Question 1

The transaction-related audit objective of timing is related to the assertion of cutoff.

Accepted Answer

Timing relates to the accuracy of when transactions are recorded, and cutoff is a key assertion under the timing objective as it ensures that transactions are recorded in the correct accounting period.

Question 2

General transaction-related audit objectives vary from audit to audit, depending on the nature and characteristics of the client's business and industry.

Accepted Answer

The answer of General transaction-related audit objectives vary from audit...

Question 3

The audit objective of posting and summarization is associated with the management assertion of accuracy.

Accepted Answer

The posting and summarization audit objective aims to ensure that transactions are accurately recorded and summarized in the financial statements, which aligns with the management assertion of accuracy.

Question 4

In the context of the audit of sales, distinguish between the occurrence and completeness transaction-related audit objectives.State the effect on the sales account (overstatement or understatement)of a violation of each objective.

Accepted Answer

The answer of In the context of the audit of...

Question 5

Which of the following statements is true about the completeness and occurrence assertions?

Accepted Answer

Violations of the occurrence assertion relate to account overstatements because occurrence ensures that recorded transactions actually happened. If a transaction is recorded but did not occur, it results in an overstatement.

Question 6

The auditor's audit objectives follow and are closely related to management assertions.

Accepted Answer

The auditor's audit objectives are designed to obtain reasonable assurance about the reliability of the financial statements, and are closely related to management assertions which are representations made by management regarding the financial statements. By testing these assertions through the audit objectives, the auditor can provide an independent opinion on the financial statements.

Question 7

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 8

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

Accepted Answer

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

Question 9

Below are five audit procedures, all of which are tests of transactions associated with the audit of the acquisition and payment cycle.Also below are the six general transaction-related audit objectives and the five management assertions.For each audit procedure, indicate (1)its audit objective, and (2)the management assertion being tested.
  
1.Foot the purchases journal and trace the totals to the related general ledger accounts.
(1)________.
(2)________.
2.Recompute the cash discounts taken by the client.
(1)________.
(2)________.
3.Compare dates on cancelled checks with the bank cancellation date.
(1)________.
(2)________.
4.Trace from a sample of cancelled checks to the cash disbursements journal.
(1)________.
(2)________.
5.Examine supporting documentation for a sample of transactions for authorized payee and amount and to determine services or goods were received.
(1)________.
(2)________.

Accepted Answer

The answer of Below are five audit procedures, all of...

Question 10

Which of the following management assertions is not associated with classes of transactions and events?

Accepted Answer

"Rights and obligations" is not specifically associated with classes of transactions and events, but rather with the "presentation and disclosure" assertion. The other three options - occurrence, classification, and accuracy - are all associated with classes of transactions and events.

Question 11

The auditor is determining that the the correct selling price was used for billing and that the quantity of goods shipped was the same as the quantity billed.She is gathering evidence about which transaction related audit objective?

Accepted Answer

Accuracy relates to ensuring that transactions are recorded correctly and that the correct amounts are charged. In this case, the auditor is verifying that the correct selling price was used for billing, indicating an accuracy assertion. The other options (existence, completeness, and cut-off) do not relate to this specific audit objective.

Question 12

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 specifically ensures that all transactions that should be included in the financial statements are indeed included, which makes it the best choice. The other assertions are: occurrence (all transactions actually took place), rights, and obligations (assets and liabilities are rightfully owned by the company), and existence (assets and liabilities exist physically).

Question 13

Below are five audit procedures, all of which are tests of transactions associated with the audit of the sales and collection cycle.Also below are the six general transaction-related audit objectives and the five management assertions.For each audit procedure, indicate (1)its audit objective, and (2)the management assertion being tested.
  
1.Vouch recorded sales from the sales journal to the file of bills of lading.
(1)________.
(2)________.
2.Compare dates on the bill of lading, sales invoices, and sales journal to test for delays in recording sales transactions.
(1)________.
(2)________.
3.Account for the sequence of prenumbered bills of lading and sales invoices.
(1)________.
(2)________.
4.Trace from a sample of prelistings of cash receipts to the cash receipts journal, testing for names, amounts, and dates.
(1)________.
(2)________.
5.Examine customer order forms for credit approval by the credit manager.
(1)________.
(2)________.

Accepted Answer

The answer of Below are five audit procedures, all of...

Question 14

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 15

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

Accepted Answer

General audit objectives apply universally to all classes of transactions, ensuring completeness, accuracy, and validity of the financial statements. Specific audit objectives, on the other hand, are tailored to particular types of transactions or account balances, focusing on the detailed aspects that need verification within those specific areas.

Question 16

Briefly explain each management assertion related to presentation and disclosure.

Accepted Answer

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

Question 17

The posting and summarization audit objective is the auditor's counterpart to management's assertion of:

Accepted Answer

The answer of The posting and summarization audit objective is...

Question 18

Relevant assertions have a meaningful bearing on whether the account is fairly stated and are used to assess the risk of material misstatement and the design and performance of audit procedures.

Accepted Answer

Relevant assertions provide important information for auditors to assess the risk of material misstatement and to design appropriate audit procedures. They are used to evaluate the fairness of the financial statements and ensure that they are free from material misstatements. Therefore, the assertion has a meaningful bearing on whether the account is fairly stated.

Question 19

After the general transaction related-audit objectives are understood, specific transaction-related audit objectives for each material class of transactions can be developed.Which of the following statements is true?

Accepted Answer

There should be at least one specific objective for each relevant general objective, but there may be more than one objective. The specific objectives provide detailed guidance for the auditor to design audit procedures and evaluate the results.

Question 20

Management makes the following assertions about account balances:

Accepted Answer

The assertion of existence, completeness, valuation and allocation, and rights and obligations is a comprehensive set of assertions that cover all aspects of account balances. Existence ensures that accounts actually exist, completeness ensures that all accounts are included, valuation and allocation ensures that accounts are correctly valued and assigned, and rights and obligations ensure that the company has the legal right and responsibility to its accounts. Accuracy and cutoff are not included in this set of assertions. Classification is important, but not as important as the other assertions in terms of ensuring correctness of account balances.

Quiz 6: Audit Responsibilities and Objectives

The transaction-related audit objective of timing is related to the assertion of cutoff.

General transaction-related audit objectives vary from audit to audit, depending on the nature and characteristics of the client's business and industry.

The audit objective of posting and summarization is associated with the management assertion of accuracy.

In the context of the audit of sales, distinguish between the occurrence and completeness transaction-related audit objectives.State the effect on the sales account (overstatement or understatement)of a violation of each objective.

Which of the following statements is true about the completeness and occurrence assertions?

The auditor's audit objectives follow and are closely related to management assertions.

Management assertions are:

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

Which of the following management assertions is not associated with classes of transactions and events?

The auditor is determining that the the correct selling price was used for billing and that the quantity of goods shipped was the same as the quantity billed.She is gathering evidence about which transaction related audit objective?

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"?

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

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

Briefly explain each management assertion related to presentation and disclosure.

The posting and summarization audit objective is the auditor's counterpart to management's assertion of:

Relevant assertions have a meaningful bearing on whether the account is fairly stated and are used to assess the risk of material misstatement and the design and performance of audit procedures.

After the general transaction related-audit objectives are understood, specific transaction-related audit objectives for each material class of transactions can be developed.Which of the following statements is true?

Management makes the following assertions about account balances: