Question 1

The first stage in an audit is performing a risk assessment.

Accepted Answer

The answer of The first stage in an audit is...

Question 2

The purpose of the audit program is to list the audit procedures to be followed in gathering audit evidence and to help those in charge of the audit to monitor the progress and supervise the work.

Accepted Answer

The purpose of an audit program is to outline audit procedures and provide a framework for monitoring and supervising the audit process. Therefore, the statement is true.

Question 3

The Public Company Accounting Oversight Board (PCAOB)does not set specific standards for audits of public companies.

Accepted Answer

The Public Company Accounting Oversight Board (PCAOB) sets specific standards for audits of public companies.

Question 4

The standards of fieldwork include the responsibility of the auditor to exercise due professional care.

Accepted Answer

The answer of The standards of fieldwork include the responsibility...

Question 5

Audit procedures can be classified as risk assessment procedures,test of controls or substantive tests.

Accepted Answer

This statement is true. Audit procedures can be classified into these three categories: risk assessment procedures, test of controls, and substantive tests.

Question 6

Recalculation involves independently performing procedures or controls that were originally performed by the client,such as reperforming a bank reconciliation.

Accepted Answer

The answer of Recalculation involves independently performing procedures or controls...

Question 7

Assertions about existence address whether assets and liabilities exist and assertions about occurrence address whether recorded transactions,such as sales transactions,have occurred

Accepted Answer

Assertions about existence address the existence of assets and liabilities while assertions about occurrence address the occurrence of recorded transactions.

Question 8

A component of the reporting standards is the requirement that an opinion always be rendered on the subject matter.

Accepted Answer

Not all reporting standards require an opinion to be rendered; some may only require a presentation of findings or facts without an opinion.

Question 9

Inherent risk refers to the susceptibility of an assertion about a class of transaction,account balance,or disclosure to a misstatement that could be immaterial,either individually or when aggregated with other misstatements,before consideration of any related controls.

Accepted Answer

Inherent risk refers to the susceptibility of an assertion about a class of transaction, account balance, or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls.

Question 10

Scanning is a type of analytical procedure which involves reviewing accounting data to identify significant or unusual items,such as examining a credit balance in an account that typically has a debit balance.

Accepted Answer

Scanning is a valid analytical procedure that involves reviewing accounting data to identify significant or unusual items, such as examining a credit balance in an account that typically has a debit balance.

Question 11

Evidence is required to be sufficient and appropriate in order to provide a reasonable basis for audit conclusions.

Accepted Answer

This statement is true. According to auditing standards, auditors must obtain sufficient and appropriate evidence to support their audit conclusions, which should be based on a reasonable basis of audit evidence.

Question 12

Audit documentation is frequently called working papers.

Accepted Answer

Audit documentation is commonly known as working papers as it includes all the documents and records used by auditors during the audit engagement.

Question 13

Planning is not required in an audit as long as an audit program has been developed.

Accepted Answer

Planning is an essential part of an audit process and cannot be bypassed even if an audit program exists. Audit planning involves evaluating the client's business, identifying areas of potential risks and developing an audit strategy to address those risks. It helps ensure that the audit is conducted efficiently, effectively, and in accordance with professional standards.

Question 14

Developing an understanding of the client's business and industry is essential to proficiency as discussed in the PCAOB's general standards.

Accepted Answer

Understanding the client's business and industry is necessary for auditors to properly plan and execute the audit, as well as identify potential risks and issues specific to the client's industry. This is discussed in PCAOB's general standard on due professional care.

Question 15

The Public Company Accounting Oversight Board obtains its authority to set audit standards for public companies from the U.S.Congress.

Accepted Answer

The PCAOB was established by the Sarbanes-Oxley Act of 2002, which was passed by Congress, and is empowered by law to set audit standards for public companies.

Question 16

The PCAOB's fieldwork standards include planning and supervision,understanding the entity and its internal control structure,and obtaining sufficient appropriate audit evidence.

Accepted Answer

The statement accurately describes the fieldwork standards of the PCAOB. Planning and supervision, understanding the entity and its internal control structure, and obtaining sufficient appropriate audit evidence are all essential components of conducting a high-quality audit.

Question 17

An auditor must obtain an adequate amount of evidence and the evidence must be of the appropriate quality.

Accepted Answer

This statement is true. Auditors must obtain sufficient and appropriate evidence to support their audit opinion. They must gather enough evidence to provide a reasonable basis for their conclusions, and the evidence must also be of good quality, meaning it is reliable, relevant, and sufficient.

Question 18

Control risk refers to the risk that a misstatement could occur in an assertion about a class of transaction,account balance,or disclosure and that could be material,either individually or when aggregated with other misstatements,will not be prevented,or detected and corrected,on a timely basis by the entity's internal control.

Accepted Answer

This statement accurately defines the concept of control risk.

Question 19

Test of controls are a type of substantive procedure.

Accepted Answer

Test of controls are not a type of substantive procedure, but rather a type of test of internal controls.

Question 20

Physically examining a client's assets is an audit procedure.

Accepted Answer

Physically examining a client's assets is an important audit procedure that involves inspecting, observing, and counting the physical assets of the client, such as inventory, equipment, and property. This helps the auditor to confirm the existence, condition, and ownership of the assets, as well as identify any potential discrepancies or misstatements in the financial statements.

Quiz 5: Professional Auditing Standards and the Audit Opinion Formulation Process