Chapter 1: Practice Questions Flashcards
The underlying conditions that create demand by users for reliable information include:
- transactions that are numerous and complex.
- users separated from accounting records by distance and time.
- financial decisions that are important to investors and users.
- decisions that are time sensitive.
Information risk refers to the risk that:
the client’s financial statements may be materially false and misleading.
Operational auditing refers to the study of business operations for the purpose of making recommendations for which of the following?
Effective and efficient use of resources
Assurance services involve which of the following?
- Relevance and reliability.
- Nonfinancial information and traditional financial statements
- Electronic databases and printed reports
Professional skepticism dictates that when management makes a statement to the auditors, the auditors should:
corroborate the statement with other documentary evidence whenever possible.
The primary responsibility for an organization’s financial statements rests with:
management
The audit objective that all transactions and accounts that should be presented in the financial statements are included is related to which financial statement assertion?
Completeness
Which of the following best describes the main reason that independent auditors report on management’s financial statements?
The management team that prepares the statements and the persons who use the statements may have conflicting interests.
The audit objective that all footnotes have been included in the annual report is related most closely to which financial statement assertion?
Presentation and disclosure
Which of the following is a management financial statement assertion about fixed assets that relates to “valuation and allocation”?
The correct allocation of depreciation expense to the period benefited is closely related to the valuation or allocation assertion.
