Question 1

Which of the following is a proper description of an auditor report?
A)Unqualified opinion - identifies certain exceptions to the clean opinion.
B)Adverse opinion - notes that there are material misstatements presented.
C)Qualified opinion - states that the auditors believe the financial statements are fairly and consistently presented in accordance with GAAP.
D)Unqualified opinion - states that the auditors were not able to reach a conclusion.

Accepted Answer

Adverse opinion - notes that there are material misstatements presented.

Question 2

A financial statement audit is part of the IT audit.

Accepted Answer

A financial statement audit is a separate and distinct process from an IT audit. While IT systems and controls may play a role in a financial statement audit, the focus and objectives of the two types of audits are different.

Question 3

The most common type of audit service is the operating audit performed by internal auditors.

Accepted Answer

The most common type of audit service is the financial audit, which is typically performed by external auditors to assess the accuracy of financial statements.

Question 4

In order to properly carry out an audit, accountants collect and evaluate proof of procedures, transactions, and / or account balances, and compare the information with established criteria.

Accepted Answer

This statement accurately describes the process of carrying out an audit. Accountants must collect and evaluate evidence and compare it to established criteria in order to determine the accuracy and completeness of financial statements.

Question 5

Because it is not possible to test all transactions and balances, auditors rely on this to choose and test a limited number of items and transactions and then make conclusions about the balance as a whole.
A)Sampling
B)Materiality
C)Compliance
D)Substance

Accepted Answer

Sampling

Question 6

All types of auditors should have knowledge about technology-based systems so that they can properly audit IT systems.

Accepted Answer

The increasing use of technology-based systems in businesses requires all auditors to have knowledge about IT systems in order to effectively audit them.

Question 7

Information risk is the chance that information used by decision makers may be inaccurate.

Accepted Answer

Information risk is the potential for inaccuracy in information used for decision making. Therefore, the statement is true.

Question 8

An important requirement for CPA firms is that they must be personally involved with the management of the firm that is being audited.

Accepted Answer

Independence is a fundamental principle of auditing. It is necessary for the CPA firm to remain independent from the management of the firm being audited in order to provide an objective and unbiased opinion on the financial statements. Therefore, the CPA firm should not be personally involved with the management of the firm being audited.

Question 9

The rule in the PCAOB/AICPA Code of Professional Conduct that is referred to as Responsibilities, can be stated as:
A)CPAs should act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.
B)To maintain and broaden public confidence, CPAs should perform their professional duties with the highest sense of integrity.
C)In carrying out their professional duties, CPAs should exercise sensitive professional and moral judgments in all their activities.
D)CPAs in public practice should observe the principles of the Code of Professional Conduct in determining the scope and nature of services to be provided.

Accepted Answer

In carrying out their professional duties, CPAs should exercise sensitive professional and moral judgments in all their activities.

Question 10

All types of auditors must follow guidelines promoting ethical conduct.For financial statement auditors, the PCAOB/AICPA has established a Code of Professional Conduct, commonly called the Code of Ethics, which consists of two sections.Which of the following correctly states the two sections?
A)Integrity and responsibility
B)Principles and rules
C)Objectivity and independence
D)Scope and nature

Accepted Answer

Principles and rules

Question 11

A financial statement audit is conducted in order for an opinion to be expressed on the fair presentation of financial statements.This goal is affected by the presence or absence of IT accounting systems.

Accepted Answer

The answer of A financial statement audit is conducted in...

Question 12

As a business grows, the volume and complexity of its transactions increase.At the same timed, there is a decrease in the chance that misstated information may exist undetected.

Accepted Answer

As the volume and complexity of transactions increase, the chance of misstated information existing undetected also increases. This is why businesses implement internal controls and audits to identify and correct any errors or irregularities.

Question 13

Any professionally trained accountant is able to perform an operational audit.

Accepted Answer

An operational audit is a type of audit that focuses on the efficiency and effectiveness of an organization's operations. Any professionally trained accountant should be able to perform an operational audit, as it requires a deep understanding of accounting principles and auditing procedures.

Question 14

When PCs are used for accounting instead of mainframes or client-server system, they face a greater risk of loss due to which of the following:
A)Authorized access
B)Segregation of duties
C)Lack of backup control
D)All of the above

Accepted Answer

Lack of backup control

Question 15

When companies rely on external, independent computer service centers to handle all or part of their IT needs it is referred to as:
A)External Processing
B)WAN Processing
C)Database Management System
D)IT Outsourcing

Accepted Answer

IT Outsourcing

Question 16

An internal auditor is not allowed to assist in the performance of a financial statement audit.

Accepted Answer

An internal auditor may assist in the performance of a financial statement audit if certain conditions are met, such as maintaining independence and objectivity. However, the internal auditor cannot serve as the sole auditor of the financial statements.

Question 17

This concept means that the auditors should not automatically assume that their clients are honest, but that they the auditors) must have a questioning mind and a persistent approach to evaluating evidence for possible misstatements.
A)Independence
B)Integrity
C)Due Care
D)Professional Skepticism
TEST BANK - CHAPTER 7 - TRUE / FALSE

Accepted Answer

Professional Skepticism

Question 18

The only person who can perform a financial statement audit of a publicly traded company is a government auditor who has extensive knowledge of generally accepted accounting principles.

Accepted Answer

A financial statement audit of a publicly traded company can also be performed by an independent certified public accounting firm that is registered with the Public Company Accounting Oversight Board (PCAOB).

Question 19

Auditors do not need to be experts on the intricacies of computer systems but they do need to understand the impact of IT on their clients' accounting systems and internal controls.

Accepted Answer

Auditors may not need to have in-depth technical knowledge of computer systems, but they should possess a basic understanding of the role that IT plays in their clients' accounting systems and internal controls. This enables them to properly assess and manage the risks associated with IT, as well as to assess the effectiveness of their clients' IT controls.

Question 20

All users of financial data - business managers, investors, creditors, and government agencies - have an enormous amount of data to use to make decisions.Due to the use of IT systems, it is easy to verify the accuracy and completeness of the information.

Accepted Answer

While IT systems can help manage and process large amounts of data, verifying the accuracy and completeness of financial information still requires careful analysis and validation, as errors and discrepancies can occur.

Quiz 7: Auditing Information Technology Bases Processes

Which of the following is a proper description of an auditor report?

A financial statement audit is part of the IT audit.

The most common type of audit service is the operating audit performed by internal auditors.

In order to properly carry out an audit, accountants collect and evaluate proof of procedures, transactions, and / or account balances, and compare the information with established criteria.

Because it is not possible to test all transactions and balances, auditors rely on this to choose and test a limited number of items and transactions and then make conclusions about the balance as a whole.

All types of auditors should have knowledge about technology-based systems so that they can properly audit IT systems.

Information risk is the chance that information used by decision makers may be inaccurate.

An important requirement for CPA firms is that they must be personally involved with the management of the firm that is being audited.

The rule in the PCAOB/AICPA Code of Professional Conduct that is referred to as Responsibilities, can be stated as:

All types of auditors must follow guidelines promoting ethical conduct.For financial statement auditors, the PCAOB/AICPA has established a Code of Professional Conduct, commonly called the Code of Ethics, which consists of two sections.Which of the following correctly states the two sections?