The primary objective of auditing is to add credibility to the financial statements prepared by management

ACCOUNTING

AUDITING - True or False / Multiple Choice / Matching Type

1. The primary objective of auditing is to add credibility to the financial statements prepared by management. True or False

2. Auditing is not possible in the absence of verifiable data. True or False

3. Compliance with “Statements on Auditing Standards” is mandatory for all auditors. True or False

4. The training called for by the first general standard comes solely from practical experience. True or False

5. The second general standard likens the auditor’s role in an audit to the role of an attorney in a legal case. True or False

6. The susceptibility of an assertion to a material misstatement, assuming that there are no controls, is: (Multiple Choice)

7. The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated is: (Multiple Choice)

8. The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity’s internal controls is: (Multiple Choice)

9. The least costly form of testing is usually: (Multiple Choice)

10. In practice, the use of analytical procedures has proven to be: (Multiple Choice)

11. Assume the preliminary audit strategy was based on a planned assessed level of control risk at a low level. Based on the final assessed level of control risk, the auditor would need to move substantive tests from interim to year-end and increase the extent of tests of details in order to accommodate a lower acceptable level of detection risk if: (Multiple Choice)

12. Tests of details of transactions generally use evidence from: (Multiple Choice)

13. The auditor would prepare a bank reconciliation using the bank statement obtained from the client and verify major reconciling items and mathematical accuracy when detection risk is: (Multiple Choice)

REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provided.
A. Existence or occurrence
B. Completeness
C. Valuation or allocation
D. Rights and obligations
E. Presentation and disclosure

14. Examine consignment agreements.

15. Examine check register for the month following year end for disbursements relating to the audit period.
16. Select high dollar items from the perpetual inventory records for inspection/counting during the physical inventory.

17. Select vendor accounts with high activity during the year, and low balance at year-end for confirmation.

18. Examine vehicle registration forms to determine the registered owner.

19. Measuring the amount of monetary errors in transactions and balances is a primary purpose of substantive tests. True or False

20. The extent of substantive tests, in practice means the length of time during which substantive tests are to be performed. True or False

Click here for the SOLUTION