AUDIT tut 1

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

• 1) It is difficult to prepare financial statements that fairly present a company’s financial position, operations, and cash flows without the expertise of an independent auditor

• ) It is management’s responsibility to seek available independent aid in the appraisal of the financial information shown in its financial statements.

• The opinion of an independent party is needed because a company may not be objective with respect to its own financial statement

• It is a customary courtesy that all stockholders of a company receive an independent report on management’s stewardship of the affairs of the business

Which of the following professional services is an attestation engagement?

• A consulting service engagement to provide computer-processing advice to a client

• An engagement to report on compliance with statutory requirements

• An income tax engagement to prepare federal and state tax returns

• (4) The preparation of financial statements from a client’s financial records

Which of the following attributes is likely to be unique to the audit work of CPAs as compared to the work performed by practitioners of other professions?

• Independence

• (2) Competence

• Due professional care

• (4) Complex body of knowledge

Operational audits generally have been conducted by internal auditors and governmental audit agencies but may be performed by certified public accountants. A primary purpose of an operational audit is to provide . . .

• (1) a means of assurance that internal accounting controls are functioning as planned

• (2) a measure of management performance in meeting organizational goals

• (3) the results of internal examinations of financial and accounting matters to a company’s top-level management

• (4) aid to the independent auditor, who is conducting the audit of the financial statements

Which of the following best describes the operational audit?

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

• 2) It concentrates on implementing financial and accounting control in a newly organized company

• (3) It focuses on verifying the fair presentation of a company’s results of operations

• (4) It concentrates on seeking aspects of operations in which waste could be reduced by the introduction of controls.

Compliance auditing often extends beyond audits leading to the expression of opinions on the fairness of financial presentation and includes audits of efficiency, economy, effectiveness, as well as . .

• (1) accuracy

• (2) adherence to specific rules or procedures

• (3) evaluation.

• (4) internal control

. Which of the following is considered an assurance engagement?

• (1) Bookkeeping

• (2) Preparation

• Compilation

• (4) Audit

Which of the following engagements is most likely to be considered an operational audit?

• (1) The auditor evaluates the organization’s efficiency in processing payments

• (2) The auditor examines information presented in an entity’s financial statements to determine whether the financial statements are presented fairly in accordance with the applicable financial reporting framework.

• (3) The auditor determines whether the organization is following provisions of laws and regulations.

• .(4) The auditor assists the client in preparation of financial statements.

about whether the financial statements are free of material misstatement in order to express an opinion. In order to obtain reasonable assurance, the auditor must

• (1) have prior experience in the industry in which the audit client operates.

• (2) examine all documents available that support the financial statements.

• (3) obtain sufficient audit evidence.

• (4) test controls around significant transaction cycles