Auditing Chapter 1

33 Questions  I  By Kosdaisy
Please take the quiz to rate it.

Finance Quizzes & Trivia
Quiz based on Auditing and Assurances Services by Arens 14e

  
Changes are done, please start the quiz.


Questions and Answers

Removing question excerpt is a premium feature

Upgrade and get a lot more done!
  • 1. 
    Compliance audits evaluate the efficiency and effectiveness of any part of an organization's operating procedures and methods.
    • A. 

      True

    • B. 

      False


  • 2. 
    A CPA firm that provides accounting, tax and consulting services to a client is said to be providing assurance services to the client.
    • A. 

      True

    • B. 

      False


  • 3. 
    When conducting a financial statement audit, an auditor need not verify that the financial statements are in accordance with specified criteria.
    • A. 

      True

    • B. 

      False


  • 4. 
    The distinguishing factor between an external and internal auditor is independence.
    • A. 

      True

    • B. 

      False


  • 5. 
    In addition to having an understanding of accounting, an auditor should possess knowledge in the accumulation and interpretation of audit evidence.
    • A. 

      True

    • B. 

      False


  • 6. 
    An auditor's independence is a critical component in the audit of a company's financial statements.
    • A. 

      True

    • B. 

      False


  • 7. 
    Operational audits generally have been conducted by internal auditors and governmental audit agencies, but may be performed by certified public accountants. A primary purpose of an operational audit is to provide
    • A. 

      A means of assurance that internal controls are functioning as planned.

    • B. 

      Aid to the independent auditor, who is conducting the audit of the financial statements.

    • C. 

      The results of internal examinations of financial and accounting matters to a company's top-level management.

    • D. 

      A measure of management performance in meeting organizational goals.


  • 8. 
    A attestation engagement is one in which a CPA is engaged to
    • A. 

      Issue a written communication expressing a conclusion about the reliability of a written assertion that is the responsibility of another party.

    • B. 

      Provide tax advice or prepare a tax return based on financial information the CPA has not audited or reviewed.

    • C. 

      Testify as an expert witness in accounting, auditing, or tax matters, given certain stipulated facts.

    • D. 

      Assemble prospective financial statements based on the assumptions of the entity's management without expressing any assurance.


  • 9. 
    Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:
    • A. 

      Finance

    • B. 

      Auditing

    • C. 

      Accounting

    • D. 

      Economics


  • 10. 
    In the audit of historical financial statements, which of the following accounting bases is the most common?
    • A. 

      Regulatory accounting principles.

    • B. 

      Cash basis of accounting.

    • C. 

      Generally accepted accounting principles.

    • D. 

      Liquidation basis of accounting.


  • 11. 
    Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n):
    • A. 

      Accounting and bookkeeping service.

    • B. 

      Attestation service.

    • C. 

      Assurance service.

    • D. 

      Tax service.


  • 12. 
    Three common types of attestation services are:
    • A. 

      Audits, reviews, and “other” attestation services.

    • B. 

      Audits, verifications, and “other” attestation services.

    • C. 

      Reviews, verifications, and “other” attestation services.

    • D. 

      Audits, reviews, and verifications.


  • 13. 
    The organization that is responsible for providing oversight for auditors of public companies is called the ________.
    • A. 

      Auditing Standards Board.

    • B. 

      American Institute of Certified Public Accountants.

    • C. 

      Public Oversight Board.

    • D. 

      Public Company Accounting Oversight Board.


  • 14. 
    Providing quantitative information that management and others can use to make decisions is the function of:.
    • A. 

      Management information systems

    • B. 

      Auditing

    • C. 

      Finance

    • D. 

      Accounting


  • 15. 
    An operational audit has as one of its objectives to:
    • A. 

      Determine whether the financial statements fairly present the entity’s operations.

    • B. 

      Evaluate the feasibility of attaining the entity’s operational objectives.

    • C. 

      Make recommendations for improving performance.

    • D. 

      Report on the entity’s relative success in attaining profit maximization.


  • 16. 
    An audit of historical financial statements is most often performed to determine whether the:
    • A. 

      Organization is operating efficiently and effectively.

    • B. 

      Entity is following specific procedures or rules set down by some higher authority.

    • C. 

      Management team is fulfilling its fiduciary responsibilities to shareholders.

    • D. 

      None of these choices.


  • 17. 
    An examination of part of an organization’s procedures and methods for the purpose of evaluating efficiency and effectiveness is what type of audit?
    • A. 

      Operational audit.

    • B. 

      Compliance audit.

    • C. 

      Financial statement audit.

    • D. 

      Production audit.


  • 18. 
    An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n):
    • A. 

      Audit of financial statements.

    • B. 

      Compliance audit.

    • C. 

      Operational audit.

    • D. 

      Production audit.


  • 19. 
    Which of the following services provides the lowest level of assurance on a financial statement?
    • A. 

      A review

    • B. 

      An audit

    • C. 

      Neither service provides assurance on financial statements.

    • D. 

      Each service provides the same level of assurance on financial statements.


  • 20. 
    In “auditing” financial accounting data, the primary concern is with:
    • A. 

      Determining whether recorded information properly reflects the economic events that occurred during the accounting period.

    • B. 

      Determining if fraud has occurred.

    • C. 

      Determining if taxable income has been calculated correctly.

    • D. 

      Analyzing the financial information to be sure that it complies with government requirements.


  • 21. 
    Which of the following is not a Trust Services principle as defined by the AICPA or CICA?
    • A. 

      Online privacy.

    • B. 

      Availability.

    • C. 

      Processing integrity.

    • D. 

      Operational integrity.


  • 22. 
    Which one of the following is more difficult to evaluate objectively?
    • A. 

      Presentation of financial statements in accordance with generally accepted accounting principles.

    • B. 

      Compliance with government regulations.

    • C. 

      Efficiency and effectiveness of operations.

    • D. 

      All three of the above are equally difficult.


  • 23. 
    The Sarbanes-Oxley Act prohibits a CPA firm that audits a public company from providing which of the following types of services to that company?
    • A. 

      Reviews of quarterly financial statements.

    • B. 

      Preparation of corporate tax returns.

    • C. 

      Most consulting services.

    • D. 

      Tax services.


  • 24. 
    Which of the following audits can be regarded as generally being a compliance audit?
    • A. 

      IRS agents’ examinations of taxpayer returns.

    • B. 

      GAO auditor’s evaluation of the computer operations of governmental units.

    • C. 

      An internal auditor’s review of a company’s payroll authorization procedures.

    • D. 

      A CPA firm’s audit of the local school district.


  • 25. 
    The trait that distinguishes auditors from accountants is the:
    • A. 

      Auditor’s ability to interpret accounting principles generally accepted in the United States.

    • B. 

      Auditor’s education beyond the Bachelor’s degree.

    • C. 

      Auditor’s ability to interpret FASB Statements.

    • D. 

      Auditor’s accumulation and interpretation of evidence related to a company’s financial statements.


  • 26. 
    Attestation services on information technology include WebTrust services and SysTrust services. Which of the following statements most accurately describes SysTrust services?
    • A. 

      SysTrust services provide assurance on business processes, transaction integrity and information processes.

    • B. 

      SysTrust services provide assurance on system reliability in critical areas such as security and data integrity.

    • C. 

      SysTrust services provide assurance on internal control over financial reporting.

    • D. 

      SysTrust services provide assurance as to whether accounting personnel are following procedures prescribed by the company controller.


  • 27. 
    The criteria by which an auditor evaluates the information under audit may vary with the information being audited.
    • A. 

      True

    • B. 

      False


  • 28. 
    The criteria used by an external auditor to evaluate published financial statements are known as generally accepted auditing standards.
    • A. 

      True

    • B. 

      False


  • 29. 
    Only companies that file annual statements with the Securities and Exchange Commission are required to have an annual external audit.
    • A. 

      True

    • B. 

      False


  • 30. 
    The financial statements most commonly audited by external auditors are the balance sheet, the income statement, and the statement of changes in retained earnings.
    • A. 

      True

    • B. 

      False


  • 31. 
    The primary purpose of a compliance audit is to determine whether the financial statements are prepared in compliance with generally accepted accounting principles.
    • A. 

      True

    • B. 

      False


  • 32. 
    Results of compliance audits are typically reported to someone within the organizational unit being audited rather than to a broad spectrum of outside users.
    • A. 

      True

    • B. 

      False


  • 33. 
    CPA firms are never allowed to provide bookkeeping services for audit clients.
    • A. 

      True

    • B. 

      False


Back to top

Removing ad is a premium feature

Upgrade and get a lot more done!
Take Another Quiz
We have sent an email with your new password.