Ch 1 HW

Question 1

1) Financial decision makers demand reliable information that is provided by accountants.

True or False

Answer 1

True

Question 2

2) financial decision makers obtain their accounting information from lenders of funds

T or F?

Answer 2

False

Question 3

3) Four conditions that create demand for reliable information are complexity, remoteness, timeliness, and consequences.

True
False

Answer 3

True

Question 4

4) The lending of credibility to financial information is known as certification.

True
False

Answer 4

False

Question 5

5) Independent auditors are employees of the client.

True
False

Answer 5

False

Question 6

6) the assurance service is the systematic process of objectively obtaining and evaluating evidence

T or F?

Answer 6

False

Question 7

7) Evidential matter consists of assertions about economic actions and events.

T or F

Answer 7

False

Question 8

8) The purpose of obtaining and evaluating evidence is to ascertain the degree of correspondence between the assertions and established criteria.

T or F

Answer 8

True

Question 9

9) The AICPA Statement on Auditing Standards defines auditing more broadly than the AAA definition of auditing

T or F?

Answer 9

False

Question 10

10) The PCAOB audit objective related to the completeness assertion is to establish evidence that assets, liabilities, and equities actually exist

T or F?

Answer 10

False

Question 11

11) The ASB balance audit objective related to valuation or accuracy is to determine whether proper values have been assigned to assets, liabilities, equities, revenues and expenses.

T or F

Answer 11

True

Question 12

12) One objective of internal auditing is to ultimately assist members of an organization to perform their work more effectively and efficiently

T or F?

Answer 12

True

Question 13

13) Internal auditors perform only operational audits

T or F?

Answer 13

False

Question 14

14) Government auditors perform both financial and performance audits.

T or F

Answer 14

True

Question 15

15) Expanded scope governmental auditing includes economy audits, efficiency audits and program results audits

T or F?

Answer 15

True

Question 16

16) The AICPA licenses CPAs to practice in the United States.

T or F

Answer 16

False

Question 17

17) Professional skepticism is an auditor’s tendency not to believe anyone.

T or F

Answer 17

False

Question 18

18)

Answer 18

18)

Question 19

19) The concept of “professional skepticism” requires that auditors assume that management is honest and should be trusted.
True
False

Answer 19

False

Question 20

20) For independent auditors of financial statements in the United States, established criteria largely consist of the generally accepted accounting
principles (GAAP).

True
False

Answer 20

True

Question 21

21) Which of the following is not an underlying condition that creates demand by users for reliable financial information?
	A) Consequences.
	B) Vagueness.
	C) Remoteness.
	D) Complexity.

Answer 21

B) Vagueness

Question 22

22) According to the American Accounting Association (AAA), the definition of auditing includes the following statement
A) an expression of opinion on the fairness of financial statements.
B) a process of reducing to a socially acceptable level the information risk to users of financial statements.
C) an independent appraisal function established within an organization to examine and evaluate its activities.
D) a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events.

Answer 22

D) a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events.

Question 23

23) Which of the following is not a major element of assurance services?
A) Improving the context of information.
B) Independence.
C) Improving profitability of the client.
D) Improving the quality of information.

Answer 23

C) Improving profitability of the client.

Question 24

24) The goal of operational auditing is to
A) evaluate compliance with specific laws and regulations.
B) reduce to a socially acceptable level the information risk to users of financial statements.
C) help managers complete their responsibilities more effectively and improve profitability.
D) express an opinion on the fairness of financial statements.

Answer 24

C) help managers complete their responsibilities more effectively and improve profitability.

Question 25

25) The PCAOB assertions made by management in financial statements do not include
A) Presentation and disclosure.
B) compliance.
C) completeness.
D) existence.

Answer 25

B) compliance.

Question 26

26) Which of the following is not a role of the AICPA?
A) License the practices of CPAs in the various states.
B) Refine the body of professional knowledge, regulate membership admissions, and police conduct of members.
C) Prepare and grade the uniform CPA examination.
D) Issue public statements on practice standards.

Answer 26

A) License the practices of CPAs in the various states.

Question 27

27) The ASB transaction objective that requires the auditor to establish evidence that all transactions and accounts that should be presented in the financial statements are included is?
A) Completeness.
B) Rights and obligations.
C) Existence or occurrence.
D) Valuation or allocation.

Answer 27

A) Completeness.

Question 28

28) Which of the following is an example of a regulatory auditor?
A) Operational auditors.
B) U.S. Internal Revenue Service auditors.
C) Big 4 auditors.
D) Internal auditors.

Answer 28

B) U.S. Internal Revenue Service auditors.

Question 29

29) The definition of performance audits does not include
A) financial audits.
B) program audits.
C) economy audits.
D) efficiency audits.

Answer 29

A) financial audits.

Question 30

30) CPA certificates and licenses to practice are issued by the
A) States or territories of the United States.
B) GAO.
C) AICPA.
D) AICPA Examinations Division.

Answer 30

A) States or territories of the United States.

Question 31

31) Audits may be characterized as (a) financial statement audits, (b) compliance audits, or (c) operational audits. The work can be done by (a) independent (external) auditors, (b) internal auditors, or (c) government auditors. Below is a list of several audit engagements. For each engagement indicate (a) the type of audit and (b) who would typically do the audit.

Render an opinion on the fairness of the presentation of financial statements of a public corporation.

Type of audit Typical auditor

A) compliance audit government (Department of Defense)

B) operational audit independent (CPA)

C) compliance audit government (IRS)

D) operational audit internal (or external)

E) financial statement audit independent (CPA)

Answer 31

E) financial statement audit independent(CPA)

Question 32

32)
Audits may be characterized as (a) financial statement audits, (b) compliance audits, or (c) operational audits. The work can be done by (a) independent (external) auditors, (b) internal auditors, or (c) government auditors. Below is a list of several audit engagements. For each engagement indicate (a) the type of audit and (b) who would typically do the audit.

Compare the cost of maintaining a fleet of delivery trucks with the option of using an independent delivery service.

Type of Audit Typical auditor

A) financial statement audit independent (CPA)

B) compliance audit government (IRS)

C) operational audit independent (CPA)

D) operational audit internal (or external)

E) compliance audit government (Department of Defense)

Answer 32

D) operational audit internal (or external)

Question 33

33)
Audits may be characterized as (a) financial statement audits, (b) compliance audits, or (c) operational audits. The work can be done by (a) independent (external) auditors, (b) internal auditors, or (c) government auditors. Below is a list of several audit engagements. For each engagement indicate (a) the type of audit and (b) who would typically do the audit.

Audit reported income on a corporation’s tax return.

Type of audit Typical auditor

A) compliance audit government (IRS)

B) financial statement audit independent (CPA)

C) compliance audit government (Department of Defense)

D) operational audit independent (CPA)

E) operational audit internal (or external)

Answer 33

A) compliance audit government (IRS)

Question 34

34)
Audits may be characterized as (a) financial statement audits, (b) compliance audits, or (c) operational audits. The work can be done by (a) independent (external) auditors, (b) internal auditors, or (c) government auditors. Below is a list of several audit engagements. For each engagement indicate (a) the type of audit and (b) who would typically do the audit.

Review contract cost of constructing aircraft engines for the United States armed services.

Type of audit Typical auditor

A) operational audit independent (CPA)

B) compliance audit government (Department of Defense)

C) compliance audit government (IRS)

D) financial statement audit independent (CPA)

E) operational audit internal (or external)

Answer 34

B) compliance audit government (Department of Defense)

Question 35

35)
Audits may be characterized as (a) financial statement audits, (b) compliance audits, or (c) operational audits. The work can be done by (a) independent (external) auditors, (b) internal auditors, or (c) government auditors. Below is a list of several audit engagements. For each engagement indicate (a) the type of audit and (b) who would typically do the audit.

Report on how the installation of a new computer system would help a client reduce data processing costs and improve financial reporting.

Type of audit Typical auditor

A) operational audit independent (CPA)

B) operational audit internal (or external)

C) financial statement audit independent (CPA)

D) compliance audit government (Department of Defense)

E) compliance audit government (IRS)

Answer 35

A) operational audit independent (CPA)