Auditing Test #1- Chapter 6 Homework Questions

?The following questions concern the reasons auditors do audits. Which one of the following best describes the reason why an independent auditor reports on financial statements?

1. A misappropriation of assets may exist, and it is more likely to be detected by independent auditors.

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

3. A misstatement of account balances may exist and is generally corrected as the result of the independent auditor's work.

4. Poorly designed internal controls may be in existence.

?The following questions concern the reasons auditors do audits. An independent audit aids in the communication of economic data because the audit?

1. Confirms the accuracy of management's financial representations.

2. Lends credibility to the financial statements.

3. Guarantees that financial data are fairly presented.

4. Assures the readers of financial statements that any fraudulent activity has been corrected.

?The following questions concern the reasons auditors do audits. The major reason an independent auditor gathers audit evidence to?

1. Form an opinion on the financial statements.

2. Detect fraud

3. Evaluate management

4. Assess control risk

?An independent auditor has the responsibility to design the audit to provide reasonable assurance of detecting errors and fraud that might have a material effect on the FS. Which of the following, if material, is fraud as defined in auditing standards?

1. Misappropriation of an asset or groups of assets.

2. Clerical mistakes in the accounting data underlying the FS

3. Mistakes in the application of accounting principles

4. Misinterpretation of facts that existed when the FS were prepared.

?What assurance does the auditor provide that errors, fraud, and direct effect illegal acts that are material to the FS will be detected?

?Which of the following statements describes why a properly designed and executed audit may not detect a material misstatement in the FS resulting from fraud?

1. Audit procedures that are effective from detecting unintentional misstatements may be ineffective for an intentional misstatement that is concealed through collusion.

2. An audit is designed to provide reasonable assurance of detecting material errors,, but there is no similar responsibility concerning fraud.

3. The factor considered in assessing control risk indicated an increased risk of intentional misstatement, but only a low risk of unintentional misstatements.

4. The auditor did not consider factor influencing audit risk for account balances that have effects pervasive to the FS taken as a whole.

Assertions
?All sales transactions have been recorded?

Assertions
?Receivables are approximately classified as to trade and other receivables in the financial statements and are clearly described?

Assertions
?Accounts receivables are recorded at the correct amounts?

Assertions
?Sales transactions have been recorded in the proper period?

Assertions
?Sales transactions have been recorded in the appropriate accounts?

Assertions
?All required disclosures about sales and receivables have been made?

Assertions
?All accounts receivable have been recorded?

Assertions
?There are no liens or other restrictions on accounts receivable?

Assertions
?Disclosure related to receivable are at the correct amounts?