Audit of Financial Statements Quiz

The objective of an audit of the financial statements is an expression of an opinion on:

• the fairness of the financial statements in all material respects.

• the accuracy of the financial statements.

• the accuracy of the annual report.

• the accuracy of the balance sheet and income statement.

If the auditor believes that the financial statements are not fairly stated or is unable to reach a conclusion because of insufficient evidence, the auditor:

• should withdraw from the engagement.

• should request an increase in audit fees so that more resources can be used to conduct the audit.

• has the responsibility of notifying financial statement users through the auditor's report.

• should notify regulators of the circumstances.

Auditors accumulate evidence to:

• defend themselves in the event of a lawsuit.

• determine if the financial statements are correct.

• satisfy the requirements of the Securities Acts of 1933 and 1934.

• reach a conclusion about the fairness of the financial statements.

Which of the following is not one of the steps used to develop audit objectives?

• know the proper type of audit opinion to issue.

• divide the financial statements into cycles.

• know the management assertions about the financial statements.

• know the specific audit objectives for classes of transactions.

For publicly listed companies, the auditor also issues which of the following reports in addition to a report containing the auditor's opinion?

• A report on internal control over financial reporting

• A report on compliance with the Foreign Corrupt Practices Act (FCPA)

• A report on compliance with generally accepted accounting principles only

• A report on compliance with the Federal Securities Act

When developing the audit objectives, what is the first step?

• Divide the financial statements into cycles

• Understand the objectives and responsibilities for the audit

• Review compliance with accounting principles

• Prepare the auditor's opinion report

The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with which of the following?

• Board of directors

• Company management

• Financial statement auditor

• Company's internal audit department

If management insists on financial statement disclosures that the auditor finds unacceptable, the auditor can withdraw from the engagement or:

• Issue an adverse opinion

• Issue a qualified opinion

• Issue a disclaimer of opinion

• Issue a clean opinion

In certifying their annual financial statements, the CEO and CFO of a public company certify that the financial statements comply with the requirements of:

• GAAP

• the Sarbanes-Oxley Act

• the Securities Exchange Act of 1934

• GAAS

Which of the following statements is true of a public company's financial statements?

• Sarbanes-Oxley requires only the CEO to certify the financial statements.

• Sarbanes-Oxley requires only the CFO to certify the financial statements.

• Sarbanes-Oxley requires both the CEO and CFO to certify the financial statements.

• Sarbanes-Oxley requires neither the CEO nor the CFO to certify the financial statements.