Question 1

A clear understanding of the steps in the accounting cycle is likely to be useful in:
A)Financial audits.
B)Investigative audits.
C)Both financial audits and investigative audits.
D)Neither financial audits nor investigative audits.

Accepted Answer

The accounting cycle involves a series of steps that are used to record financial transactions and produce financial statements. These financial statements are the primary focus of financial audits, which are designed to evaluate the accuracy and completeness of the financial information presented by an organization. Investigative audits may also involve a review of financial transactions, making an understanding of the accounting cycle useful in identifying potential areas of concern. Therefore, a clear understanding of the steps in the accounting cycle is likely to be useful in both financial audits and investigative audits.

Question 2

In ___, auditors examine a company's rules and procedures for conducting business.
A)A financial audit
B)An operational audit
C)A compliance audit
D)A systems audit

Accepted Answer

B

Question 3

A ___ determines whether the various forms of information technology in an accounting information system are producing expected results.
A)Financial audit
B)Compliance audit
C)Systems audit
D)Forensic audit

Accepted Answer

A systems audit is designed to evaluate the effectiveness and efficiency of information technology systems in achieving their intended objectives, including whether they are producing the expected results. A financial audit focuses on the accuracy of financial statements, a compliance audit assesses whether a company is complying with laws and regulations, and a forensic audit is conducted to investigate possible fraud or other illegal activities.

Question 4

An investigative auditor wanted to assess employees' motivation for committing fraud.Which of the following tools will be most beneficial to the auditor in that task?
A)Expectancy theory
B)Capability maturity model
C)Document analysis
D)Management audit

Accepted Answer

Expectancy theory is a motivational theory that explains how individuals make decisions about behavior based on expected outcomes. In the context of fraud, the theory can help identify the factors that motivate employees to engage in fraudulent activities. It examines three key elements: expectancy (the belief that effort will result in performance), instrumentality (the belief that performance will lead to certain outcomes), and valence (the value that an individual places on those outcomes). Understanding expectancy theory can help an auditor assess employees' motivations for committing fraud. The other options, such as the capability maturity model, document analysis, and management audit, may not provide the same level of insights into employees' motivations for fraud.

Question 5

The generic model of business process management discussed in the text is likely to be most useful in which type of audit?
A)Operational
B)Financial
C)Management
D)Investigative

Accepted Answer

The generic model of business process management focuses on the systematic evaluation and improvement of operational processes. Therefore, it would be most useful in an operational audit which examines the effectiveness and efficiency of processes in achieving organizational goals.

Question 6

Generally accepted auditing standards are divided into three groups.All of the following are standards in the "general" group except:
A)Training
B)Independence
C)Professional care
D)Internal control

Accepted Answer

The three groups of generally accepted auditing standards (GAAS) are general standards, standards of fieldwork, and standards of reporting. The general standards include three requirements: independence, professional care, and the adequate training and proficiency of auditors. Internal control is a standard under the group of standards of fieldwork, which also includes obtaining sufficient evidence and maintaining proper documentation.

Question 7

The terms "adverse" and "disclaimer" are most closely associated with which generally accepted auditing standard?
A)Reporting
B)Opinion
C)Disclosure
D)Some other standard

Accepted Answer

The terms "adverse" and "disclaimer" are types of audit opinions, which are part of the Opinion standard in auditing.

Question 8

Which of the following organizations is most likely to be subject to a compliance audit?
A)Yellow Pages Company
B)City of Los Angeles
C)Microsoft
D)All of these are likely to be subject to a compliance audit.

Accepted Answer

Government entities like the City of Los Angeles are often subject to compliance audits to ensure they adhere to laws, regulations, and policies.

Question 9

Which of the following violates the generally accepted auditing standard indicated?
A)Opinion: Auditors issued an adverse report on financial statements.
B)Consistency: An auditor explained inconsistencies between a client's application of GAAP over the last two years.
C)Evidence: An auditor used last year's report as the only evidence for the current year's report.
D)All of these violate the standards indicated.

Accepted Answer

Using last year's report as the only evidence violates the auditing standard of sufficiency of evidence. Auditors are required to obtain sufficient and appropriate evidence to support their findings and conclusions. Relying solely on last year's report may not provide enough evidence for the current year's audit. Choices A and B do not violate generally accepted auditing standards. An adverse report is warranted when the financial statements are materially misstated or not presented in accordance with the applicable financial reporting framework. Explaining inconsistencies between a client's application of GAAP over the last two years is required by the consistency auditing standard.

Question 10

Which type of audit is a "basket" of the other types?
A)Financial
B)Operational
C)International
D)Management

Accepted Answer

International audits can encompass elements of financial, operational, and management audits as they assess the diverse aspects of an organization's operations across different countries. This makes them a "basket" of other audit types, addressing a wide range of compliance, financial, and performance issues in an international context.

Question 11

A government accountant suspects someone within the government is embezzling cash.Which of the following statements is most true?
A)The government would not pass a compliance audit.
B)An investigative audit will confirm the accountant's suspicion.
C)Both the government would not pass a compliance audit and an investigative audit will confirm the accountant's suspicion are true.
D)Neither the government would not pass a compliance audit nor an investigative audit will confirm the accountant's suspicion is true.

Accepted Answer

An investigative audit may not necessarily confirm the accountant's suspicion without evidence, and a compliance audit focuses on adherence to laws and regulations, not specifically on detecting embezzlement.

Question 12

The COSO enterprise risk management framework can be useful in:
A)Systems audits.
B)Investigative audits.
C)Both systems audits and investigative audits.
D)Neither systems audits nor investigative audits.

Accepted Answer

The COSO Enterprise Risk Management Framework provides a comprehensive approach to identifying, assessing, and managing risks within an organization. It is useful for both systems audits, which assess the effectiveness of internal controls, and investigative audits, which identify potential fraud, waste, and abuse. Therefore, both options A and B are not the best answer, and option D is incorrect as well.

Question 13

The text described seven types of audits common in accounting practice.Which of the following statements about them is most true?
A)An adverse report in a financial statement audit is evidence that an investigative audit is needed.
B)Expectancy theory can be useful in many types of audits.
C)Both an adverse report in a financial statement audit is evidence that an investigative audit is needed and expectancy theory can be useful in many types of audits are true.
D)Neither an adverse report in a financial statement audit is evidence that an investigative audit is needed nor expectancy theory can be useful in many types of audits is true.

Accepted Answer

Expectancy theory, which deals with motivation and decision-making, can indeed be useful in various types of audits by helping auditors understand the motivations behind organizational behavior and assess risks accordingly.

Question 14

An auditor is concerned that her company's purchasing process is not functioning as efficiently as possible.Which type of audit will best address her concern?
A)Financial
B)Operational
C)Management
D)Purchasing

Accepted Answer

An operational audit focuses on evaluating the effectiveness and efficiency of specific processes, such as purchasing. It is designed to identify areas where improvements can be made and to ensure that the process is functioning as effectively as possible. A financial audit focuses on the accuracy of financial statements, a management audit evaluates the effectiveness of management policies and procedures, and a purchasing audit specifically focuses on the purchasing process, but may not provide the same level of overall evaluation as an operational audit.

Question 15

The text described seven types of audits common in accounting practice.Which of the following statements about them is most true?
A)Every audit involves some form of information technology.
B)Most audits involve some form of human judgment.
C)Both every audit involves some form of information technology and most audits involve some form of human judgment are true.
D)Neither every audit involves some form of information technology nor most audits involve some form of human judgment is true.

Accepted Answer

Most audits, regardless of their specific type, require human judgment to interpret findings, assess risks, and make recommendations. While technology plays a significant role in modern auditing, the necessity of human judgment is a consistent aspect across all types of audits.

Question 16

Tim is the lead auditor on an engagement with WRT Corporation.Before starting the audit, Tim planned and reviewed the schedule with his audit team.Which of the following generally accepted audit standards did Tim uphold by planning?
A)Independence
B)Professional care
C)Supervision
D)Disclosure

Accepted Answer

Tim upheld the generally accepted audit standard of supervision by planning and reviewing the schedule with his audit team. This ensures the work is done effectively and efficiently by assigning tasks and delegating responsibilities to team members. Choices A, B, and D are not applicable to this scenario.

Question 17

Which of the following generally accepted auditing standards suggests that an auditor should not have a financial interest in an audit client?
A)Professional care
B)Disclosure
C)Independence
D)Some other standard

Accepted Answer

The standard of independence requires an auditor to be free from any financial, business, or personal relationships with the audit client that could impair their objectivity and impartiality in the audit process. Having a financial interest in an audit client could compromise the auditor's independence and credibility. Therefore, it is important for auditors to maintain their independence while conducting an audit.

Question 18

Generally accepted auditing standards are divided into three groups.In which group would you find "internal control?"
A)General
B)Field work
C)Reporting
D)None of these

Accepted Answer

Internal control is considered under the field work standards, which guide the auditor on the planning and performance of the audit, including understanding the entity and its environment, including its internal control.

Question 19

Generally accepted auditing standards are divided into three groups.Which of the following is a standard in the "reporting" group?
A)Training
B)Supervision
C)Evidence
D)Disclosure

Accepted Answer

Disclosure is a standard in the "reporting" group, which includes standards related to the auditor's report and the financial statements. Training and supervision are standards in the "fieldwork" group, while evidence is a standard in both the "fieldwork" and "reporting" groups.

Question 20

All of the following terms are associated with financial audit reports except:
A)Unmodified.
B)Adverse.
C)Truthful.
D)Disclaimer.

Accepted Answer

All financial audit reports should be truthful, but the terms associated with financial audit reports include unmodified, adverse, and disclaimer.

Quiz 18: Auditing and Evaluating the Ais

A clear understanding of the steps in the accounting cycle is likely to be useful in:

In ___, auditors examine a company's rules and procedures for conducting business.

A ___ determines whether the various forms of information technology in an accounting information system are producing expected results.

An investigative auditor wanted to assess employees' motivation for committing fraud.Which of the following tools will be most beneficial to the auditor in that task?

The generic model of business process management discussed in the text is likely to be most useful in which type of audit?

Generally accepted auditing standards are divided into three groups.All of the following are standards in the "general" group except:

The terms "adverse" and "disclaimer" are most closely associated with which generally accepted auditing standard?

Which of the following organizations is most likely to be subject to a compliance audit?

Which of the following violates the generally accepted auditing standard indicated?

Which type of audit is a "basket" of the other types?

A government accountant suspects someone within the government is embezzling cash.Which of the following statements is most true?

The COSO enterprise risk management framework can be useful in:

The text described seven types of audits common in accounting practice.Which of the following statements about them is most true?

An auditor is concerned that her company's purchasing process is not functioning as efficiently as possible.Which type of audit will best address her concern?

The text described seven types of audits common in accounting practice.Which of the following statements about them is most true?

Tim is the lead auditor on an engagement with WRT Corporation.Before starting the audit, Tim planned and reviewed the schedule with his audit team.Which of the following generally accepted audit standards did Tim uphold by planning?

Which of the following generally accepted auditing standards suggests that an auditor should not have a financial interest in an audit client?

Generally accepted auditing standards are divided into three groups.In which group would you find "internal control?"

Generally accepted auditing standards are divided into three groups.Which of the following is a standard in the "reporting" group?

All of the following terms are associated with financial audit reports except: