Chapter 1 - Part 1

1.

1 point

An “integrated audit” expresses an opinion on which of the following?

The company’s internal controls.

The company’s financial statements.

The company’s compliance with its rules and policies.

Both A and B.

2.

1 point

What is the first phase in an audit?

Client acceptance or client continuance.

Understanding the client.

Understanding internal controls.

Testing of account balances.

3.

1 point

What is the term used to describe a systematic process of objectively obtaining evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users?

Internal audit.

Financial statement audit.

External audit.

Program audit.

4.

1 point

What can users of the audit report reasonably expect from the audited financial statements?

The financial statements are complete and contain many of the important financial disclosures.

The financial statements are presented fairly according to the substance of GAAP.

The financial statements are free from all errors.

All of the above.

None of the above.

5.

1 point

Which of the following procedures do third-party users of the audit report not expect the auditor to perform?

Evaluate measurements and disclosures made by management.

Provide a biased evaluation of the financial statements.

Determine whether financial statements are presented in accordance with GAAP.

Gather sufficient appropriate evidence to support their opinion.

6.

1 point

Why is auditing important in a free market society?

The public requires auditors to function as divisions of regulatory bodies.

Auditors detect all errors and fraud perpetrated by company employees.

It provides reliable information upon which to judge economic performance.

The auditor is an amiable insurance policy for investors.

All of the above are true.

7.

1 point

What is the management of a company responsible for?

Hiring the auditor.

Preparing the financial statements.

The audit workpapers.

Ensuring auditor independence.

8.

1 point

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

An outside source of expertise on accounting matters.

Individuals who perform tests and draw conclusions on assertions.

A participant in management decision making.

A provider of a written communication.

9.

1 point

Which one of the following is a factor that creates a need for an independent auditor's assessment of the financial statement presentation?

Complexity of transactions affecting the financial statements.

Lack of criteria on which to base information.

Remoteness of the user from the organization.

Both A and C.

Both A and B.

10.

1 point

Which one of the following is not a primary driver of audit quality?

Skills and personal qualities of audit staff.

Reasonable audit fees.

Effective audit processes.

Audit firm culture.

11.

1 point

What must audit firms do to perform financial statement audits for public companies?

Register with the American Institute of Certified Public Accountants.

Register with the Institute of Internal Auditors.

Register with the U.S. General Accounting Office.

Register with the Public Company Accounting Oversight Board.

12.

1 point

Which one of the following organizations is recognized for providing guidance on a framework for internal control ?

AICPA.

PCAOB.

IAASB.

COSO.

13.

1 point

What document communicates the conclusions of the financial statement audit?

The financial statement.

Written management assertion.

The audit report.

None of the above.

14.

1 point

An Integrated Audit Report provides opinion(s) on which of the following?

The financial statements.

Internal controls.

Both financial statements and internal controls.

Neither financial statements or internal controls.

15.

1 point

Which phase of the audit opinion formulation process is most commonly thought of as auditing by the general public?

Performing risk assessment.

Obtaining evidence about internal controls.

Obtaining substantive evidence about accounts.

Making reporting decisions.

16.

1 point

What must an auditor do in an audit?

Consider how the economic activity is portrayed in the financial statements.

Force management to make operational decisions that will improve the company’s financial performance.

Disregard independence in order to find the underlying truth of the evidence.

Establish new criteria by which financial statements may be compared.

17.

1 point

Who are the users of the financial statements?

Management.

Auditors.

Taxing Authorities.

Both A and C.

18.

1 point

Which the following is not a reason for a public company to receive an audit?

Potential bias in providing information.

Closeness between a user and the organization.

Complexity of the processing systems.

Remoteness between a user and the organization.

19.

1 point

According to the FRC which of the following attributes contributes to the reliability and usefulness of audit reporting?

The audit methodology is well structured.

Quality technical support is available when auditors require guidance.

Auditors appropriately conclude as to the truth and fairness of the financial statements.

The audit work is effectively reviewed.

20.

1 point

How is the audit report referred to when the auditor has no reservations about management’s financial statements?

An unqualified report.

A qualified report.

An adverse report.

An integrated report.

21.

1 point

To conduct an audit, what must an auditor do?

Comply with relevant ethical standards.

Exercise perfect judgment.

Obtain sufficient appropriate evidence to provide absolute assurance.

All of the above.

22.

1 point

In the United States, what is the most common criteria against which the auditor measures the fairness of financial statement presentation?

Auditing standards.

Generally accepted accounting principles.

Generally accepted accounting standards.

Governmental accounting principles.

23.

1 point

Which of the following is a driver of audit quality?

Audit firm culture.

Engagement team skills and attributes.

Factors outside control of auditors.

Investor requirements.

A, B, and C only.