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- 1. Multiple ChoiceWhy do auditors generally use a sampling approach to evidence gathering?Auditors are experts and do not need to look at much to know whether the financial statements are correct or not.
Auditors must balance the cost of the audit with the need for precision.
Auditors must limit their exposure to their auditee to maintain independence.The auditor's relationship with the auditee is generally adversarial, so the auditor will not have access to all of the financial information of the company. - 2. Multiple ChoiceThe basic purpose of a financial statement audit is to
Detect fraud.
Examine individual transactions so that the auditor may certify as to their validity.. Provide assurance regarding whether the auditee's financial statements are fairly stated.Assure the consistent application of correct accounting procedures. - 3. Multiple ChoiceAssurance services may improve all of the following except
Relevance.Credibility.Periodicity.Reliability. - 4. Multiple ChoiceEvidence is reliable if it
Signals the true state of a management assertion.Applies to the period being audited.Relates to the audit assertion being tested.Is consistent with management's assertions. - 5. Multiple ChoiceFor publicly-held companies, which of the following is integrated into the audit of financial statements?Budgetary information audit.The audit of internal controls.Audit of management forecasts.Audit of interim financial statements.
- 6. Multiple ChoiceIn the context of agency theory, information asymmetry refers to the idea thatInformation can vary in its reliabilityInformation can vary in its relevance.Management has more information about the entity's true financial position than do the absentee owners (i.e. stockholders).Management likely will not act in the best interests of the absentee owners.
- 7. Multiple ChoiceThe auditor's report is generally addressed to the
Chief operating officer.Securities and Exchange CommissionStockholders of the companyChief financial officer - 8. Multiple ChoiceWhich of the following is true with respect to the auditor's report?The report indicates that the company's financial statements were audited in accordance with generally accepted accounting standards.The report indicates that the company's financial statements were audited in accordance with applicable auditing standards.The report indicates that the company's financial statements were audited in accordance with the auditor's best judgment.The report indicates that the company's financial statements were audited in accordance with statements issued by the FASB.
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