44 Free Test Bank for Auditing A Risk Based Approach to Conducting a Quality Audit 9th Edition by Johnstone

44 Free test bank for Auditing A Risk Based Approach to Conducting a Quality Audit 9th Edition by Johnstone Multiple Choice Questions provides free essential questions on auditing with contemporary answers to develop profession in auditing which is significant to revise problems in the academic concepts and day-to-day practice.

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Which the following is not a reason for a public company to receive an audit?

•  Potential bias in providing information.
•  Closeness between a user and the organization.
•  Complexity of the processing systems.
•  Remoteness between a user and the organization.

Why does the AICPA remain a valuable organization?

•  Its continued involvement in the enforcement of auditing standards, particularly for public companies.
•  Its continued involvement in the regulation and enforcement of the audit profession.
•  Its continued involvement in the education and administration of the CPA exam.
•  Its continued involvement in the promulgation of accounting standards.

What must an auditor do in an audit?

•  Consider how the economic activity is portrayed in the financial statements.
•  Force management to make operational decisions that will improve the company’s financial performance.
•  Disregard independence in order to find the underlying truth of the evidence.
•  Establish new criteria by which financial statements may be compared.

Which of the following groups is not a user of the audited financial statements?

•  Management.
•  Vendors.
•  Retired Employees.
•  Competitors.

Which of the following is most often the client’s preferred audit report?

•  Qualified.
•  Unqualified.
•  Adverse.
•  Disclaimer.

What should internal controls be design to do?

•  Detect errors.
•  Detect and prevent errors.
•  Prevent errors.
•  Eliminate the possibility of fraud.

Which one of the following is not a management expectation for independent auditors?

•  An outside source of expertise on accounting matters.
•  Individuals who perform tests and draw conclusions on assertions.
•  A participant in management decision making.
•  A provider of a written communication.

According to the AICPA, which of the following is not a safeguards to the auditing profession?

•  Education.
•  Professional standards.
•  External reviews.
•  Legislation concerning competency requirements.

What is the first phase in an audit?

•  Client acceptance or client continuance.
•  Understanding the client.
•  Understanding internal controls.
•  Testing of account balances.

Which one of the following is not an example of an independence violation?

•  Audit partner’s spouse is the CFO at a client.
•  Audit firm accepts money for conducting the audit.
•  Auditors owning a small amount of stock in a client.
•  Providing investment tips to friends about clients.

According to the Financial Reporting Council (FRC), when is the culture of an audit firm likely to provide a positive contribution to audit quality?

•  When the leadership of the audit firm ensures partners and other staff have sufficient time and resources to deal with difficult issues as they arise.
•  When the leadership of the audit firm ensures robust systems for client acceptance and continuation based on ability to pay fees.
•  When the leadership of the audit firm creates an environment where achieving efficiency is valued, invested in and rewarded.
•  When the leadership of the audit firm ensures financial considerations drive actions.

Congress authorized which of the following organizations to establish generally accepted accounting principles?

•  SEC.
•  APB.
•  AICPA.
•  FASB.

Which of the following does the public expect of auditors?

•  Understand and enforce principles that best portray the spirit of FASB concepts.
•  Be neutral to preparers and users of financial information.
•  Recognize that the investing public is the primary user of audit services.
•  Take responsibility for the discovery of fraud.
•  All of the above are expectations of the public.

What must audit firms do to perform financial statement audits for public companies?

•  Register with the American Institute of Certified Public Accountants.
•  Register with the Institute of Internal Auditors.
•  Register with the U.S. General Accounting Office.
•  Register with the Public Company Accounting Oversight Board.

As it relates to an audit, which of following statement about professional skepticism is true?

•  Professional skepticism is not taken into consideration.
•  Professional skepticism relates only to the nature of procedures performed.
•  Professional skepticism is an attitude.
•  Professional skepticism is determined based upon the importance to a user of the financial statements.

Which of the following procedures do third-party users of the audit report not expect the auditor to perform?

•  Evaluate measurements and disclosures made by management.
•  Provide a biased evaluation of the financial statements.
•  Determine whether financial statements are presented in accordance with GAAP.
•  Gather sufficient appropriate evidence to support their opinion.

Which one of the following is not an example of a typical review program?

•  Interoffice reviews.
•  Engagement quality review.
•  Peer reviews.
•  Self reviews.

What is the term used to describe a systematic process of objectively obtaining evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users?

•  Internal audit.
•  Financial audit.
•  External audit.
•  Integrated audit

What is the audit committee of the board of directors of a company is responsible for?

•  Hiring the auditor.
•  Preparing the financial statements.
•  The audit workpapers.
•  Obtaining evidence.

Which type of auditor may perform a financial statement audit?

•  Public company auditors.
•  Internal auditors.
•  External auditor.
•  A and C.

Who licenses CPAs?

•  The PCAOB.
•  The AICPA.
•  The state boards of accountancy.
•  The SEC.

Audit committees play an important role in promoting independence of both internal and external auditors. Which of the following is the most important limitation on the effectiveness of audit committees?

•  Audit committees may have close personal and professional friendships with management.
•  Audit committee members are compensated by the PCAOB.
•  Audit committees devote their efforts to external audit concerns and do not
•  pay much attention to internal auditing.
•  Audit committee members are required to have degrees in non-accounting fields.

Which one of the following is not a key attribute needed to perform an audit?

•  Subject matter knowledge.
•  Independence.
•  Established criteria or standards.
•  Accounting skills.

Which of the following is not part of the systematic process called auditing?

•  Communicating results of the audit to users.
•  Procuring and evaluating evidence.
•  Providing important managerial decisions for a client.
•  Comparing evidence regarding assertions to certain established criteria.

About what should an auditor assure audit committees have an accurate understanding?

•  Any meaningful threats to auditor objectivity.
•  The scope of the audit.
•  The qualitative aspects of the entity’s accounting and reporting and potential ways of improving financial reporting.
•  All of the above.

Who does the public expect the auditor will recognize as the primary users of the audited financial statements?

•  Their clients.
•  The Public Company Accounting Oversight Board.
•  Members of management.
•  Third-party users.

What can users of the audit report reasonably expect from the audited financial statements?

•  The financial statements are complete and contain many of the important financial disclosures.
•  The financial statements are presented fairly according to the substance of GAAP.
•  The financial statements are free from all errors.
•  All of the above.
•  None of the above.

Who is responsible for internal controls within an organization?

•  The internal auditor.
•  The external auditor.
•  Management.
•  The PCAOB.

An Integrated Audit Report provides opinion(s) on which of the following?

•  The financial statements.
•  Internal controls.
•  Both financial statements and internal controls.
•  Neither financial statements or internal controls.

An “integrated audit” includes an audit of what?

•  The company’s internal controls.
•  The company’s financial statements.
•  The company’s compliance with its rules and policies.
•  Both A and B.

Which one of the following is a potential problem with management's communication of financial information that causes third parties to desire the independent auditor's assessment of the financial statement presentation?

•  Complexity of transactions affecting the financial statements.
•  Lack of criteria on which to base information.
•  Remoteness of the user from the organization.
•  Both A and C.
•  Both A and B.