27 Free Test Bank for Auditing and Assurance Services A Systematic Approach 8th Edition by Messier

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Which of the following best describes why an independent auditor is asked to express an opinion on the fair presentation of financial statements?

•  A. It is difficult to prepare financial statements that fairly present a company's financial position and changes in cash flows without the expertise of an independent auditor.
•  B. It is management's responsibility to seek available independent aid in the appraisal of the financial information shown in its financial statements.
•  C. The opinion of an independent party is needed because a company is not likely to be considered objective with respect to its own financial statements.
•  D. It is a customary courtesy that all stockholders of a company receive an independent report on management's stewardship in managing the affairs of the business.

For publicly-held companies, which of the following is integrated into the audit of financial statements?

•  A. Budgetary information audit.
•  B. The audit of internal controls.
•  C. Audit of management forecasts.
•  D. Audit of interim financial statements.

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.

Assurance services may improve all of the following except

•  A. Relevance.
•  B. Credibility.
•  C. Periodicity.
•  D. Reliability.

An auditor who accepts an audit engagement and does not possess expertise with respect to the business entity's industry, should

•  A. Engage financial experts familiar with the nature of the business entity.
•  B. Obtain a knowledge of matters that relate to the nature of the entity's business.
•  C. Refer a substantial portion of the audit to another CPA, who will act as the principal auditor.
•  D. First inform management that an unqualified opinion cannot be issued.

Before accepting an engagement to audit a new client, an auditor is required to

•  A. Make inquiries of the predecessor auditor.
•  B. Tell the client whether or not the auditor is willing to issue a "clean" opinion.
•  C. Prepare a memorandum setting forth the staffing requirements and documenting the preliminary audit plan.
•  D. Become a member of the client's board of directors.

Which of the following statements is not true with respect to assurance, attest, and audit services?

•  A. These services are applied only to financial statements and financial statement accounts.
•  B. These services all involve obtaining and evaluating evidence.
•  C. These services all involve determining the correspondence of some information to a set of criteria.
•  D. These services all involve issuing a report.

In the context of agency theory, information asymmetry refers to the idea that

•  A. Information can vary in its reliability.
•  B. Information can vary in its relevance.
•  C. Management has more information about the entity's true financial position than do the absentee owners (i.e. stockholders).
•  D. Management likely will not act in the best interests of the absentee owners.

Which of the following statements about the study of auditing is NOT true?

•  A. The study of auditing can be valuable to future accountants and business decision makers whether or not they plan to become auditors.
•  B. The study of auditing focuses on learning the analytical and logical skills necessary to evaluate the relevance and reliability of information.
•  C. The study of auditing focuses on learning the rules, techniques, and computations required to analyze financial statements.
•  D. The study of auditing begins with the understanding of a coherent logical framework and techniques useful for gathering and analyzing evidence about others' assertions.

An auditor would issue an adverse opinion if

•  A. The auditor encounters adverse attitudes toward the auditor on the part of client management.
•  B. A qualified opinion cannot be given because the auditor is not qualified to do so.
•  C. An immaterial misstatement is present.
•  D. The statements taken as a whole do not fairly present the financial condition and results of operations of the company.