AUD - Accounting vs. Auditing

Question 1

Define GAAP (Generally Accepted Accounting Principles)

Answer 1

Standards by which the quality of the financial statements is judged.

Question 2

What are the benefits of an audit to a private company?

Answer 2

1. More favorable cost of capital
2. Insights into adequacy of internal controls
3. Benchmark an entity’s performance with other similary entities

Question 3

The auditor’s primary role is…

Answer 3

to provide an impartial (independent) assessment of the reliability of management’s financial statements.

Question 4

Who is primarily responsible for the fairness of an entity’s financial statements?

Answer 4

Management; the financial statements are the representation of management.

Question 5

Define GAAS (General Accepted Auditing Standards)

Answer 5

Standards by which the quality of the auditor’s performance is judged.

Question 6

General purpose financial statements are…

Answer 6

representations of management.

Question 7

What is the primary role of the auditor?

Answer 7

To provide an impartial assessment of the reliability of management’s financial statements.

Question 8

The auditor’s responsibility is confined to…

Answer 8

the expression of an opinion on the financial statements.