UL INTEGRATED REVIEW & REFRESHER COURSE IN ACCOUNTANCY

AUDITING AUD 1.1/RDB

QUIZZER – Introduction to Auditing

1. Independent auditing can best be described as:

a. A branch of accounting.
b. A discipline that attests to the results of accounting and other functional operations and data.
c. A professional activity that measures and communicates financial and business data.
d. A regulatory function that prevents the issuance of improper financial information.

2. Which of the following best describes why an independent auditor reports on financial statements:
a. to give stockholders some assurance that any fraudulent activities will be detected
b. a poorly designed internal control structure may exist which produces unreliable financial statements
c. the client may not be totally knowledgeable of prevailing GAAP
d. to lend credibility since the client may not be objective with respect to its own financial statements

3. The demand for assurance for financial statement users is similar to that of a potential home buyer that hires a
home inspector in that:
a. The buyer [or user] pays directly for this assurance in both situations.
b. There is often information asymmetry and conflicts of interest present.
c. The cost of obtaining information is not relevant.
d. Independence is not necessary in either situation.

4. Which of the following best represents the term "assurance domain"?

a. Internal and external auditors. c. Areas where auditors can provide services.
b. Financial statement audits. d. Professional auditing standards.

5. Which of the following best describes the relationship between attestation services and audit services?
a. Attestation is a subset of auditing that improves the quality of information for decision makers.
b. Auditing is a subset of attestation that focuses on providing clients with advisory services and decision
support.
c. Auditing is a subset of attestation that focuses on the issuance of an opinion on the fairness of financial
statements.
d. Attestation is a subset of auditing that provides a higher level of assurance than does an audit engagement.

6. Which of the following audit phases would generally be conducted before all of the others?
a. Auditing business processes and related accounts.
b. Preliminary assessment of materiality and audit risk.
c. Gaining an understanding of the client's industry
d. Consideration of internal control systems.

7. A service provided by practitioners that always involves a report that goes to a third party is
a. assurance b. attestation c. audit d. Both B and C.

8. Which one of the following is not part of the attest process?

a. gathering evidence about assertions
b. proving the accuracy of the books and records
c. evaluating evidence against objective criteria
d. communicating the conclusions reached

9. Which one of the following is not a management expectation for independent auditors?
a. an outside source of expertise on accounting matters
b. individuals who perform tests and draw conclusions on assertions
c. a participant in management decision making
d. a provider of a written communication

10. Internal auditors may perform all of the following types of audits except
a. operational audits.
b. compliance audits.
c. computer system audits.
d. all of the above may be performed by internal auditors.

11. An “integrated audit” includes an audit of

a. the company’s internal controls.
b. the company’s financial statements.
c. the company’s compliance with its rules and policies.
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UL INTEGRATED REVIEW & REFRESHER COURSE IN ACCOUNTANCY
AUDITING AUD 1.1/RDB
d. Both A and B.

12. Which of the following services is the broadest and most inclusive?
a. Audit b. Attestation c. Assurance d. Compliance

13. An expectation of the public is that the auditor will recognize that the primary users of audit assurance are
a. the clients.
b. the Public Company Accounting Oversight Board.
c. members of management.
d. third-party users.

14. Auditing is important in a free market society because

a. the public requires CPAs functioning as divisions of regulatory bodies.
b. auditors detect all errors and fraud made by company employees.
c. it provides reliable information based upon which to judge economic performance.
d. the auditor is an amiable insurance policy for investors.
e. all of the above are true.

15. Third-party users of the audit report expect the auditor to do all of the following except:
a. to evaluate measurements and disclosures made by management
b. to provide a biased evaluation of the financial statements
c. to determine whether financial statements are presented in accordance with GAAP
d. to gather sufficient evidence to support their opinion

16. Results of the financial statement audit are communicated to users through a(n)
a. financial statement. c. audit report.
b. written management assertion. d. none of the above.

17. Assurance services may include which of the following?

a. attesting to financial statements
b. examination of the economy and efficiency of governmental operations
c. evaluation of a division's performance for management
d. tax preparation services
e. A, B, and C only

18. The criteria against which the auditor measures the fairness of financial statement presentation are known as
a. generally accepted auditing standards.
b. generally accepted accounting principles.
c. generally accepted accounting standards.
d. generally accepted governmental accounting principles.

19. Which one of the following statements is not true about internal auditing?
a. Internal auditing is an objective evaluation function.
b. Internal auditing is established within an organization.
c. Internal auditing's purpose is to provide assurance regarding the company's compliance with stated policies and
procedures.
d. Internal auditing is established as an independent service to regulatory bodies and creditors.

20. An audit which has as its purpose the evaluation of the economy and efficiency with which resources are employed
is known as a(n)
a. financial audit. c. operational audit.
b. compliance audit. d. governmental audit.

21. An audit which determines whether organizational policies are being followed and whether external mandates are
being met is known as
a. a financial audit. c. an operational audit.
b. a compliance audit. d. none of the above

22. The objective of an operational audit is to

a. evaluate whether laws have been broken by management.
b. evaluate fairness of presentation of financial statements.
c. evaluate compliances with company rules and regulations.
d. evaluate the effectiveness and efficiency with which resources are employed.

23. Which type of auditor may perform an operational audit?

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UL INTEGRATED REVIEW & REFRESHER COURSE IN ACCOUNTANCY
AUDITING AUD 1.1/RDB
a. external auditor.
b. internal auditor.
c. governmental auditor.
d. Both B and C.
e. All of the above.

24. What is the criteria used in an operational audit?

a. GAAP. c. rules and regulations.
b. effectiveness and d. company policies.
efficiency. e. Both B and C.

25. What is the criteria used in a compliance audit?

a. GAAP.
b. effectiveness and efficiency.
c. rules and regulations.
d. company policies.
e. Both C and D.