Question 1

Misappropriation of assets:

Accepted Answer

A) is generally committed by company management. 
B) harms the users of the financial statements by providing them incorrect financial data for their decision making. 
C) causes harm to stockholders because the assets are no longer available to their rightful owners. 
D) causes the financial statements to be misstated since the misappropriation usually involves material amounts. 
A) is generally committed by company management. 
B) harms the users of the financial statements by providing them incorrect financial data for their decision making. 
C) causes harm to stockholders because the assets are no longer available to their rightful owners. 
D) causes the financial statements to be misstated since the misappropriation usually involves material amounts.

Question 2

Below are five audit procedures, all of which are tests of balances associated with the audit of accounts receivable.Also below are the eight general balance-related audit objectives and the four management assertions.For each audit procedure, indicate (1)its audit objective, and (2)the management assertion being tested.
   
1.Obtain an aged listing of accounts receivable.For a sample of individual customers on the listing, agree the customer's name, amount, and other information with the corresponding information in the accounts receivable master file.
(1)________.
(2)________.
2.Examine details of sales for five days before and five days after year-end to determine whether sales have been recorded in the proper period.
(1)________.
(2)________.
3.Assess the reasonableness of the balance in the allowance for doubtful accounts.
(1)________.
(2)________.
4.Inquire as to whether any accounts receivable have been factored or sold during the period.
(1)________.
(2)________.
5.Inquire as to whether there are any receivables from related parties.
(1)________.
(2)________.

Accepted Answer

1.(1)F (2)X
2.(1)E (

Question 3

The transaction-related audit objective that deals with whether recorded transactions have actually occurred is the completeness objective.

Accepted Answer

A) True 
 B)False

Question 4

The auditor's audit objectives follow and are closely related to management assertions.

Accepted Answer

A) True 
 B)False

Question 5

The detail tie-in is part of the ________ assertion for account balances.

Accepted Answer

A) classification 
B) valuation and allocation 
C) rights and obligations 
D) completeness 
A) classification 
B) valuation and allocation 
C) rights and obligations 
D) completeness

Question 6

The transaction-related audit objective of timing is related to the assertion of cutoff.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following assertions is described as "this assertion addresses whether all transactions that should be included in the financial statements are in fact included"?

Accepted Answer

A) Occurrence 
B) Completeness 
C) Rights and obligations 
D) Existence 
A) Occurrence 
B) Completeness 
C) Rights and obligations 
D) Existence

Question 8

Management assertions are:

Accepted Answer

A) directly related to the financial reporting framework used by the company, usually U.S.GAAP or IFRS. 
B) stated in the footnotes to the financial statements. 
C) explicitly expressed representations about the financial statements. 
D) provided to the auditor in the assertions letter, but are not disclosed on the financial statements. 
A) directly related to the financial reporting framework used by the company, usually U.S.GAAP or IFRS. 
B) stated in the footnotes to the financial statements. 
C) explicitly expressed representations about the financial statements. 
D) provided to the auditor in the assertions letter, but are not disclosed on the financial statements.

Question 9

Why does the auditor divide the financial statements into smaller segments?

Accepted Answer

A) Using the cycle approach makes the audit more manageable. 
B) Most accounts have few relationships with others and so it is more efficient to break the financial statements into smaller pieces. 
C) The cycle approach is used because auditing standards require it. 
D) All of the above are correct. 
A) Using the cycle approach makes the audit more manageable. 
B) Most accounts have few relationships with others and so it is more efficient to break the financial statements into smaller pieces. 
C) The cycle approach is used because auditing standards require it. 
D) All of the above are correct.

Question 10

The detail tie-in objective is not concerned that the details in the account balance:

Accepted Answer

A) agree with related subsidiary ledger amounts. 
B) are properly disclosed in accordance with GAAP. 
C) foot to the total in the account balance. 
D) agree with the total in the general ledger. 
A) agree with related subsidiary ledger amounts. 
B) are properly disclosed in accordance with GAAP. 
C) foot to the total in the account balance. 
D) agree with the total in the general ledger.

Question 11

An auditor assesses the risk of material misstatement to determine the impact on the audit plan and to determine the nature, extent, and timing of the audit procedures.

Accepted Answer

A) True 
 B)False

Question 12

When the auditor identifies or suspects noncompliance with laws and regulations, the auditor:

Accepted Answer

A) should discuss the matter with those whom they believe committed the illegal act. 
B) begin communication with the FASB in accordance with PCAOB regulations. 
C) may disclaim an opinion on the basis of scope limitations if he is precluded by management from obtaining sufficient appropriate evidence. 
D) should withdraw from the engagement. 
A) should discuss the matter with those whom they believe committed the illegal act. 
B) begin communication with the FASB in accordance with PCAOB regulations. 
C) may disclaim an opinion on the basis of scope limitations if he is precluded by management from obtaining sufficient appropriate evidence. 
D) should withdraw from the engagement.

Question 13

The cutoff objective, "transactions near the balance sheet date are recorded in the proper period," is a balance-related audit objective.

Accepted Answer

A) True 
 B)False

Question 14

If management insists on financial statement disclosures that the auditor finds unacceptable, the auditor can withdraw from the engagement or:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 15

The auditor's evaluation of the likelihood of material employee fraud is normally done initially as a part of:

Accepted Answer

A) tests of controls. 
B) tests of transactions. 
C) understanding the entity's internal control. 
D) the assessment of whether to accept the audit engagement. 
A) tests of controls. 
B) tests of transactions. 
C) understanding the entity's internal control. 
D) the assessment of whether to accept the audit engagement.

Question 16

The objective of an audit of the financial statements is an expression of an opinion on:

Accepted Answer

A) the fairness of the financial statements in all material respects. 
B) the accuracy of the financial statements. 
C) the accuracy of the annual report. 
D) the accuracy of the balance sheet and income statement. 
A) the fairness of the financial statements in all material respects. 
B) the accuracy of the financial statements. 
C) the accuracy of the annual report. 
D) the accuracy of the balance sheet and income statement.

Question 17

Asking the right questions and probing further until the auditor is satisfied with the responses can help the auditor to detect a material misstatement in the financial statements.

Accepted Answer

A) True 
 B)False

Question 18

Discuss three reasons why auditors are responsible for "reasonable" but not "absolute" assurance.

Accepted Answer

•Most audit evidence results from testin

Question 19

An auditor discovers that the company's bookkeeper unintentionally made an mistake in calculating the amount of the quarterly sales.This is an example of:

Accepted Answer

A) employee fraud. 
B) an error. 
C) misappropriation of assets. 
D) a defalcation. 
A) employee fraud. 
B) an error. 
C) misappropriation of assets. 
D) a defalcation.

Question 20

General transaction-related audit objectives vary from audit to audit, depending on the nature and characteristics of the client's business and industry.

Accepted Answer

A) True 
 B)False

Exam 6: Audit Responsibilities and Objectives

Misappropriation of assets:

The transaction-related audit objective that deals with whether recorded transactions have actually occurred is the completeness objective.

The auditor's audit objectives follow and are closely related to management assertions.

The detail tie-in is part of the ________ assertion for account balances.

The transaction-related audit objective of timing is related to the assertion of cutoff.

Which of the following assertions is described as "this assertion addresses whether all transactions that should be included in the financial statements are in fact included"?

Management assertions are:

Why does the auditor divide the financial statements into smaller segments?

The detail tie-in objective is not concerned that the details in the account balance:

An auditor assesses the risk of material misstatement to determine the impact on the audit plan and to determine the nature, extent, and timing of the audit procedures.

When the auditor identifies or suspects noncompliance with laws and regulations, the auditor:

The cutoff objective, "transactions near the balance sheet date are recorded in the proper period," is a balance-related audit objective.

If management insists on financial statement disclosures that the auditor finds unacceptable, the auditor can withdraw from the engagement or:

The auditor's evaluation of the likelihood of material employee fraud is normally done initially as a part of:

The objective of an audit of the financial statements is an expression of an opinion on:

Asking the right questions and probing further until the auditor is satisfied with the responses can help the auditor to detect a material misstatement in the financial statements.

Discuss three reasons why auditors are responsible for "reasonable" but not "absolute" assurance.

An auditor discovers that the company's bookkeeper unintentionally made an mistake in calculating the amount of the quarterly sales.This is an example of:

General transaction-related audit objectives vary from audit to audit, depending on the nature and characteristics of the client's business and industry.

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Internal Control, Control Risk, and Section 404 Audits

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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