TEST BANK for Auditing: A Practical Approach with Data Analytics, 2nd Edition by Raymond N. Johnson, Laura Davis Wiley

COMPLETE - Elaborated Test bank for Auditing-A Practical Approach with Data Analytics 2Ed. by Laura Davis Wiley , Raymond N. Johnson, Robyn Moroney, Fiona Campbell & Jane Hamilton. ALL Chapters(1-16) Included |1450| Pages - Questions & Answers Pass Auditing-A Practical Approach with Data Analytics in First Attempt Guaranteed!Get 100% Latest Exam Questions, Accurate & Verified Answers to Pass the Actual Exam! Instant Download! COMPLETE - Elaborated Test bank for Auditing-A Practical Approach with Data Analytics 2Ed. by Laura Davis Wiley , Raymond N. Johnson, Robyn Moroney, Fiona Campbell & Jane Hamilton. ALL Chapters(1-16) Included |1450| Pages - Questions & Answers Pass Auditing-A Practical Approach with Data Analytics in First Attempt Guaranteed!Get 100% Latest Exam Questions, Accurate & Verified Answers to Pass the Actual Exam! Instant Download! Auditing-A Practical Approach with Data Analytics 2Ed. by Laura Davis Wiley , Raymond N. Johnson, Robyn Moroney, Fiona Campbell & Jane Hamilton ISBN-10 1119785995 ISBN-13 978-1119785996 Introduction and Overview of Audit and Assurance Professionalism and Professional Responsibilities Risk Assessment Part 1: Audit Risk and Audit Strategy Risk Assessment Part 2: Understanding the Client Audit Evidence Gaining an Understanding of the Client’s System of Internal Control Risk Response: Performing Tests of Controls Audit Data Analytics Risk Response: Performing Substantive Procedures Risk Response: Audit Sampling for Substantive Procedures Auditing the Revenue Process Auditing the Purchasing and Payroll Processes Auditing Cash, Inventory, and Related Income Statement Accounts Auditing Investing and Financing Activities Completing the Audit Reporting on the Audit 4) Private companies, or non-issuers, are not required by the U.S. government to have an annual financial statement audit. Answer: TRUE Explanation: Private companies, or non-issuers, are not required by the U.S. government to have an annual financial statement audit, but often other interested users, such as a bank or lender, may request that a private company provide audited financial statements. Diff: 1 LO: 2 Bloom: Knowledge Min: 1 AACSB: Analytic AICPA: AC: Reporting 5) One of the reasons there is a demand for financial statement audits is that users of financial statements often lack accounting and legal knowledge to fully understand complex accounting and disclosure choices. Answer: TRUE Explanation: Financial statements are complex, the amounts are often affected by significant estimates, and the disclosures often require significant knowledge and experience to evaluate. Most financial statement users do not have the accounting and legal knowledge to assess the reasonableness of complex accounting and disclosure choices being made by the company. Diff: 1 LO: 3 Bloom: Comprehension Min: 1 AACSB: Analytic AICPA: PC: Communication 6) In financial accounting, the balance sheet is a statement of financial position. Answer: TRUE Explanation: In financial accounting, the financial statements include the balance sheet (statement of financial position), income statement (statement of comprehensive income), statement of cash flows, statement of changes in equity and accompanying notes. Diff: 1 LO: 3 Bloom: Knowledge Min: 1 AACSB: Analytic AICPA: PC: Communication 3 7) Business valuation falls within the purview of non-assurance services. Answer: TRUE Explanation: Many of these accounting firms provide non-assurance (or non-audit) services as well as assurance services. These non-assurance services include management consulting, business valuation, mergers and acquisitions, insolvency, tax and accounting services. Diff: 1 LO: 4 Bloom: Knowledge Min: 1 AACSB: Analytic AICPA: AC: Measurement Analysis and Interpretation 8) Securities Exchange Act of 1934 regulates the ongoing trading of securities after the initial public offering and requires the annual audit of a public company's financial statements. Answer: TRUE Explanation: The Securities Exchange Act of 1934 regulates the ongoing trading of securities after the initial public offering and requires the annual audit of a public company's financial statements. Diff: 1 LO: 5 Bloom: Knowledge Min: 1 AACSB: Ethics AICPA: BC: Governance Perspective 9) The Securities Act of 1933 enhances annual financial disclosures for public companies and placed more emphasis on corporate responsibility. Answer: FALSE Explanation: The Securities Act of 1933 regulates the disclosure of financial information in a company's initial public offering of stock and requires that the financial information be audited. Diff: 1 LO: 5 Bloom: Knowledge Min: 1 AACSB: Ethics AICPA: BC: Governance Perspective 10) Neither client characteristics nor actions of the auditor affect the audit risk. Answer: FALSE Explanation: Audit risk is affected by client characteristics as well as actions of the auditor. Diff: 1 LO: 6 Bloom: Knowledge Min: 1 AACSB: Ethics AICPA: AC: Reporting 4 11) Materiality is a relative concept, and it differs from company to company and from year to year for a given company. Answer: TRUE Explanation: Materiality is a relative concept, and it differs from company to company and from year to year for a given company. Auditors design an audit to provide reasonable assurance that the financial statements are free of material misstatement. However, auditors do not design an audit to look for immaterial misstatements because they would not influence a financial statement user. Diff: 1 LO: 6 Bloom: Knowledge Min: 1 AACSB: Ethics AICPA: AC: Reporting 12) When auditors determine that the financial statements of a public company are presented fairly in accordance with the applicable financial reporting framework, they issue a type of report that PCAOB standards call "the standard clean report." Answer: FALSE Explanation: If auditors have determined the financial statements are presented fairly in accordance with the applicable financial reporting framework, they issue the standard unqualified report. The PCAOB standards use the term "unqualified" report. Diff: 1 LO: 6 Bloom: Knowledge Min: 1 AACSB: Ethics AICPA: AC: Reporting 13) In an unqualified audit report on the financial statements of a public company, the concluding statement of the Basis for Opinion paragraph mentions reasonable basis for the audit firm's opinion. Answer: TRUE Explanation: The basis for opinion paragraph explains, in brief terms, the process of conducting an audit. It mentions the concept of reasonable assurance about whether the financial statements are free of material misstatement. It includes an explicit statement that PCAOB audit standards were followed because the audit pertains to a public company. The scope paragraph also includes a brief discussion of the professional judgments made during the audit. Finally, it concludes with a statement that the audit firm believes that its audit provides a reasonable basis for its opinion. Diff: 1 LO: 6 Bloom: Knowledge Min: 1 AACSB: Ethics AICPA: AC: Reporting 5 14) In an audit report on the effectiveness of ICFR for a public company, the basis for opinion paragraph states the different responsibilities of management and auditors. Answer: FALSE Explanation: In an audit report on the effectiveness of ICFR for a public company, the basis for opinion paragraph states the different responsibilities of management and auditors. Like the audit report on the financial statements, this paragraph references registration with the PCAOB and independence requirements of the SEC and other federal securities laws. Diff: 1 LO: 7 Bloom: Knowledge Min: 1 AACSB: Communication AICPA: BC: Governance Perspective 15) In an audit report on the effectiveness of ICFR for a public company, the Opinion on Internal Control over Financial Reporting paragraph mentions that auditors are only required to obtain reasonable assurance about whether the company maintained, in all material respects, effective ICFR. Answer: TRUE Explanation: In an audit report on the effectiveness of ICFR for a public company, the Opinion on Internal Control over Financial Reporting paragraph explains that auditors conducted their audit in accordance with the standards of the PCAOB. In brief terms, it explains the process of conducting an audit of the effectiveness of ICFR. It mentions that auditors are only required to obtain reasonable assurance about whether the company maintained, in all material respects, effective ICFR. It concludes with a statement that the audit firm believes its audit provides a reasonable basis for its opinion. Diff: 1 LO: 7 Bloom: Knowledge Min: 1 AACSB: Communication AICPA: BC: Governance Perspective 16) A financial statement user's expectations are only impacted by legislation. Answer: FALSE Explanation: A financial statement user's expectations are often impacted by audit standards, ethical standards, regulations, legislation, and firm policy and procedures. Diff: 1 LO: 8 Bloom: Knowledge Min: 1 AACSB: Communication AICPA: AC: Measurement Analysis and Interpretation 6 17) The audit expectation gap is caused by user expectations such as: The auditor will catch all instances of fraud. Answer: TRUE Explanation: The audit expectation gap is caused by unrealistic user expectations such as: the auditor is providing complete assurance; the auditor is guaranteeing the future viability of the entity; an unmodified audit opinion is an indicator of complete accuracy of the financial statements; the auditor will definitely find any and all fraud; and that the auditor has checked all transactions. Diff: 1 LO: 8 Bloom: Knowledge Min: 1 AACSB: Communication AICPA: AC: Reporting 18) Identify a service that falls under audit services. A) examination of historical financial statements B) compilation of historical financial statements C) inspection of website security D) review of financial forecast Answer: A Explanation: Examination of historical financial statements comes under audit services. Diff: 1 LO: 1 Bloom: Knowledge Min: 1 AACSB: Ethics AICPA: AC: Measurement Analysis and Interpretation 19) Examination of internal controls is a service that comes under ________ services, which fall under ________ services. A) audit; assurance B) assurance; attestation C) acceptable; assurance D) attestation; audit Answer: A Explanation: Attestation services (under the umbrella of assurance services) include review of historical financial statements, review of financial forecast, and examination of internal control. Diff: 1 LO: 1 Bloom: Knowledge Min: 1 AACSB: Ethics AICPA: AC: Measurement Analysis and Interpretation 7 20) Compared to an audit of historical financial statements, a review engagement is ________. A) less extensive and also less expensive B) more extensive and also more expensive C) less extensive but more expensive D) more extensive but less expensive Answer: A Explanation: In a review engagement, the practitioner expresses limited assurance that no material modifications need to be made to the financial statements. So, a review of historical financial statements is a less extensive, and therefore, less expensive service that can be very useful for smaller private companies. Diff: 1 LO: 1 Bloom: Comprehension Min: 1 AACSB: Ethics AICPA: AC: Measurement Analysis and Interpretation 21) Who are the only licensed accounting professionals in the United States? A) Certified Public Accountants (CPA) B) Chartered Accounts (CA) C) Financial Accountants (FA) D) Chief financial and operating officer (CFOO) Answer: A Explanation: Certified Public Accountants (CPA) are the only licensed accounting professionals in the United States. Diff: 1 LO: 1 Bloom: Knowledge Min: 1 AACSB: Ethics AICPA: AC: Measurement Analysis and Interpretation 22) As attestation services encompass more than just the inspection of historical financial statements, the term ________ is used rather than ________. A) practitioner; auditor B) auditor; practitioner C) intended user; auditor D) intended user; practitioner Answer: A Explanation: In attestation services, the term practitioner is used rather than auditor because attestation services encompass more than just the audit of historical financial statements. Diff: 1 LO: 1 Bloom: Knowledge Min: 1 AACSB: Communication AICPA: AC: Reporting 8 23) What services are defined as independent professional services that improve the quality of information, or its context, for decision makers? A) assurance services B) attestation services C) absolute assurance D) audit services Answer: A Explanation: Assurance services are defined as independent professional.