acct 241 ch 1

  1. The underlying conditions that creat demand by users for reliable information include:

    E. all of the above
  2. Information risk refers to the risk that

    • A. the clients' financial statements may be materially false and
    • misleading
  3. Operational auditing refers to the study of business operations for the purpose of making recommendations for which of the following?

    A. economic and efficient use of resources
  4. Assurance services invlove which of the following?

    D. all of the above
  5. Professional skepticism dictates that when management makes a statement to the auditors, the auditors should

    • B. corroborate the evidence with other supporting documentation whenever
    • possible
  6. The primary responsibility for an organization's financial statements rests with

    A. management
  7. The audit objective that all transactions and accounts that should be presented in the financial statements are included is related to which assertion?

    E. completeness
  8. Which of the following best describes the main reason independent auditors report on management's financial statements?

    • B. the management that prepares the statements and ther persons who use
    • the statements may have conflicting interests.
  9. The audit objective that all footnotes have been included in the financial statements is related most closely to which assertation?

    A. presentation and disclosure
  10. Which of the following is an ASB balance assertion about fixed assets related to "accuracy and valuation"?

    B. fixed assets depressiation has been correctly calculated
  11. Which of the following would be considered an assuranceengagement?

    E. All of the above.
  12. It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that:

    • B. a potential conflict of interest always exists between the auditor
    • and the management of the enterprise under audit
  13. In an attestation engagement, a CPA practitioner is engaged to:

    • C. prepare a written report containing a conclusion about the
    • reliability of a management assertion
  14. A determination of cost savings obtained by outsourcing cafeteria services is most likely to be an objective of:

    C. operational auditing
  15. The primary difference between operational auditing and financial auditing is that in operational auditing:

    C. the auditor is seeking to help management use resources in the most effective manner possible
  16. According to the AICPA, the objective of an audit of financial statements is:

    • A. an expression of opinion on the fairness with which they present
    • financial position results of operations, and cash flows in conformity
    • with generally accepted accounting principles
  17. Bankers who are processing loan applications from companies seeking large loans will probably ask for financial statements audited by an independent CPA because:

    • D. they generally see a potential conflict of interest between company
    • managers who want to get loans and the bank’s needs for reliable
    • financial statements
  18. The Sarbanes-Oxley Act of 2002 prohibits professional service firms from providing which of the following services to an audit client?

    D. All of the above
  19. Independent auditors of financial statements perform audits that reduce and control:

    D. information risk faced by investors
  20. The primary objectives of compliance auditing is to:

    • B. determine whether auditee personnel are following laws, rules,
    • regulations, and policies
  21. What requirements are usually necessary to become licensed as a Certified Public Accountant?

    D. All of the above.
  22. The organization primarily responsible for ensuring that public officials are using public funds efficiently, economically, and effectively is the:

    A. General Accounting Organization (GAO)
  23. Performance audits usually include (two answers):

    C. Economy and efficiency audits.
  24. The objective in an auditor’s review of credit ratings of a client’s customers is to obtain evidence related to management’s assertion about:

    D. valuation or allocation
  25. Jones, CPA, is planning the audit of Rhonda’s Company. Rhonda verbally asserts to Jones that all the expenses for the year have been recorded in the accounts. Rhonda’s representation in this regard:

    • A. is not considered a sufficient basis for Jones to conclude that all
    • expenses have been recorded
  26. The risk to investors that a company’s financial statements may be materially misleading is called:

    C. information risk
  27. When auditing merchandise inventory at year-end, the auditor performs audit procedures to ensure that all goods purchased before year-end are received before the physical inventory count. This audit procedure provides assurance about which management assertion?

    A. Cutoff.
  28. When auditing merchandise inventory at year-end, the auditor performs audit procedures to obtain evidence that no goods held on consignment for customers are included in the inventory balance. This audit procedure provides assurance about which management assertion?

    B. Rights and obligations.
  29. When an auditor reviews additions to the equipment (fixed asset) account to make sure that repair and maintenance expenses are not
    understated, she wants to obtain evidence as to management’s assertion regarding:

    D. existence
Card Set
acct 241 ch 1
acct 241 ch 1