Auditing Theory Exam 9

General Rule: Read the question carefully and answer it wisely. (10 points)

1. The purpose of an audit of financial statements is to

a. Relieve management or those charged with governance of the responsibility for the preparation and presentation of the
financial statements
b. Obtain an absolute level of assurance that the financial statements as a whole are free from material misstatement
c. Enhance the degree of confidence of intended users in the financial statements
d. Assure the future viability of the entity my expressing an opinion on the entity’s financial statements

2. The overall objectives of the auditor in conducting an audit or financial statements are
I. To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether cause by fraud or error
II. To report on the financial statements
III. To obtain conclusive rather than persuasive evidence
IV. To detect all misstatements, whether due to fraud or error
a. I and II only
b. II and IV only
c. I, II, and III only
d. I, II, III, and IV

3. The primary reason for a financial statement audit by an independent CPA is to

a. Provide increased assurance to users as to the fairness of the financial statements
b. Guarantee that there are no misstatements in the financial statements and ensure that any fraud will be discovered
c. Satisfy governmental regulatory requirements
d. Relieve management of responsibility for the financial statements

4. Independent auditing can best be described as

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

5. Assurance services differ from consulting services in that they

I. Focus on providing advice
II. Involve monitoring of one party by another
a. I only
b. II only
c. Both I and II
d. Neither I nor II