Auditing 1-20

Question 1

1. _____is the primary purpose of an audit.
   A. Detecting fraud and errors
   B. Expressing an opinion on the financial statements
   C. Recommending improvements in internal controls
   D. Assuring future financial performance

Answer 1

Answer:
b) Expressing an opinion on the financial statement

Question 2

2. An assurance engagement is different from an audit because:

A. It provides a higher level of assurance
B. It is always performed by external auditors
C. It focuses on non-financial information
D. It does not involve an expression of opinion

Answer 2

Answer:
d) It does not involve an expression of opinion

Question 3

3. Which of the following statements is true regarding an external audit?

A. It is performed by the internal audit department
B. It is optional for public companies
C. It is conducted by independent auditors
It focuses on compliance with tax regulations

Answer 3

Answer:
c) It is conducted by independent auditors

Question 4

4. The primary objective of an operational audit is to:

a) Assess the efficiency and effectiveness of operations
b) Identify potential fraud within the organization
c) Evaluate the accuracy of financial statements
d) Assess the compliance with legal regulations

Answer 4

Answer:
a) Assess the efficiency and effectiveness of operations

Question 5

5. In an assurance engagement, the practitioner’s conclusion is based on:

a) Absolute assurance
b) Reasonable assurance
c) Limited assurance
d) Expert opinion

Answer 5

Answer:
b) Reasonable assurance

Question 6

6. Which of the following engagements is NOT an example of an assurance
   engagement?

a) Review engagement

b) Compilation engagement

c) Agreed-upon procedures engagement

d) Attestation engagement

Answer 6

Answer:
b) Compilation engagement

Question 7

7. The primary responsibility for the prevention and detection of fraud in an
   organization lies with:

a) External auditors

b) Management

c) Shareholders

d) Regulatory authorities

Answer 7

Answer:
b) Management

Question 8

8. An audit report includes:

a) A statement of absolute assurance

b) An opinion on the fairness of financial statements

c) A detailed list of internal control weaknesses

d) A recommendation to replace management

Answer 8

Answer:
b) An opinion on the fairness of financial statements

Question 9

9. The International Standards on Auditing (ISA) are issued by:

a) International Auditing and Assurance Standards Board (IAASB)

b) International Financial Reporting Standards Foundation (IFRSF)

c) International Accounting Standards Board (IASB)

d) International Ethics Standards Board for Accountants (IESBA)

Answer 9

Answer:
a) International Auditing and Assurance Standards Board (IAASB)

Question 10

10. In an assurance engagement, the practitioner provides:

a) Absolute assurance on the subject matter

b) Limited assurance on the subject matter

c) A guarantee for future performance

d) A guarantee for future profitability

Answer 10

Answer:
b) Limited assurance on the subject matter

Question 11

11. _______is the primary purpose of an external audit.

a) Identifying potential fraud within the organization

b) Evaluating internal controls

c) Providing an independent assessment of financial statements

d) Reviewing the organization’s compliance with tax regulations

Answer 11

Answer:
c) Providing an independent assessment of financial statement

Question 12

12._____conducts an external audit.

a) The organization’s internal audit team
statement

b) A third-party auditing firm independent of the organization

c) The organization’s finance department

d) The organization’s board of directors

Answer 12

Answer:
b) A third-party auditing firm independent of the organization

Question 13

13.________is the purpose of evaluating internal controls during an external audit?

a) To identify potential areas of cost reduction

b) To assess the organization’s compliance with ethical standards

c) To ensure that the organization’s management is effective

d) To safeguard assets and prevent fraud

Answer 13

Answer: d) To safeguard assets and prevent fraud

Question 14

14.______is examined during an external audit?

a) Operational processes and employee performance

b) Marketing strategies and customer feedback

c) Financial statements and records

d) Production efficiency and supply chain management

Answer 14

Answer: c) Financial statements and records

Question 15

15. What is the significance of the external auditor’s report?

a) It provides recommendations for improving the organization’s
financial performance.

b) It certifies that the organization is financially stable.

c) It confirms the accuracy of the financial statements.

d) It helps investors make informed decisions about the organization.

Answer 15

Answer: d) It helps investors make informed decisions about the organization.

Question 16

16. Which of the following statements is true about external audits?

a) External audits are only required for large corporations.

b) External audits are conducted by the organization’s internal audit team.

c) External audits focus on evaluating internal controls.

d) External audits provide an independent assessment of financial statements.

Answer 16

Answer: d) External audits provide an independent assessment of financial statements.

Question 17

17._______is the difference between an external audit and an internal audit.

a) An external audit focuses on financial statements, while an internal audit focuses on operational processes.

b) An external audit is conducted by the organization’s finance department, while an internal audit is conducted by a third-party firm.

c) An external audit is performed annually, while an internal audit is carried out on an ad-hoc basis.

d) An external audit aims to identify potential fraud, while an internal audit evaluates compliance with tax regulations.

Answer 17

Answer: a) An external audit focuses on financial statements, while an internal audit focuses on operational processes.

Question 18

18. Which of the following is NOT a typical user of the external auditor’s report?

a) Shareholders

b) Customers

c) Regulators

d) Investors

Answer 18

Answer: b) Customers

Question 19

20._______is the primary objective of corporate governance.

a) Maximizing profits for shareholders

b) Ensuring compliance with legal regulations

c) Promoting ethical behavior within the organization

d) Enhancing shareholder value while protecting stakeholders’ interests

Answer 19

Answer: d) Enhancing shareholder value while protecting stakeholders

interests

Question 20

19. Corporate governance means______

a) The process of managing employee performance

b) The system of rules, practices, and processes by which a company is directed and controlled

c) The process of financial decision-making in a company

d) The marketing strategies employed by a company to increase sales

Answer 20

Answer: b) The system of rules, practices, and processes by which a company is directed and controlled