Accounting vs. Auditing

Question 1

The phrase “generally accepted accounting principles” is an accounting term that
Includes broad guidelines of general application but not detailed practices and procedures.
Encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.
Provides a measure of conventions, rules, and procedures governed by the AICPA.
Is included in the audit report to indicate that the audit has been conducted in accordance with generally accepted auditing standards (GAAS).

Answer 1

Encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.

This answer is correct because the term does encompass the conventions, rules and procedures necessary to define accepted accounting practice at a particular time.

Question 2

The auditor’s judgment concerning the overall fairness of the presentation of financial position, results of operations, and statement of cash flows is applied within the framework of
Quality control.
Generally accepted auditing standards which include the concept of materiality.
The auditor’s consideration of the audited company’s internal control.
Generally accepted accounting principles.

Answer 2

Generally accepted accounting principles.
This Answer is Correct
This answer is correct because the auditor’s judgment concerning the fairness of financial statements should be applied within the framework of generally accepted accounting principles.

Question 3

Which of the following is most likely to be unique to the audit work of CPAs as compared to work performed by practitioners of other professions?
Due professional care.
Competence.
Independence.
Complex body of knowledge.

Answer 3

Independence.

Question 4

Which of the following is not a primary responsibility of an auditor:
Provide regulators with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
Provide creditors with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
Provide management with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
Provide investors with an opinion by the auditor on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

Answer 4

Provide management with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

The auditor’s primary role is to provide an impartial (independent) report on the reliability of management’s financial statements. These financial statements are distributed to interested parties outside of the reporting entity itself, such as actual or potential shareholders and creditors, major customers and suppliers, employees, regulators, and others for their decision-making (resource allocation) needs. Management prepares the financial statements and represents that they are in fact fairly presented while the auditor is auditing such representations.