Which of the following best describes the primary role of auditors in financial reporting quizlet?

Home

Subjects

Solutions

Create

Log in

Sign up

Upgrade to remove ads

Only ₩37,125/year

• Flashcards

• Learn

• Test

• Match

• Flashcards

• Learn

• Test

• Match

Terms in this set (40)

Chapter 1

1. An auditor traces the serial numbers on equipment to a nonissuer's sub-ledger. Which of the following management assertions is supported by this test?
A. Valuation and allocation.
B. Completeness.
C. Rights and obligations.
D. Presentation and disclosure.

B

2. Which of the following best describes the primary role and responsibility of independent external auditor?
A. Produce a company's annual financial statements and notes.
B. Obtain an understanding of the client's internal control structure and give management a report about control problems and deficiencies.
C. Provide business consulting advice to audit clients.
D. Express an opinion on the fairness of a company's annual financial statements and footnotes.

D

3. It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that
A. Financial statements and financial data are verifiable.
B. In audits of financial statements, the auditor acts exclusively in the capacity of an auditor.
C. The professional status of the independent auditor imposes commensurate professional obligations.
D. A potential conflict of interest always exists between the auditor and the management of an enterprise.

D

4. In testing the existence assertion for an asset, an auditor ordinarily works from the
A. financial statements to the potentially unrecorded items.
B. potentially unrecorded items to the financial statement.
C. accounting records to the supporting evidence.
D. supporting evidence to the accounting records.

C

Chapter 3

5. Before accepting an engagement to audit a new client, an auditor is required to
A. make inquiries of the predecessor auditor after obtaining the consent of the prospective client.
B. obtain the prospective client's signature to the engagement letter.
C. prepare a memorandum setting forth the staffing requirements and documenting the preliminary audit plan.
D. discuss the management representation letter with the prospective client's audit committee.

A

6. Which of the following factors most likely would cause an auditor not to accept a new audit engagement?
A. An inadequate understanding of the entity's internal controls
B. The close proximity to the end of the entity's fiscal year
C. Concluding that the entity's management probably lacks integrity
D. The inability to perform preliminary analytical procedures before assessing control risk

C

7. An engagement letter is used primarily to
A. ensure a clear contractual understanding of the services to be provided by the CPA.
B. express an opinion on the financial statements.
C. provide management representations to be included in the audit evidence.
D. disclaim liability.

A

8. In testing the completeness assertion for a liability account, an auditor ordinarily works from the
A. financial statements to the potentially unrecorded items.
B. potentially unrecorded items to the financial statements.
C. accounting records to the supporting evidence.
D. trial balance to the subsidiary ledger.

B

Chapter 4
9. Management fraud generally refers to
A. unintentional mistakes.
B. noncompliance.
C. intentional distortions of financial statements.
D. violations of GAAS.

C

10. External auditors are responsible
A. for authenticating documents.
B. for reporting immaterial frauds to a level of management at least one level above the people involved.
C. for finding all intentional misstatements concealed by collusion.
D. for reporting all frauds to outside agencies or parties.

B

11. The probability that an audit team will give an inappropriate opinion on financial statements best describes
A. audit risk.
B. inherent risk.
C. control risk.
D. detection risk.

A

12. If control risk increases, and all other risks in the audit risk model stay constant except the one referred to below, which of the following statements is correct?
A. Detection risk will increase.
B. Inherent risk will increase.
C. Audit risk will decrease.
D. Detection risk will decrease.

D

Chapter 5
13. The appropriate separation of duties does not include
A. authorization to execute transactions.
B. recording of transactions.
C. custody of assets involved in the transactions.
D. data preparation.

D

14. Which of the following is not a component of internal controls?
A. Control environment
B. Control activities
C. Inherent risk
D. Monitoring

C

15. If auditors assess control risk at the maximum level, they will tend to
A. perform a great deal of additional tests of controls.
B. perform a great deal of substantive testing during the audit.
C. perform substantive tests at an interim date.
D. perform more audit procedures using internal evidence.

B

16. In testing control activities, an auditor ordinarily selects from a variety of techniques, including
A. inquiry and analytical procedures.
B. reperformance and observation.
C. comparison and confirmation.
D. inspection and verification.

B

Chapter 6
17. Which of the following is not considered one of the three factors increasing the probability of fraud?
A. Motive
B. Lack of training
C. Opportunity
D. Rationalization

B

18. In the audit of cash the auditor obtains a bank cutoff statement primarily to
A. identify old outstanding checks that the client may exclude from the year-end bank reconciliation in order to misappropriate cash.
B. obtain sufficient information to reconcile the client's bank account as of year-end.
C. obtain direct confirmation of the client's bank balances as of year-end.
D. test the propriety of items appearing on the client's year-end bank reconciliation.

D

19. The mail which includes payments should be opened by two people. This control is called
A. separation of duties.
B. anti-collusion.
C. joint custody.
D. lapping.

C

20. An entity with a large volume of customer remittances by mail could most likely reduce the risk of employee misappropriation of cash by using
A. a bank lockbox system.
B. independently prepared mailroom prelists.
C. daily check summaries.
D. employee fidelity bonds.

A

Chapter 7
21. To be recognized, revenues must also be realized or realizable and
A. foreseeable.
B. collected.
C. earned.
D. shipped.

C

22. Confirmations of accounts receivable provide the most evidence for which of the following assertions?
A. Completeness.
B. Valuation or allocation.
C. Rights and obligations.
D. Existence.

D

23. Which of the following is not a valid reason for an auditor deciding not to send accounts receivable confirmations?
A. The balance is immaterial.
B. Confirmations would be ineffective.
C. The client requests alternative procedures be performed instead.
D. Other procedures provide sufficient competent evidence.

C

24. The most effective audit procedure for determining the collectability of an account receivable is the
A. review of the subsequent cash collections.
B. examination of the related sales invoice(s).
C. confirmation of the account.
D. review of authorization of credit sales to the customer and the previous history of collections.

A

Chapter 8
25. When confirming accounts payable, emphasis should be put on what kind of accounts?
A. Accounts with small or zero balances.
B. All accounts should be equally emphasized.
C. Accounts with large balances.
D. Accounts listed in the accounts payable subsidiary.

A

26. Vouchers should be stamped PAID to
A. prevent duplicate payment.
B. generate a new purchase order.
C. indicate posting in the voucher register.
D. facilitate preparation of the bank reconciliation.

A

27. Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?
A. Reconcile receiving reports with related cash payments made just prior to year-end.
B. Contrast the ratio of accounts payable to purchases with the prior year's ratio.
C. Vouch a sample of creditor balances to supporting invoices, receiving reports, and purchase orders.
D. Compare cash payments occurring after the balance sheet date with the accounts payable trial balance.

D

28. Which of the following would not overstate current-period net income?
A. Capitalizing an expenditure that should be expensed.
B. Failing to record a liability for an expenditure.
C. Failing to record a check paying an item in vouchers payable.
D. All of the above would overstate net income.

C

Chapter 9

29. An auditor who wished to test for the existence or occurrence of inventory would most likely select a sample of inventory items from the perpetual records and

A. trace additions to the general ledger.
B. vouch additions to receiving reports.
C. vouch additions to sales invoices.
D. trace receipts to receiving reports.

B

30. An auditor selected an inventory item on the warehouse floor, test counted it, and traced the count to the final inventory compilation. The auditor most likely was testing the PCAOB assertion of

A. existence.
B. valuation.
C. completeness.
D. rights and obligations.

C

31. Which of the following is not an acceptable method of determining inventory cost under GAAP?
A. FIFO.
B. LIFO.
C. Average cost.
D. All of the above are acceptable.

D

32. An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete or slow-moving inventory to support management's financial statement (PCAOB) assertion of

A. valuation or allocation.
B. rights and obligations.
C. existence or occurrence.
D. presentation and disclosure.

A

Chapter 11

33. An important method used by auditors to learn of material contingencies is
A. obtaining responses to an attorney letter.
B. inquiring and discussing them with management.
C. examining documents in the client's possession concerning contingencies.
D. confirming accounts receivable with the client's customers.

A

34. What is the primary purpose of obtaining written representations?
A. To provide auditors with substantive evidence of important assertions
B. To impress upon management its primary responsibility for the financial statements
C. To allow auditors to communicate important internal control deficiencies to management
D. To allow auditors to communicate important suggestions for improvement to management

B

35. If auditors are appointed on January 3, 2014, the date of the financial statements is December 31, 2014, the date of the auditors' report is February 7, 2015 and the audit report release date is March 3, 2015, what is the appropriate date of the written representations?
A. January 3, 2014
B. December 31, 2014
C. February 7, 2015
D. March 3, 2015

C

36. Subsequent events occur between the ____ and the ____.
A. audit report release date; beginning of subsequent year's audit
B. date of the auditors' report; audit report release date
C. date of the financial statements; audit report release date
D. date of the financial statements; date of the auditors' report

D

Chapter 12

37. Which of the following scope limitations would ordinarily be of most concern to the auditors?
A. The inability to observe inventories because auditors were appointed following the date of the financial statements
B. The inability to obtain confirmation of year-end balances from customers because of different billing dates
C. Management's refusal to provide auditors with written representations
D. The use of the work of component auditors in the audit of group financial statements

C

38. Auditors will issue an adverse opinion when

A. a severe scope limitation has been imposed by the entity.
B. a violation of generally accepted accounting principles is sufficiently material and pervasive that a qualified opinion is not justified.
C. a qualified opinion cannot be rendered because the auditors lack independence.
D. the entity's ability to continue as a going concern is subject to substantial doubt.

B

39. In which of the following circumstances would a qualified opinion not be appropriate?

A. A scope limitation prevents the auditors from completing an important auditing procedure.
B. The entity has failed to properly disclose going-concern uncertainties.
C. The auditors lack independence with respect to the audited entity.
D. An accounting principle at variance with generally accepted accounting principles is used.

C

40. Auditors who are reporting on financial statements that contain a material departure from generally accepted accounting principles should include an additional paragraph and

A. express a qualified or adverse opinion.
B. not modify the opinion paragraph as long as the departure is adequately disclosed in a footnote.
C. disclaim an opinion on the financial statements.
D. express a qualified opinion or disclaimer of opinion.

A

4 - Audit Evidence

102 terms

zconner821

Audit Chapter 6

58 terms

AuditFlynn

Audit 135 Quiz

89 terms

segen_haile

Andro Personal Products

29 terms

Richardlt1

strategic ch 3 minicases

13 terms

Richardlt1

BA 430 ch2 Iwanowycz

38 terms

Richardlt1

Microeconomics (B)lowhorn 22+23

28 terms

Richardlt1

bio exam part two

24 terms

megan_stoneburner

nutr review ch 5

39 terms

veronica_martinez1

WOMN 1600 - Status Quo? The Unfinished Business of…

28 terms

Emma_Dueck5PLUS

Com 325 Test 1

42 terms

haeleyl

Which of the following best describes the primary role of auditors in financial reporting?

Which of the following describes the primary purpose of the audit function?

Which of the following best describes the primary reason an independent auditor reports on financial statement?

What is the main function of an auditor quizlet?