Auditing 1-20 Flashcards
- _____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:
b) Expressing an opinion on the financial statement
- 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:
d) It does not involve an expression of opinion
- 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:
c) It is conducted by independent auditors
- 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:
a) Assess the efficiency and effectiveness of operations
- In an assurance engagement, the practitioner’s conclusion is based on:
a) Absolute assurance
b) Reasonable assurance
c) Limited assurance
d) Expert opinion
Answer:
b) Reasonable assurance
- 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:
b) Compilation engagement
- 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:
b) Management
- 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:
b) An opinion on the fairness of financial statements
- 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:
a) International Auditing and Assurance Standards Board (IAASB)
- 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:
b) Limited assurance on the subject matter
- _______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:
c) Providing an independent assessment of financial statement
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:
b) A third-party auditing firm independent of the organization
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: d) To safeguard assets and prevent fraud
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: c) Financial statements and records
- 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: d) It helps investors make informed decisions about the organization.
- 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: d) External audits provide an independent assessment of financial statements.
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: a) An external audit focuses on financial statements, while an internal audit focuses on operational processes.
- Which of the following is NOT a typical user of the external auditor’s report?
a) Shareholders
b) Customers
c) Regulators
d) Investors
Answer: b) Customers
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: d) Enhancing shareholder value while protecting stakeholders
interests
- 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: b) The system of rules, practices, and processes by which a company is directed and controlled
