QUIZ 1 – SOLUTIONS (ANSWERS IN BOLD)
Instructions: Circle the letter for the answer you select. True/False and Multiple Choice are 2 points each. Short Answer Questions are 3 points each 1. Auditing services and attestation services are the same. A. True
2. Why do auditors generally use a sampling approach to evidence gathering? A. Auditors are experts and do not need to look at much to know whether the financial statements are correct or not. B. Auditors must balance the cost of the audit with the need for precision. C. Auditors must limit their exposure to their client to maintain independence. D. The auditor's relationship with the client is generally adversarial, so the auditor will not have access to all of the financial information of the company.
3. The basic purpose of a financial statement audit is to
A. Detect fraud.
B. Examine individual transactions so that the auditor may certify as to their validity. C. Provide assurance regarding whether the client's financial statements are fairly stated. D. Assure the consistent application of correct accounting procedures.
4. Which of the following best describes the concept of audit risk? A. The risk of the auditor being sued because of association with an audit client. B. The risk that the auditor will provide an unqualified opinion on financial statements that are, in fact, materially misstated. C. The overall risk that a material misstatement exists in the financial statements. D. The risk that auditors use audit procedures that are inappropriate. 2
5. Which of the following best describes the fundamental, underlying reason for why there is demand for an independent auditor to report on financial statements? A. A management fraud may exist and it is more likely to be detected by auditors if they are independent. B. Different interests may exist between the company preparing the statements and the parties using...
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