Question 1

The audit objective that all balances include items owned by the client is related most closely to which one of the ASB balance assertions?
A)Existence
B)Rights and obligations
C)Completeness
D)Valuation

Accepted Answer

The audit objective that all balances include items owned by the client is most closely related to the "Rights and obligations" assertion. This assertion concerns whether the entity has the rights to the assets listed and the obligations related to the liabilities recorded, ensuring that the entity owns or has legal rights to the assets reported on its balance sheet.

Question 2

The audit objective that all balances include all items that should be recorded in that account is related most closely to which one of the ASB balance assertions?
A)Existence
B)Rights and obligations
C)Completeness
D)Valuation

Accepted Answer

The completeness assertion relates to ensuring that all balances include all items that should be recorded in that account. Therefore, option C is the correct answer. The existence assertion relates to whether assets and liabilities exist at a given date. The rights and obligations assertion relates to whether the entity has rights to its assets and liabilities. The valuation assertion relates to whether financial statement balances are accurate and valid.

Question 3

The audit objective that footnotes in the financial statements should be clear and expressed such that the information is easily conveyed to the readers of the financial statements is related most closely with which of the ASB presentation and disclosure assertions?
A)Occurrence
B)Rights and obligations
C)Comprehensibility
D)Understandability

Accepted Answer

The objective of footnotes being clear and easily conveyed to readers relates most closely to understandability, one of the presentation and disclosure assertions. This assertion ensures that information provided in the financial statements is readily understandable to users with reasonable knowledge of business and economic activities.

Question 4

Which of the following is not a recommendation usually made following the completion of an operational audit?
A)Economic and efficient use of resources
B)Effective achievement of business objectives
C)Attesting to the fairness of the financial statements
D)Compliance with company policies

Accepted Answer

Attesting to the fairness of financial statements is typically the realm of external auditors, not operational auditors. Operational audits focus on evaluating the effectiveness and efficiency of operations, while external auditors focus on attesting to the accuracy and fairness of financial statements. Therefore, recommending attestation to the fairness of financial statements is not a typical recommendation following an operational audit.

Question 5

The engineering department at Omni Company built a piece of equipment in the company's own shop for use in the company's operations.When looking at the ending balance for the fixed asset account the auditor examined all work orders,purchased materials,labor cost reports,and applied overhead that were capitalized as part of the equipment costs.Which of the following is the ASB balance assertion most closely related to the auditor's testing?
A)Existence
B)Completeness
C)Rights and obligations
D)Valuation

Accepted Answer

The auditor's testing of work orders, purchased materials, labor cost reports, and applied overhead for the equipment costs relates to the valuation assertion. The auditor is ensuring that the ending balance in the fixed asset account accurately reflects the value of the equipment that was built in-house by examining the costs incurred to construct it.

Question 6

Which of the following best describes the primary role and responsibility of independent external auditor?
A)Produce a company's annual financial statements and notes.
B)Express an opinion on the fairness of a company's annual financial statements and footnotes.
C)Provide business consulting advice to audit clients.
D)Obtain an understanding of the client's internal control structure and give management a report about control problems and deficiencies.

Accepted Answer

The primary role and responsibility of an independent external auditor is to express an opinion on the fairness of a company's annual financial statements and footnotes, based on the audit conducted according to auditing standards. The auditor must provide reasonable assurance that the financial statements are free from material misstatements, whether due to fraud or error. The auditor is independent of the company being audited and must maintain professional skepticism and objectivity throughout the audit process.

Question 7

In order to be considered as external auditors with respect to government agencies,GAO auditors must be
A)organizationally independent.
B)empowered as the accounting and auditing agency by the U.S.Congress.
C)funded by the federal government.
D)guided by standards similar to GAAS.

Accepted Answer

The answer of In order to be considered as external...

Question 8

Which of the following is not included in The American Accounting Association (AAA)definition of auditing?
A)Potential conflict of interest
B)Systematic process
C)Assertions about economic actions
D)Established criteria

Accepted Answer

The American Accounting Association (AAA) definition of auditing includes systematic process, assertions about economic actions, and established criteria. However, potential conflict of interest is not specifically mentioned in the definition.

Question 9

Assurance services involve all of the following,except
A)relevance as well as the reliability of information.
B)nonfinancial information as well as traditional financial statements.
C)providing absolute rather than reasonable assurance.
D)electronic databases as well as printed reports.

Accepted Answer

Assurance services provide reasonable, not absolute, assurance.

Question 10

The engineering department at Omni Company built a piece of equipment in the company's own shop for use in the company's operations.The auditor reviewed all work orders that were capitalized as part of the equipment costs.Which of the following is the ASB transaction assertion most closely related to the auditor's testing?
A)Occurrence
B)Completeness
C)Accuracy
D)Classification

Accepted Answer

The answer of The engineering department at Omni Company built...

Question 11

The audit objective that all transactions are recorded in the proper account is related most closely to which one of the ASB transaction assertions?
A)Occurrence
B)Completeness
C)Accuracy
D)Classification

Accepted Answer

The classification assertion pertains to ensuring that transactions are recorded in the appropriate account. The occurrence assertion relates to whether the transactions actually took place, completeness relates to whether all transactions were recorded, and accuracy relates to whether transactions were recorded at the correct amount.

Question 12

What is the term used to identify the risk that the client's financial statements may be materially false and misleading?
A)Business risk
B)Information risk
C)Client risk
D)Risk assessment

Accepted Answer

Information risk refers to the risk that the information contained in the client's financial statements may be materially false and misleading, which could lead to incorrect audit opinions and potential legal and financial repercussions. Business risk relates to the client's overall business environment and its ability to generate profits and cash flows, while client risk refers to the risk inherent in the nature of the client's business and industry. Risk assessment is a process used to identify, evaluate, and respond to risks in the audit process.

Question 13

The audit objective that all transactions are recorded in the proper period is related most closely to which of the Audit Standards Board (ASB)transaction assertions?
A)Occurrence
B)Completeness
C)Cutoff
D)Accuracy

Accepted Answer

The assertion of cutoff relates to ensuring that transactions are recorded in the proper period. This includes making sure that transactions that occurred before or after the period are not recorded within the period being audited. Therefore, the audit objective of ensuring that all transactions are recorded in the proper period is related most closely to the cutoff assertion.

Question 14

The auditor's judgment concerning the overall fairness of the presentation of financial position,results of operations,and cash flows is applied within the framework of
A)quality control.
B)generally accepted auditing standards,which include the concept of materiality.
C)the auditor's evaluation of the audited company's internal control.
D)the applicable financial reporting framework (i.e.,GAAP in the United States).

Accepted Answer

The auditor's judgment concerning the overall fairness of the presentation of financial position, results of operations, and cash flows is applied within the framework of the applicable financial reporting framework, which in the United States is generally accepted accounting principles (GAAP). While quality control, generally accepted auditing standards, and the evaluation of internal control are important considerations in the audit process, they do not directly relate to the auditor's judgment of the overall fairness of the financial statements.

Question 15

Which of the following best describes the main reason independent auditors report on management's financial statements?
A)Management fraud may exist and it is likely to be detected by independent auditors.
B)The management that prepares the statements and the persons who use the statements may have conflicting interests.
C)Misstated account balances may be corrected as the result of the independent audit work.
D)The management that prepares the statements may have a poorly designed system of internal control.

Accepted Answer

Independent auditors provide an objective assessment of financial statements to ensure their accuracy and reliability, addressing potential conflicts of interest between management (who prepare the statements) and the users of the statements (such as investors, creditors, and regulators). This helps to maintain trust and transparency in financial reporting.

Question 16

Because of the risk of material misstatement,an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of
A)objective judgment.
B)independent integrity.
C)professional skepticism.
D)impartial conservatism.

Accepted Answer

Professional skepticism is the most appropriate attitude to adopt when performing an audit as it involves a questioning mindset, being alert to potential misstatements or fraud, and having a critical assessment of evidence. Objective judgment and independent integrity are also important attitudes for an auditor, but professional skepticism is specifically mentioned in the context of mitigating the risk of material misstatement. Impartial conservatism is not an appropriate attitude for an auditor as it suggests a bias towards a more negative view of the financial statements.

Question 17

The audit objective that all the transactions and accounts presented in the financial statements represent real assets,liabilities,revenues,and expenses is related most closely to which of the PCAOB assertions?
A)Existence or occurrence
B)Rights and obligations
C)Completeness
D)Presentation and disclosure

Accepted Answer

The objective of ensuring that all transactions and accounts presented in the financial statements represent real assets, liabilities, revenues, and expenses relates most closely to the PCAOB assertion of existence or occurrence, which ensures that the recorded transactions are real, and the recorded assets, liabilities, revenues, and expenses actually exist or occurred during the period under review.

Question 18

Which of the following best describes assurance services?
A)Independent professional services that report on the client's financial statements
B)Independent professional services that improve the quality of information for decision makers
C)Independent professional services that report on specific written management assertions
D)Independent professional services that improve the operations of the client

Accepted Answer

Assurance services are independent professional services that aim to improve the quality of information for decision-making. This can include services such as audits, reviews, and compilations of financial statements, as well as assessments of internal controls and other non-financial information. The goal of assurance services is to provide confidence to users of the information that it is reliable, relevant, and useful.

Question 19

Which of the following is not a PCAOB assertion about inventory related to presentation and disclosure?
A)Inventory is properly classified as a current asset on the balance sheet.
B)Inventory is properly stated at its cost on the balance sheet.
C)Major inventory categories and their valuation bases are adequately disclosed in notes.
D)All of these are PCAOB presentation and disclosure assertions about inventory

Accepted Answer

Inventory being properly stated at its cost on the balance sheet is related to valuation and allocation assertion, not directly to presentation and disclosure. Presentation and disclosure assertions focus on how information is presented in financial statements and accompanying notes, including proper classification and adequate disclosure of accounting policies and amounts.

Question 20

Which of the following is the essential purpose of the audit function?
A)Detection of fraud
B)Examination of individual transactions to certify as to their validity
C)Determination of whether the client's financial statement assertions are fairly state
D)Assurance of the consistent application of correct accounting procedures

Accepted Answer

The essential purpose of the audit function is to determine whether the client's financial statement assertions are fairly stated. This includes examining evidence and conducting procedures to gain reasonable assurance that financial statements are free from material misstatement, whether due to fraud or error. While detection of fraud may be a component of the audit function, it is not the essential purpose. Examination of individual transactions to certify their validity and assurance of consistent application of correct accounting procedures are also not the essential purpose of the audit function.

Quiz 1: Auditing and Assurance Services

The audit objective that all balances include items owned by the client is related most closely to which one of the ASB balance assertions?

The audit objective that all balances include all items that should be recorded in that account is related most closely to which one of the ASB balance assertions?

The audit objective that footnotes in the financial statements should be clear and expressed such that the information is easily conveyed to the readers of the financial statements is related most closely with which of the ASB presentation and disclosure assertions?

Which of the following is not a recommendation usually made following the completion of an operational audit?

Which of the following best describes the primary role and responsibility of independent external auditor?

In order to be considered as external auditors with respect to government agencies,GAO auditors must be

Which of the following is not included in The American Accounting Association (AAA) definition of auditing?

Assurance services involve all of the following,except

The audit objective that all transactions are recorded in the proper account is related most closely to which one of the ASB transaction assertions?

What is the term used to identify the risk that the client's financial statements may be materially false and misleading?

The audit objective that all transactions are recorded in the proper period is related most closely to which of the Audit Standards Board (ASB) transaction assertions?

The auditor's judgment concerning the overall fairness of the presentation of financial position,results of operations,and cash flows is applied within the framework of

Which of the following best describes the main reason independent auditors report on management's financial statements?

Because of the risk of material misstatement,an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

The audit objective that all the transactions and accounts presented in the financial statements represent real assets,liabilities,revenues,and expenses is related most closely to which of the PCAOB assertions?

Which of the following best describes assurance services?

Which of the following is not a PCAOB assertion about inventory related to presentation and disclosure?

Which of the following is the essential purpose of the audit function?