Test Bank For Auditing An International Approach 7th Edition By Bewley
ISBN-10: 1259087468, ISBN-13: 9781259087462
| 1. |
Which of the following best describes the main reason that independent auditors report on a company’s financial statements?
| A. |
Management fraud may exist within the company and it is likely that the independent auditors will detect it. |
| B. |
Users of financial statements need confidence in the numbers they base their decisions on. |
| C. |
Misstated account balances may be corrected as the result of the independent audit work. |
| D. |
The accounting system from which the financial statements are derived may have a poorly designed system of internal control. |
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| 2. |
Reducing information risk means the same as ________.
| A. |
serving the public interest |
| B. |
monitoring economic activities |
| C. |
improving the credibility of information |
| D. |
ensuring generally accepted accounting principles are used to measure profit |
|
| 3. |
Three-party accountability is a special case of which economic theory problem?
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| 4. |
The agency problem can be mitigated by ________.
| B. |
a higher degree of independence |
|
| 5. |
The underlying conditions that create demand by users for reliable financial information include the fact that ________.
| A. |
more reliable information will allow investors to calculate the rate of return on their investment |
| B. |
users are separated from accounting records by distance and time |
| C. |
governments rely on such information to create tax policies |
| D. |
there is a need for the expression of an opinion as to the fairness of financial statements |
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| 6. |
The auditee is the person or company ________.
| A. |
who will use the audited information |
| C. |
who pays the audit fee |
| D. |
whose information is being audited |
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| 7. |
Professional judgment is a widely used concept in accounting and auditing. How is it defined in the audit standards?
| A. |
There is no definition of professional judgment in the auditing standards. |
| B. |
Professional judgment includes consideration of key principles and concepts of disciplines underlying the professional standards, such as economics, psychology, law, finance, statistics and philosophy. |
| C. |
Professional judgment means reaching a complex decision by incorporating auditing standards, accounting standards, and rules of professional ethics in a coherent manner. |
| D. |
Professional judgment involves specialized concepts and language integrating several disciplines in order to provide appropriate justification for audit decisions. |
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| 8. |
What is the primary role and responsibility of independent external auditors?
| A. |
to prepare a company’s annual financial statements and notes. |
| B. |
to perform an audit and provide an opinion on the financial statements of a company. |
| C. |
to provide business consulting advice to audit clients. |
| D. |
to obtain an understanding of a client’s internal control system and prepare a report for management about control weaknesses. |
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