AUDITING 1

An audit of financial statements is conducted to determine if the

• A.Client’s internal control is functioning as intended.

• B. Organization is operating efficiency and effectively.

• C. Auditee is following specific procedures or rules set down by some higher authority.

• D. Overall financial statements are stated in accordance with the applicable financial reporting framework.

Which of the following describe the operational audit?

• A. In attempts and is designed to verify the fair presentation of a company’s results of operations.

• B. It concentrates on seeking out aspects of operations in which waste would be reduced by the introduction of controls.

• C. It requires the constant review by internal auditors of the administrative controls as they relate to operations of the company.

• D. It concentrates on implementing financial and accounting control in a newly organized company.

Which of the following statements is not a distinction between independent auditors and internal auditors?

• A. Independent auditors represent third party users external to the auditee entity, whereas internal auditors report directly to management.

• B. Internal auditors are employees of the auditee, whereas independent auditors are independent contractors

• C. Although independent auditors strive for both validity and relevance of evidence, internal auditors are concerned almost exclusively with validity.

• D. The internal auditor’s span of coverage goes beyond financial auditing to encompass operational and performance auditing

Which of the following has the primary responsibility for the fairness of the representations made in the financial statements?

• A. Client’s management.

• B. Audit Committee.

• C. Independent auditor.

• D. Board of Accountancy.

Which of the following statements does not describe a condition that creates a demand for auditing?

• A. Expertise is often required for information preparation and verification.

• B. Conflict between an information preparer and a user can result in biased information.

• C. Information can have substantial economic consequences for a decision-maker.

• D. Users can directly assess the quality of information.

Auditor’s primary responsibility is to detect errors and frauds.

• TRUE

• FALSE

Compliance audits evaluate the efficiency and effectiveness of any part of an organization’s operating procedures and methods.

• TRUE

• FALSE

Chartered Accountant firms are allowed to provide bookkeeping services for audit clients.

• TRUE

• FALSE

Recording, classifying and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called economics.

• TRUE

• FALSE

The majority of the members of audit committee should be executive directors of the company or related company.

• TRUE

• FALSE