…Assignment 1

State the objective of the audit of financial statement. In general terms, how do
auditors meet that objective?

The objective of the audit of financial statements by the independent auditor is

the expression of an opinion on the fairness with which the financial statements
present financial position, results of operations, and cash flows in conformity
with applicable accounting standards.

The auditor meets that objective by accumulating sufficient appropriate

evidence to determine whether management’s assertions regarding the financial
statements are fairly stated.

Correct the following statements

.Errors are usually more difficult for an auditor to detect than frauds -1
Answer
Errors are usually less difficult for an auditor to detect than frauds

Audits are expected to provide a higher degree of assurance for the detection -2
.of material frauds than is provided for an equally material error
Answer

Audits are expected to provide a lower degree of assurance for the detection of
.material frauds than is provided for an equally material error

Auditing standards indicate that reasonable assurance is a moderate, but not -1

absolute, level of assurance that the financial statements are free of material
.misstatement

Auditing standards indicate reasonable assurance is a high, but not absolute, level of
.assurance that the financial statements are free of material misstatements
Choose the correct answer

In certifying their annual financial statements, the CEO and CFO of a public -1
:company certify that the financial statements comply with the requirements of
.a) GAAP
.b) the Sarbanes-Oxley Act
.c) the Securities Exchange Act of 1934
.d) GAAS

2- An independent auditor has the responsibility to design the audit to provide

reasonable assurance of detecting errors and fraud that might have a material
 effect on the financial statements. Which of the following, if material, is a fraud
as defined in auditing standards?

a- Misappropriation of an asset or groups of assets.

b- Clerical mistakes in the accounting data underlying the financial statements.
c- Mistakes in the application of accounting principles.
d- Misinterpretation of facts that existed when the financial statements were
prepared.

Which of the following statements is true of a public company's financial -3

?statements
.a) Sarbanes-Oxley requires the CEO only to certify the financial statements
.b) Sarbanes-Oxley requires the CFO only to certify the financial statements
.c) Sarbanes-Oxley requires the CEO and CFO to certify the financial statements
d) Sarbanes-Oxley requires neither the CEO nor the CFO to certify the financial
.statements

2- Because of the risk of material misstatement, an audit should be planned and

performed with an attitude of
a- Objective judgment
b- Independent integrity
c- Professional skepticism
d- Impartial conservatism.

The responsibility for the preparation of the financial statements and the -5
:accompanying footnotes belongs to
.a) the auditor
.b) management
.c) both management and the auditor equally
.d) management for the statements and the auditor for the notes

6- Which of the following best describes the reason why an independent auditor
reports on financial statements?
a- A misappropriation of assets may exist, and it is more likely to be detected by
independent auditors.
b- Different interests may exist between the company preparing the
statements and the persons using the statements.
c- A misstatement of account balance may exist and is generally corrected as the
result of the independent auditor's work.