Chapter I. Auditing

Question 1

When the auditor has no reservations about management’s financial statements or internal controls, the report is referred to as:

Answer 1

Unqualified audit report

Question 2

What factors cause the need for independent assurance arise?

Answer 2

1. Potential bias
2. Remoteness
3. Complexity
4. Consequences

Question 3

What is the cornerstone of the auditing profession?

Answer 3

Independence

Question 4

What is the first step of the Audit Opinion Formulation Process?

Answer 4

Making client acceptance and continuance decisions

Question 5

What are the steps involved in the Audit Opinion Formulation Process?

Answer 5

1. Making client acceptance and continuance decisions
2. Performing risk assessment
3. Obtaining evidence about internal control operating effectiveness
4. Obtaining substantive evidence about accounts, disclosures and assertions
5. Completing the audit and making reporting decisions

Question 6

What is a financial statement audit?

Answer 6

It is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to intended users.