Question 1

Briefly explain each management assertion related to presentation and disclosure.

Accepted Answer

The answer of Briefly explain each management assertion related to...

Question 2

International auditing standards and U.S. GAAP classify assertions into three categories. Which of the following is not a category of assertions that management makes about the accounting information in financial statements?

Accepted Answer

Assertions are made by management about the accounting information in financial statements. International auditing standards and U.S. GAAP classify these assertions into three categories: assertions about classes of transactions for the period under audit; assertions about account balances at period end; and assertions about presentation and disclosure. Assertions about the quality of source documents used to prepare the financial statements is not a category of assertions.

Question 3

Under the cycle approach to segmenting an audit, transactions recorded in different journals should never be combined with the general ledger balances that result from those transactions.

Accepted Answer

In the cycle approach to segmenting an audit, transactions recorded in different journals are often combined with the general ledger balances that result from those transactions to assess the overall accuracy and integrity of financial records, as they are interrelated.

Question 4

Which of the following management assertions is not associated with transaction-related audit objectives?

Accepted Answer

Classification and understandability is not an assertion related to transaction-related audit objectives. The other three assertions - occurrence, accuracy, and completeness - are all directly associated with transaction-related audit objectives.

Question 5

The most important general ledger account included in and affecting several cycles is the:

Accepted Answer

The cash account affects various cycles including the revenue, expenditure, financing, and conversion cycles. In the revenue cycle, cash inflows are recorded in the cash account, while in the expenditure cycle, outflows of cash are recorded in the cash account. In the financing cycle, cash inflows and outflows are recorded, and in the conversion cycle, cash transactions related to the production process are recorded. Therefore, the cash account is the most important general ledger account that affects several cycles.

Question 6

Which of the following is not one of the three categories of assertions?

Accepted Answer

The three categories of assertions are: assertions about classes of transactions and events for the period under audit, assertions about account balances at period end, and assertions about presentation and disclosure. Assertions about financial statements and correspondence to GAAP are not a separate category, but rather apply to all three categories of assertions.

Question 7

Which of the following statements about the existence and completeness assertions is not true?

Accepted Answer

Existence deals with the audit concern of whether the recorded transactions actually occurred, while completeness deals with the audit concern of whether all transactions that should have been recorded were actually recorded. Therefore, existence deals with overstatements (transactions that are recorded but did not actually occur), and completeness deals with understatements (transactions that should have been recorded but were not).

Question 8

In describing the cycle approach to segmenting an audit, which of the following statements is not true?

Accepted Answer

The statement "The 'inventory and warehousing' cycle may be audited at any time during the engagement since it is unrelated to the other cycles" is not true. The cycle approach is designed so that each cycle is closely related to the other cycles, and the inventory and warehousing cycle is typically audited as part of the "acquisition of goods and services and payment" cycle.

Question 9

When using the cycle approach to segmenting the audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that:

Accepted Answer

The answer of When using the cycle approach to segmenting...

Question 10

Which of the following statements is true regarding the distinction between general audit objectives and specific audit objectives for each account balance?

Accepted Answer

General audit objectives are broad and apply to all account balances, ensuring that they are fairly presented in accordance with the applicable financial reporting framework.

Question 11

Which of the following assertions is described as "this assertion addresses whether all transactions that should be included in the financial statements are in fact included"?

Accepted Answer

Completeness assertion addresses whether all transactions that should be included in the financial statements are in fact included.

Question 12

Management assertions are:

Accepted Answer

Management assertions are fundamental claims made by the management regarding the accuracy of the financial statements and are directly related to the financial reporting framework used by the company, such as U.S. GAAP or IFRS. These assertions form the basis upon which financial statements are prepared and audited.

Question 13

Briefly explain each management assertion related to classes of transactions and events for the period under audit.

Accepted Answer

The answer of Briefly explain each management assertion related to...

Question 14

Which of the following journals would be included most often in the various audit cycles?

Accepted Answer

The general journal is used to record all transactions that do not fit into any of the other journals. This includes transactions such as adjusting entries, closing entries, and non-routine transactions. As a result, the general journal is used most often in the various audit cycles.

Question 15

Why does the auditor divide the financial statements into segments around the financial statement cycles?

Accepted Answer

Dividing the financial statements into segments around the financial statement cycles helps the auditor in assigning tasks to different members of the audit team. This approach aids in the division of labor by allowing each team member to focus on specific areas of the financial statements. It also helps ensure that the audit is conducted efficiently within a specified time frame. While the cycle approach is commonly used by auditors, it is not necessarily required by auditing standards. Detecting indirect-effect illegal acts is a separate matter altogether and is not directly related to the division of financial statements into cycles.

Question 16

Auditors generally use a financial statement cycle approach when performing a financial statement audit. Describe the transaction flow, using specific examples, from journals to financial statements that produce financial statements.

Accepted Answer

The answer of Auditors generally use a financial statement cycle...

Question 17

If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the:

Accepted Answer

Including a short-term note payable in accounts payable misclassifies the liability, violating the classification and understandability assertion.

Question 18

The auditor is determining that the recorded sales are for the amount of goods shipped are correctly billed and recorded. She is gathering evidence about which transaction related audit objective?

Accepted Answer

The auditor is gathering evidence to determine if the amount recorded in sales is accurate, which is a test of accuracy. The other given options are not relevant to the auditor's objective in this scenario.

Question 19

Which of the following statements is true?

Accepted Answer

The answer of Which of the following statements is true?
...

Question 20

Briefly explain each management assertion related to account balances at period end.

Accepted Answer

The answer of Briefly explain each management assertion related to...

Quiz 6: The CPA Profession

Briefly explain each management assertion related to presentation and disclosure.

International auditing standards and U.S. GAAP classify assertions into three categories. Which of the following is not a category of assertions that management makes about the accounting information in financial statements?

Under the cycle approach to segmenting an audit, transactions recorded in different journals should never be combined with the general ledger balances that result from those transactions.

Which of the following management assertions is not associated with transaction-related audit objectives?

The most important general ledger account included in and affecting several cycles is the:

Which of the following is not one of the three categories of assertions?

Which of the following statements about the existence and completeness assertions is not true?

In describing the cycle approach to segmenting an audit, which of the following statements is not true?

When using the cycle approach to segmenting the audit, the reason for treating capital acquisition and repayment separately from the acquisition of goods and services is that:

Which of the following statements is true regarding the distinction between general audit objectives and specific audit objectives for each account balance?

Which of the following assertions is described as "this assertion addresses whether all transactions that should be included in the financial statements are in fact included"?

Management assertions are:

Briefly explain each management assertion related to classes of transactions and events for the period under audit.

Which of the following journals would be included most often in the various audit cycles?

Why does the auditor divide the financial statements into segments around the financial statement cycles?

Auditors generally use a financial statement cycle approach when performing a financial statement audit. Describe the transaction flow, using specific examples, from journals to financial statements that produce financial statements.

If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the:

The auditor is determining that the recorded sales are for the amount of goods shipped are correctly billed and recorded. She is gathering evidence about which transaction related audit objective?

Which of the following statements is true?

Briefly explain each management assertion related to account balances at period end.