Audit Essay

2737 words - 11 pages

Chapter 1

Multiple-Choice Questions

easy Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:
c a. finance.
b. auditing.
c. accounting.
d. economics.

easy In the audit of historical financial statements, which of the following accounting bases is the most common?
c a. Regulatory accounting principles.
b. Cash basis of accounting.
c. Generally accepted accounting principles.
d. Liquidation basis of accounting.

easy Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is ...view middle of the document...

balance sheet, the income statement, and the statement of cash flows.
d b. income statement, the statement of cash flows, and the statement of net working capital.
c. statement of cash flows, the balance sheet, and the retained earnings statement.
d. balance sheet, the income statement, and the statement of cash flows.

medium The ___________ rate may be defined as approximately the rate a bank could earn by investing in U.S. treasury notes for the same length as the length of a business loan.
c a. nominal
b. stated
c. risk-free
d. prevailing

10. The use of the Certified Public Accountant title is regulated by:
medium a. the federal government.
b b. state law through a licensing department or agency of each state.
c. the American Institute of Certified Public Accountants through the licensing departments of the tax and auditing committees.
d. the Securities and Exchange Commission.

11. An operational audit has as one of its objectives to:
medium a. determine whether the financial statements fairly present the entity’s operations.
c b. evaluate the feasibility of attaining the entity’s operational objectives.
c. make recommendations for improving performance.
d. report on the entity’s relative success in attaining profit maximization.

12. An audit of historical financial statements is most often performed to determine whether the:
medium a. organization is operating efficiently and effectively.
d b. entity is following specific procedures or rules set down by some higher authority.
c. management team is fulfilling its fiduciary responsibilities to shareholders.
d. none of these choices.

medium An examination of part of an organization’s procedures and methods for the purpose of evaluating efficiency and effectiveness is what type of audit?
a a. Operational audit.
b. Compliance audit.
c. Financial statement audit.
d. Production audit.

medium An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n):
b a. audit of financial statements.
b. compliance audit.
c. operational audit.
d. production audit.

15. Which of the following is a type of audit evidence?
medium a. Oral responses to the auditor from employees of the company under audit.
d b. Written communications from company employees or outsiders.
c. Observations made by an auditor.
d. Evidence may take any of the above forms.

16. Which of the following services provides the lowest level of assurance on a financial statement?
medium a. A review.
a b. An audit.
c. Neither service provides assurance on financial statements.
d. Each service provides the same level of assurance on financial statements.

17. The three requirements for becoming a CPA include all but which of the following?
medium a. Uniform CPA examination requirement.
c b. Educational requirements.
c. Character requirements.
d. Experience...

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