Chapter 1 LO4

Question 1

what is the most common way for users to obtain reliable info ?

Answer 1

have an independent audit

Question 2

as a way to reduce info risk , what does:”User shares information risk with management” mean?

Answer 2

Management is responsible for providing reliable information, and may be held responsible in a lawsuit if inaccurate information is provided

Question 3

decision makers use audited info on the assumption that it is _____ what? (3)

Answer 3

reasonably 1. complete 2. accurate 3. unbiased

Question 4

what is Biases and motives of the provider in causes of info risk?

Answer 4

Information is provided by someone whose goals are inconsistent with those of the decision maker and may be biased

Question 5

Decision makers do not have firsthand knowledge and must rely on information provided by others.. what kind of cause of info risk is this?

Answer 5

remoteness of info

Question 6

What are the 3 main ways to reduce info risk?

Answer 6

1. user verifies info 2. user shares info risk with managers 3. auditied financial statments are provided

Question 7

Information is provided by someone whose goals are inconsistent with those of the decision maker and may be biased. what kind of cause of info risk is this

Answer 7

Biases and motives of the provider

Question 8

The user may go to the business to verify the information. what way of reducing info risk is this

Answer 8

user verifies info

Question 9

Higher volumes of transactions increase the likelihood of undetected errors. what kind of cause of info risk is this

Answer 9

voluminous data

Question 10

Transactions are increasingly complex and more difficult to record properly. Complex accounting standards are difficult to interpret and apply. what kind of cause of info risk is this

Answer 10

Complex exchange transactions

Question 11

as a way to reduce info risk, what does “User verifies information” entail

Answer 11

The user may go to the business to verify the information.

Question 12

what is remoteness of info?

Answer 12

Decision makers do not have firsthand knowledge and must rely on information provided by others.

Question 13

what is the difficulty with sharing info risk with managment?

Answer 13

users may not be able to collect on losses. if company goes bankrupt…unlikely managment have funds to repay users

Question 14

Management is responsible for providing reliable information, and may be held responsible in a lawsuit if inaccurate information is provided. what way of reducing info risk is this?

Answer 14

user shares info risk with managers

Question 15

external users like stockholders and lenders who rely on those financial statement to make business decisions look the auditors report as an indication of what?

Answer 15

the statements reliability

Question 16

what is Complex exchange transactions as a cause of info risk?

Answer 16

Transactions are increasingly complex and more difficult to record properly. Complex accounting standards are difficult to interpret and apply.

Question 17

what is an example of Biases and motives of the provider in causes of info risk?

Answer 17

used care salesman. he wants to sell you want a good deal. these goals are inconsistent

Question 18

what is voluminous data in cause of info risk?

Answer 18

Higher volumes of transactions increase the likelihood of undetected errors

Question 19

why do bus value the auditors assurance about financial statments being reasonalby complete, accurate, and unbiased?

Answer 19

because of the auditors independence fromt he client and knowledge of financial statement reporting matters

Question 20

as a way to reduce info, what does “User verifies information” entail

Answer 20

The user may go to the business to verify the information.

Question 21

what do stockholders and lenders who use financial statement look at to see whether or not the statement is reliable?

Answer 21

the auditors report

Question 22

what is an 2example of a a user performing their own verification

Answer 22

1.IRS verifies bus and ind tax returns to determine whetther tax return filed reflect actual tax due 2. business going to buy another business and will use audit team to indepently very and evaluate key info of the prospective business

Question 23

what is remoteness of info?

Answer 23

Decision makers do not have firsthand knowledge and must rely on information provided by others.

Question 24

what is an 2example of a a user performing their own verification

Answer 24

1.IRS verifies bus and ind tax returns to determine whetther tax return filed reflect actual tax due 2. business going to buy another business and will use audit team to indepently very and evaluate key info of the prospective business

Question 25

Information is provided by someone whose goals are inconsistent with those of the decision maker and may be biased. what kind of cause of info risk is this

Answer 25

Biases and motives of the provider

Question 26

a user verifying info as a way to reduce info risk is often _____ and _____

Answer 26

costly impractical

Question 27

what are the 4 causes of info risk?

Answer 27

1. remoteness of info 2. biases and motives of the provider 3. voluminous data 4. complex exchange transactions

Question 28

External auditors are engaged to provide assurance that the financial statements are reliable. what way of reducing info risk is this

Answer 28

auditied financial statments are provided

Question 29

what is voluminous data in cause of info risk?

Answer 29

Higher volumes of transactions increase the likelihood of undetected errors

Question 30

typically who engages the auditor to provide assurances to users that the financial statments are reliable? for private company? for public?

Answer 30

private- management public- audit committee

Question 31

Transactions are increasingly complex and more difficult to record properly. Complex accounting standards are difficult to interpret and apply. what kind of cause of info risk is this

Answer 31

Complex exchange transactions

Question 32

what are the 4 causes of info risk?

Answer 32

1. remoteness of info 2. biases and motives of the provider 3. voluminous data 4. complex exchange transactions

Question 33

T/F after comparing costs and benefits, bus managers and financial statment user by conclue best way to deal ith info risk is to have it remain reasonably high since it may be less expensive to do so that incur costs of reducing info risk

Answer 33

T

Question 34

T/F when info is obtained form others, the likelihood of it being intentiaonally or not misstated increase what kind of cause of info risk is this?

Answer 34

T remoteness of info

Question 35

T/F when info is obtained form others, the likelihood of it being intentiaonally or not misstated increase what kind of cause of info risk is this?

Answer 35

T remoteness of info

Question 36

what is an example of Biases and motives of the provider in causes of info risk?

Answer 36

used care salesman. he wants to sell you want a good deal. these goals are inconsistent

Question 37

Transactions are increasingly complex and more difficult to record properly. Complex accounting standards are difficult to interpret and apply. what kind of cause of info risk is this

Answer 37

Complex exchange transactions

Question 38

Higher volumes of transactions increase the likelihood of undetected errors. what kind of cause of info risk is this

Answer 38

voluminous data

Question 39

as a way to reduce info risk , what does “Audited financial statements are provided” mean?

Answer 39

External auditors are engaged to provide assurance that the financial statements are reliable.