Audit Final Exam 117 Questions with 100% Correct Answers

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Audit Final Exam 117 Questions with 100% Correct Answers Which of the following statements best describes a relationship between sample size and other elements of auditing? A. If materiality in... creases, so will the sample size. B. If the desired level of assurance increases, sample sizes can be smaller. C. If materiality decreases, sample size will need to increase. D. There is no relationship between sample size and materiality or the desired level of assurance. -Ans-C 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 auditee's financial statements are fairly stated. D. Assure the consistent application of correct accounting procedures. -Ans-c Assurance services may improve all of the following except A. Relevance. B. Credibility. C. Periodicity. D. Reliability. -Ans-c Which of the following best describes the concept of audit risk? A. The risk of the auditor being sued because of association with an auditee. B. The risk that the auditor will provide a "clean" 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 -Ans-b During the first phase of an audit, a CPA most likely would A. Identify specific internal control activities that are likely to prevent fraud. B. Evaluate the reasonableness of the company's accounting estimates. C. Evaluate the integrity of management. D. Inquire of the company's attorney as to whether any unrecorded claims are probable or asserted. -Ans-c 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 the statements. C. A misstatement of account balances may exist and it is the independent auditor's responsibility to ensure that financial statements are not misstated. D. A poorly designed internal control system may be in place. -Ans-b Which of the following would best be described as an assurance service? A. Preparing a report representing a client's position during an IRS audit. B. Working with a company to develop a more efficient method of processing financial transactions. C. Offering an opinion concerning the accuracy of statements made on an entity's website relating to its online privacy policies. D. Assisting a company in identifying potential sources of capital for potential acquisitions -Ans-c Auditors are most likely to use the most rigorous audit procedures to examine A. Routine transactions. B. Management assertions that are deemed to be of low risk . C. Only the rights and obligations assertion. D. Management assertions that are deemed to be of high risk. -Ans-d When obtaining an understanding of the entity and its environment, the auditor should obtain an understanding of internal controls primarily to A. Identify areas of relatively high risk of misstatement and plan the audit accordingly. B. Provide suggestions for improvement to the company. C. Serve as a basis for setting audit risk and materiality. D. Decide whether to perform an audit for the company. -Ans- [Show More]

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