Exam 6: Audit Responsibilities and Objectives

It is possible that an audit performed in accordance with generally accepted auditing standards may fail to detect a material misstatement in the financial statements.

The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with the

When dealing with laws and regulations that do not have a direct effect on the financial statements, the auditor

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

Although auditors need to consider the interrelationships between cycles, they typically treat cycles independently to the extent practical to manage complex audits effectively.

The Sarbanes-Oxley Act provides for criminal penalties.

Which of the following would most likely be deemed a direct effect illegal act?

One of the paragraphs of the auditor's report includes a paragraph addressing the auditor's responsibility for not detecting material misstatements in the financial statements, as this is management's responsibility, not the auditors.

Discuss the differences between errors, frauds, and illegal acts. Give an example of each.

The preparation of the financial statements by management contain complex estimates; therefore, the auditor has to rely upon evidence which is convincing, not just persuasive.

Auditors should be alert for potential judgment tendencies, traps, and biases that may impact their decision-making process. Identify and define four of these judgment tendencies. Then, for each judgment tendency, suggest a way to avoid or mitigate the tendency.

If the auditor were responsible for making certain that all of management's assertions in the financial statements were absolutely correct,

Which of the following is not a step in the professional judgment process?

In order to mitigate confirmation, the auditor should make the opposing case and consider alternative explanations, potentially disconfirming or conflicting information.

Auditing standards make ________ distinction(s) between the auditor's responsibilities for searching for errors and fraud.

The auditor's first course of action when an illegal act is uncovered should be to immediately notify the appropriate authorities, including but not limited to, law enforcement and the Securities and Exchange Commission.

Two overriding considerations affect the many ways an auditor can accumulate evidence: 1. Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 2) Cost of accumulating evidence should be minimized. In evaluating these considerations

The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to

An important balance-related audit objective is realizable value. Describe the purpose of this audit objective, what it is concerned with, and give an example.

When an auditor knows that an illegal act has occurred, he or she must