Question 1

Which of the following are part of the attest process?

Accepted Answer

Part of the attest process includes evaluating evidence against objective criteria and communicating the conclusions reached to a third party. However, it does not involve guaranteeing the accuracy of the books and records.

Question 2

Independent professional services that are provided on financial or other information that improve the quality of decision making are known as

Accepted Answer

Assurance services are independent professional services that provide financial or other information in order to improve the quality of decision-making. These services may include auditing, review of financial statements, and other forms of attestation services. Internal auditing, on the other hand, is a function within an organization that provides independent appraisals of the internal operations of the organization, while financial auditing is a specific type of assurance service that involves the examination and verification of financial statements. Attestation services are a type of assurance service that involves issuing a report on a subject matter or an assertion made by another party.

Question 3

The purpose of assurance services is to improve the quality of the information provided.

Accepted Answer

Assurance services are designed to enhance the quality of information provided to stakeholders. These services help in providing an independent and objective examination of the financial and non-financial information, which can assist decision-makers in making informed decisions.

Question 4

Which one of the following is not part of the attest process?

Accepted Answer

While gathering evidence about assertions, evaluating evidence against objective criteria, and communicating the conclusions reached are all part of the attest process, proving the accuracy of the books and records is not. That is the role of bookkeeping or accounting, not the attest process.

Question 5

Which one of the following is a potential problem with management's communication of financial information that causes third parties to desire the independent auditor's assessment of the financial statement presentation?

Accepted Answer

The complexity of transactions affecting the financial statements and the remoteness of the user from the organization can both lead to potential problems with management's communication of financial information that cause third parties to desire the independent auditor's assessment of the financial statement presentation. Additionally, the lack of criteria on which to base information can also be a potential problem, but this is not listed as a choice in the question.

Question 6

The need for assurance services arises for all of the following reasons EXCEPT:

Accepted Answer

The need for assurance services arises due to potential bias in providing information, complexity of the processing systems, and remoteness between a user and the organization. However, closeness between a user and the organization does not necessarily create a need for assurance services. In fact, in such cases, the user may have direct access to reliable information and therefore not require assurance services.

Question 7

Which one of the following is not a management expectation for independent auditors?

Accepted Answer

Independent auditors are expected to be an outside source of expertise on accounting matters, perform tests and draw conclusions on assertions, and provide a written communication in the form of an audit report. However, they are not expected to be a participant in management decision making as it would compromise their independence and objectivity.

Question 8

Auditing is important in a free market society because

Accepted Answer

Auditing provides reliable information based upon which to judge economic performance, which is important in a free market society. While auditors aim to detect errors and fraud, they cannot guarantee to detect all of them, and they do not functio as divisions of regulatory bodies but rather as independent third parties. Lastly, while an auditor can provide some assurance to investors, it is not a guarantee or insurance policy.

Question 9

The internal auditor is a primary provider of operational audits.

Accepted Answer

The internal auditor is responsible for conducting operational audits, financial audits, and compliance audits within an organization.

Question 10

Third-party users of the audit report expect the auditor to do all of the following except:

Accepted Answer

Providing a biased evaluation of the financial statements is not expected of auditors. Auditors are expected to be independent and objective when conducting their audits and providing their opinions. All the other options are expectations of auditors by third-party users of the audit report.

Question 11

Users can reasonably expect audited financial statements to be

Accepted Answer

Audited financial statements are expected to be complete and contain all important financial disclosures, be free from material misstatements and be presented fairly according to GAAP (Generally Accepted Accounting Principles). GAAP is a set of guidelines that ensures consistency in financial reporting to facilitate understanding and comparability of financial information among different entities. Auditors follow GAAP to ensure that the financial statements are accurate, complete, and presented fairly.

Question 12

Which of the following services is the broadest and most inclusive?

Accepted Answer

Assurance services encompass both audit and attestation services, but also include a wider range of services focused on improving the reliability and quality of information used by decision makers. Compliance services, while important, are more focused on ensuring adherence to regulatory requirements rather than providing comprehensive and objective assessments of information.

Question 13

An expectation of the public is that the auditor will recognize that the primary users of audit assurance are

Accepted Answer

The primary users of audit assurance are third-party users, such as investors, creditors, and other stakeholders who rely on the accuracy of the financial statements to make informed decisions. While clients and members of management may also benefit from the audit assurance, their interests may not always align with those of the third-party users. The PCAOB, as a regulatory body, has an interest in ensuring that audits are conducted in accordance with professional standards, but is not a primary user of audit assurance.

Question 14

The internal auditor is a primary provider of assurance services.

Accepted Answer

The internal auditor is responsible for providing assurance services to the organization by assessing and reporting on the effectiveness of its governance, risk management, and internal control processes.

Question 15

Internal auditors may perform all of the following types of audits except

Accepted Answer

Internal auditors may perform all of the above types of audits, including operational audits, compliance audits, and computer system audits.

Question 16

An audit and an assurance service both require a report to a third party.

Accepted Answer

An audit requires a report to a third party, but assurance services may not always require such a report. Assurance services can be broader and may include internal reports.

Question 17

An audit is a form of an attestation service.

Accepted Answer

An audit is a type of attestation service that provides an opinion on the fairness of the financial statements in accordance with the applicable financial reporting framework.

Question 18

Which one of the following is not a key attribute needed to perform assurance?

Accepted Answer

While accounting skills may be helpful in performing assurance, they are not a key attribute required for assurance. The other attributes listed (subject matter knowledge, independence, and established criteria or standards) are all essential for performing assurance.

Question 19

Which one of the following is not a critical component of assurance services?

Accepted Answer

A CPA is not necessarily required for assurance services, as these services can be provided by other qualified professionals.

Question 20

Users of the audit report can reasonably expect the audited financial statements to be

Accepted Answer

Users of the audit report can reasonably expect the audited financial statements to be presented fairly according to the substance of GAAP. However, it is important to note that the audit report does not guarantee the absence of errors or provide complete information and all financial disclosures.

Quiz 1: Auditing: Integral to the Economy