AUDITING THEORIES

29. Which of the following does not pertain to the standards of

fieldwork?
a. Adequate planning and supervision
b. Obtaining sufficient competent evidential matter
c. Proper study and evaluation of internal control as a basis for
reliance thereon
d. Technical training and proficiency

30. The third standard of field work states that sufficient

competent evidential matter may in part be obtained through the
following methods except
a. Inspection
b. Observation
c. Confirmation
d. Reconciliation

1. In determining the primary responsibility of the external

auditor for an audit of a company’s financial statements, the
auditor owes primary allegiance to:
a. The management of the audit client because the auditor is
hired and paid by management.
b. Stockholders, creditors and the investing public.
c. The Auditing and Assurance Standards Council, because it
determines auditing standards and auditor’s responsibility.
d. The audit committee of the audit client because that committee
is responsible for coordinating and reviewing all audit activities
within the company.

2. Which of the following is more difficult to evaluate

objectively?
a. Compliance with applicable government regulations
b. Presentation of financial statements in accordance with the
applicable financial reporting criteria
c. All the given criteria are equally difficult to evaluate
objectively
d. Efficiency and effectiveness of operations

3. A typical objective of an operational audit is to determine

whether an entity’s
a. Specific operating units are functioning efficiently and
effectively
b. Internal control structure is adequately operating as designed
c. Operational information is in accordance with generally
accepted accounting principles.
d. Financial statements present fairly the results of operations

4. Which of the following is not one of the major differences

between financial and operating auditing?
a. The financial audit is oriented to the past, but an operational
audit concerns performance for the future.
b. The financial audit report has widespread distribution, but the
operational audit report has limited distribution.
c. Financial audits are limited to matters that directly affect the
fairness of the financial statement presentation, but operational
audits cover any aspect of efficiency and effectiveness.
AUDITING THEORIES

d. Financial audits deal with the information on the financial

statements, but operational audits are concerned with the
information in the ledgers and journals.

5. Independent external auditing can best be described as a

a. Professional activity that attests to the fair presentation of
financial statements.
b. Professional activity that measures and communicates
financial accounting data
c. Subset of accounting
d. Regulatory activity that prevents the issuance of misleading
financial information.