Multiple-Choice Questions

Question 1 (3 points)

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The best answer to describe auditing is

Question 1 options:

1)	a type of assurance service, but not an attest service.

2)	a type of attest service, but not an assurance service.

3)	both a type of attest service and assurance service.

4)	a type of attest service.

Question 2 (3 points)

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Which answer best describes a relationship between sample size and other elements of auditing?

Question 2 options:

1)	If materiality increases, so will the sample size.

2)	If the desired level of assurance increases, sample sizes can be smaller.

3)	If materiality increases, sample size will most likely decrease.

4)	There is no relationship between sample size and materiality or the desired level of assurance.

Question 3 (3 points)

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What is the best way to describe the concept of audit risk?

Question 3 options:

1)	The risk of the auditor being sued because of association with an auditee.

2)	The risk that the auditor will provide a "clean" opinion on financial statements that are, in fact, materially misstated.

3)	The overall risk that a material misstatement exists in the financial statements.

4)	The risk that auditors use audit procedures that are inappropriate.

Question 4 (3 points)

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What is the best reason for why there is demand for auditors to report on financial statements?

Question 4 options:

1)	A management fraud may exist and it is more likely to be detected by auditors if they are independent.

2)	Different interests may exist between the company preparing the statements and the parties using the statements.

3)	A misstatement of account balances may exist and it is the independent auditor's responsibility to ensure that financial statements are not misstated.

4)	A poorly designed internal control system may be in place.

Question 5 (3 points)

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Auditing is defined as a "systematic process of objectively obtaining and evaluating evidence regarding assertions..." What is meant by "systematic process"?

Question 5 options:

1)	All audits involve obtaining the same evidence.

2)	All audits involve evaluating evidence in the same manner.

3)	There should be a well-planned approach for obtaining and evaluating evidence.

4)	All assertions are equally important for all audits.

Question 6 (3 points)

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The auditor's report is typically addressed to

Question 6 options:

1)	the PCAOB.

2)

the SEC.

3)	investors.

4)	management.

Question 7 (3 points)

What is true about what the auditors report indicates?

Question 7 options:

1)	that the company's financial statements were audited in accordance with generally accepted accounting standards

2)	that the company's financial statements were audited in accordance with applicable auditing standards

3)	that the company's financial statements were audited in accordance with the auditor's best judgment

4)	that the company's financial statements were audited in accordance with statements issued by the FASB

Question 8 (3 points)

What answer best describes the concept of materiality?

Question 8 options:

1)	Materiality is determined by reference to specific quantitative guidelines established by the AICPA.

2)	Materiality depends only on the dollar amount of an item relative to other items in the financial statements.

3)	Materiality depends on the nature of an item but not on the dollar amount of the item.

4)	Materiality is largely a matter of professional judgment.

Question 9 (3 points)

Which is not a concept that is included in the scope paragraph of the auditor's report?

Question 9 options:

1)	The conformance of the financial statements with generally accepted accounting principles.

2)	The audit was conducted in accordance with applicable auditing standards.

3)	The audit was planned and performed to obtain reasonable, rather than absolute, assurance.

4)	An audit involves examining items on a test (i.e. sampling) basis.

Question 10 (3 points)

When does an auditor issue an adverse opinion?

Question 10 options:

1)	A misstatement of account balances were found and management corrected them.

2)	A qualified opinion cannot be given because the auditor is not qualified to do so.

3)	An immaterial misstatement is present.

4)	When the statements as a whole do not fairly present the financial condition and results of operations of the company.