Business risk is the risk that an entity will fail to meet its objectives.

A. True
B. False
ANSWER: A

Decisions makers are not trained to collect, compile, and summarize the key operating information
themselves.
A. Complexity
B. Remoteness
C. Time Sensitivity
D. Consequences
ANSWER: A

Investors are not able to personally visit locations to check on investments.

A. Complexity
B. Remoteness
C. Time Sensitivity
D. Consequences
ANSWER: B

Information risk is the probability that the information circulated by a company will be false or
misleading.
A. True
B. False
ANSWER: A

Assurance services are independent professional services that improve the quality of information, or
its context, for decision makers.
A. True
B. False
ANSWER: A

Audit assurance involves an engagement resulting in the issuance of a report on subject matter or an
assertion about the subject matter that is the responsibility of another party. Attestation is a specific
type of audit assurance.
A. True
B. False
ANSWER: B

Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions
about economic actions and events to ascertain the degree of correspondence between the
assertions and established criteria and communicating the results to interested users.
A. True
B. False
ANSWER: A

Footnote disclosure of important accounting policies must be relevant and reliable. However if it does
not have quantitative value it can be ignored.
A. True
B. False
ANSWER: B

Assets, liabilities, and equities on the balance sheet actually exist

A. Existence
B. Occurrence
C. Rights and Obligation
D. Valuation
ANSWER: A
Each of the revenue and expense transactions actually occurred.
A. Existence
B. Occurrence
C. Rights and Obligation
D. Completeness
ANSWER: B

Amounts reported as assets of the company represent its property rights. Amounts reported as
liabilities represent its obligations.
A. Existence
B. Occurrence
C. Rights and Obligation
D. Valuation or Allocation
ANSWER: C

All transactions, events, assets, liabilities, and equities that should have been recorded have been
recorded.
A. Existence
B. Occurrence
C. Rights and Obligation
D. Completeness
ANSWER: C

All disclosures that should have been discussed in the footnotes are there.
A. Existence
B. Occurrence
C. Rights and Obligation
D. Completeness
ANSWER: D

Cutoff refers to accounting for revenue, expense, and other transactions in the proper period (neither
postponing some recordings to the next period (i.e., completeness) nor accelerating next period’s
transactions into the current year accounts (i.e., existence or occurrence))
A. True
B. False
ANSWER: A

The cutoff date refers to the client’s year-end balance sheet date
A. True
B. False
ANSWER: A