rd edition

none of these choices Users of the audit report can reasonably expect the audited financial statements to be: 1.. complete and contain all important financial disclosures, be free from

Test Bank for Auditing and Assurance A Business Risk Approach 3rd Edition

The need for assurance services arises for all of the following reasons except:

1 a potential bias in providing information

2 b closeness between a user and the organisation

3 c complexity of the processing systems

4 d remoteness between a user and the organisation

Independent professional services that are provided on financial or other information that improve the quality of decision making are known as:

1 a internal auditing

2 b financial auditing

3 c assurance services

4 d attestation services

Which one of the following is not a critical component of assurance

services?

1 a a process on which service is provided

2 b an assurance service provider

3 c a user who derives value

4 d a registered company auditor

Which one of the following is not a key attribute needed to perform

4 d all of these choices

Which one of the following is not part of the attest process?

1 a gathering evidence about assertions

2 b proving the accuracy of the books and records

3 c evaluating evidence against objective criteria

4 d communicating the conclusions reached

Which of the following is/are not part of the attest process?

1 a communicating the conclusions reached to a third party

2 b guaranteeing the accuracy of the books and records

3 c evaluating evidence against objective criteria

4 d all of these choices

Which one of the following is a potential problem with management’s

communication of financial information that causes third parties to desire the independent auditor’s assessment of the financial statement

presentation?

1 a complexity of transactions affecting the financial statements

2 b lack of criteria on which to base information

3 c remoteness of the trading partner from the organisation

4 d none of these choices

Users of the audit report can reasonably expect the audited financial

statements to be:

1 a complete, contain all necessary information and contain all financial

disclosures

2 b a true and fair view of the organisation’s financial results

3 c free from all errors

4 d all of these choices

Which one of the following is not a management expectation for independent auditors?

1 a an outside source of expertise on accounting matters

2 b individuals who perform tests and draw conclusions on assertions

3 c a participant in management decision making

4 d a provider of a written communication

Users can reasonably expect audited financial statements to be:

1 a complete and contain all important financial disclosures, be free from material misstatements and be presented fairly

2 b complete and contain all important financial disclosures, be free from material misstatements and be presented fairly according to accounting standards

3 c complete, be accurate and be presented fairly according to generally accepted accounting principles (GAAP)

4 d complete and contain all important financial disclosures, be free from all misstatements and be presented fairly according to the substance of

generally accepted accounting principles

Internal auditors may perform all of the following types of audits except:

1 a operational audits

2 b compliance audits

3 c computer system audits

4 d all of these choices

An ‘integrated audit’ includes an audit of:

1 a the company’s external controls

2 b the company’s financial statements

3 c the company’s compliance with its rules and policies

4 d none of these choices

Which of the following services is the broadest and most inclusive?

Auditing is important in a free market society because:

1 a the public requires auditors to function as divisions of regulatory bodies

2 b auditors detect all errors and fraud made by company employees

3 c it provides reliable information based upon which to judge economic performance

4 d the auditor is an amiable insurance policy for investors

5 e all of these choices

Third-party users of the audit report expect the auditor to do all of the following except:

1 a to evaluate measurements and disclosures made by management

2 b to provide a biased evaluation of the financial statements

3 c to determine whether financial statements are presented in accordance with accounting standards

4 d to gather sufficient evidence to support their opinion

Public accounting firms performing financial report audits for companies must:

1 a register with the Auditing and Assurance Standards Board (AUASB)

2 b register with the Institute of Internal Auditors

3 c register with the Australian Securities Exchange (ASX)

4 d have a registered company auditor sign the audit report

The auditor of financial statements must make very difficult interpretations regarding authoritative literature Additionally, the auditor must:

1 a consider whether the application of a generally accepted accounting principle best portrays the economic activity of the company

2 b force management to make certain decisions regarding their financial statements

3 c disregard independence in order to find the underlying truth of the

evidence

4 d establish new criteria by which financial statements may be compared

Results of the financial statement audit are communicated to users through a(n):

1 a financial statement

2 b written management assertion

3 c audit report

4 d none of these choices

Assurance services do not include which of the following?

1 a attesting to financial statements

2 b examination of the economy and efficiency of governmental operations

3 c evaluation of a division’s performance for management

4 d tax preparation services

The criteria against which the auditor measures the truth and fairness of financial report presentation in Australia are known as:

1 a generally accepted auditing standards

2 b generally accepted accounting principles

3 c generally accepted accounting standards

4 d generally accepted public sector accounting principles

Management of a company is responsible for:

1 a hiring the auditor

2 b preparing the financial statements

3 c the audit work papers

4 d independence and obtaining evidence

Which one of the following is an example of management expectations for independent auditors?

1 a an expert providing a written communication as the product of the

engagement

2 b individuals who perform day-to-day accounting functions on behalf of the company

3 c an active participant in management decision making

4 d an internal source of expertise on financial and other matters

Which one of the following is not a provider of assurance services?

2 b increased internal and external emphasis on effective procedures to detect

1 a It is an objective evaluation function

2 b It is established within an organisation

3 c Its purpose is to provide assurance regarding the company’s compliance with stated policies and procedures

4 d It is established as an independent service to regulatory bodies and

creditors

An audit which has as its purpose the evaluation of the economy and

efficiency with which resources are employed is known as a(n):

1 a hiring the auditor

2 b preparing the financial statements

3 c the audit work papers

4 d independence and obtaining evidence

The Australian Auditing and Assurance Standards Board (AUASB) remains a valuable organisation because of its continuing involvement in:

1 a the audit standard setting process

2 b regulation and enforcement of the audit profession

3 c education and administration of the professional accounting body exam

4 d promulgation of accounting standards

The objective of an operational audit is to:

1 a evaluate whether laws have been broken by management

2 b evaluate fairness of presentation of financial statements

3 c evaluate compliances with company rules and regulations

4 d evaluate the effectiveness and efficiency with which resources are

2 b Public Sector Services Board

3 c Auditing and Assurance Standards Board (AUASB)

4 d Australian Securities Exchange (ASX)

Which of the following organisations is authorised to establish generally accepted auditing standards?

1 a Auditing and Assurance Standards Board (AUASB)

2 b Financial Reporting Council (FRC)

3 c Australian Securities and Investments Commission (ASIC)

4 d Accounting Professional and Ethical Standards Board (APESB)

The public expects auditors to:

1 a understand and enforce principles that best portray the spirit of accountingconcepts

2 b be neutral to preparers and users of financial information

3 c recognise that the public are the primary users of audit services

4 d take more responsibility for the discovery of fraud

5 e all of these choices

Auditors of companies are licensed by the:

1 a Financial Reporting Council (FRC)

2 b Accounting Professional and Ethical Standards Board (APESB)

3 c Australian Securities and Investments Commission (ASIC)

4 d Auditing and Assurance Standards Board (AUASB)

The Certified Internal Auditor program is administered by the:

1 a Australian Securities and Investments Commission (ASIC)

2 b Institute of Internal Auditors (IIA)

3 c Australian Securities Exchange (ASX)

4 d Accounting Professional and Ethical Standards Board (APESB)

The body that sets the strategic direction for the Auditing and Assurance Standards Board is:

1 a Australian Prudential Regulation Authority (APRA)

2 b Financial Reporting Council (FRC)

3 c Accounting Professional and Ethical Standards Board (APESB)

4 d Australian Securities Exchange (ASX)

The organisation that issued the Internal Control, Integrated Framework which serves as the primary criterion for evaluating the quality of a

company’s internal control system is:

1 a Accounting Professional and Ethical Standards Board (APESB)

2 b Committee of Sponsoring Organizations (COSO)

3 c Financial Reporting Council (FRC)

4 d Australian Securities Exchange (ASX)

Auditing is a systematic process that includes all of the following except:

1 a communicating results to users

2 b procuring and evaluating evidence

3 c providing important managerial decisions for a client

4 d comparing evidence regarding assertions to certain established criteria

Which of the following is not a component of assurance services?

1 a information or a process on which the assurance services is provided

2 b report to a third party

3 c a user or a group of users who derive value from the service provided

4 d none of these choices

5 e all of these choices

Which type of auditor would typically perform an operational audit?

1 a external auditor

2 b internal auditor

3 c none of these choices

4 d all of these choices

What is the criteria used in an operational audit?

1 a generally accepted accounting principles (GAAP)

2 b effectiveness and efficiency

3 c rules and regulations

4 d company policies

Which of the following assurance services would be provided by the internal auditor?

1 a the quality of an organisation’s governance processes

2 b effectiveness and efficiency

3 c company rules and regulations

4 d all of these choices

The need for assurance services arises because the interests of the users of information may be different from that of the interests of those responsible for providing information

A bank using Milton Company’s financial statements to determine the credit worthiness of a potential loan to Milton is a good example of the need for unbiased reporting

A member of one of the professional accounting bodies automatically

qualifies as an assurance provider in all areas of business

The audit function is unique because it exists to perform services on a ‘client’

on behalf of shareholders, directors and other parties

Auditing primarily exists because users need unbiased information on which

to assess management performance and make economic decisions

1 True

2 False

The degree of confidence that users place on management’s financial

statements is higher than that placed on audited financial statements

because few users have direct knowledge of the company’s operations and management is the most knowledgeable about operations

1 True

2 False

Corporate governance is an oversight structure that ensures that

management operates in the best interests of management

Management is required to comment on the fairness of the company’s

financial presentation This reduces the auditor’s legal responsibility for the opinion rendered on the financial statements

Audited financial statements should be presented fairly according to the substance of generally accepted accounting principles (GAAP)

1 True

2 False

The Australian Auditing Standards Board (AUASB) is made up of members appointed by the Financial Reporting Council (FRC) and a Treasury appointed Chairman

1 True

2 False

The International Auditing and Assurance Standards Board (IAASB) is

interested in harmonising auditing standards around the world and is working closely with US standard setters on selected standards

1 True

2 False

The Australian Auditing Standards Board provides the criteria against which the auditor measures the fairness of financial statement presentation for both public and private companies

Registration for company auditors is the responsibility of the Australian

Securities and Investments Commission (ASIC)

2 False

Operational audits are designed to determine if the company’s financial statements are prepared in compliance with generally accepted accounting principles (GAAP)

The Australian Accounting Standards Board (AASB) has the authority to

establish generally accepted accounting principles for reporting entities

1 True

2 False

The Auditing and Assurance Standards Board (AUASB) has authority to

establish generally accepted accounting principles (GAAP) for all business enterprises

Auditors of public companies need not adhere to the requirements of

statutory or regulatory organisations

1 True

2 False

When the auditor has no reservations about management’s financial

statements, then the report issued is called a qualified report

The internal auditor is a primary provider of assurance services