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Multiple Choice Quiz
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1
The underlying conditions that create demand by users for reliable information include
A)transactions that are numerous and complex.
B)users separated from accounting records by distance and time.
C)financial decisions that are important to investors and users.
D)decisions that are time-sensitive.
E)All of the above.
2
Information risk refers to the risk that
A)the client's financial statements may be materially false and misleading
B)the auditor may express an unqualified opinion on financial statements that are material misstated.
C)the client may not be able to remain in business.
D)errors and frauds would not be detected by the auditor's own procedures.
3
Operational auditing refers to the study of business operations for the purpose of making recommendations for which of the following?
A)effective and efficient use of resources.
B)compliance with rules and regulations.
C)attesting to the fairness of the financial statements.
D)All of the above.
4
Assurance services involve which of the following?
A)relevance and reliability.
B)nonfinancial information and traditional financial statements.
C)electronic databases and printed reports.
D)All of the above.
5
Professional skepticism dictates that when management makes a statement to the auditors, the auditors should
A)Disregard the statement because it ranks low on the evidence quality scale.
B)Corroborate the statement with other documentary evidence whenever possible.
C)Require that the statement be put in writing.
D)Believe the statement in order to maintain the professional client-auditor relationship.
6
The primary responsibility for an organization's financial statements rests with
A)The internal auditors.
B)Management.
C)The Public Company Accounting Oversight Board.
D)The external auditors.
7
The audit objective that all transactions and accounts that should be presented in the financial statements are included is related to which financial statement assertion?
A)occurrence
B)rights and obligations
C)completeness
D)existence
E)valuation and allocation.
8
Which of the following best describes the main reason that independent auditors report on management's financial statements?
A)A management fraud may exist, and if it does, it will always be detected by independent auditors.
B)The management team that prepares the statements and the persons who use the statements may have conflicting interests.
C)Misstated account balances may be corrected as the result of the independent audit work.
D)The management team that prepares the statements may have a poorly designed system of internal control
9
The audit objective that all footnotes have been included in the annual report is related most closely to which financial statement assertion?
A)existence or occurrence
B)rights and obligations
C)valuation
D)presentation and disclosure
10
Which of the following is a management financial statement assertion about fixed assets that relates to "valuation and allocation"?
A)Fixed assets are properly classified as noncurrent assets.
B)Fixed asset depreciation has been correctly calculated.
C)The client has title to the machinery and equipment.
D)Pledge or assignment of fixed as collateral is appropriately shown in notes.





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