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02. Auditing Theory

AT.03 Risk-based FS Audit Process Drill

Question 1
Which of the following elements of the audit risk model is most likely to be the same across a range of audits performed by a professional accounting firm?

Response: Audit risk

Feedback: This choice is correct. The range of acceptable audit risk may be similar across different audit firms, however, the inherent and control risk will vary depending
on the characteristic of the client, while detection risk will vary depending on the level of assessed inherent and control risk and the audit firm's acceptable audit risk.

Correct answer: Audit risk

Score: 1 out of 1 Yes

Question 2
Users of the audit report can reasonably expect the audited financial statements to

Response: Be presented fairly according to the substance of applicable financial reporting framework.

Feedback: This choice is correct. Auditors express an opinion as to the fairness of financial statements.

Correct answer: Be presented fairly according to the substance of applicable financial reporting framework.

Score: 1 out of 1 Yes

Question 3
Which of the following is not one of the basic assumptions of financial statements audit?

Response: No short-term conflict between the auditor and the management

Feedback: This is correct. Short-term conflicts between the auditor and the management are expected in an audit.

Correct answer: No short-term conflict between the auditor and the management

Score: 1 out of 1 Yes

Question 4
Which of the following criteria is unique to the independent auditor's attest function?

Response: Independence.

Feedback: This choice is correct. Independence is unique to the independent auditor's attest functions. The other choices are applicable even to other engagements by the
practitioner.

Correct answer: Independence.

Score: 1 out of 1 Yes

Question 5
Which of the following is an incorrect statement about audit objectives?

Response: There should be a one-to-one relationship between audit objectives and procedures.

Feedback: This choice is correct. This is the incorrect statement because several procedures can address one or more audit objectives. In addition, certain audit objectives
may need to be addressed by more than one audit procedures. Hence, the relationship is not necessarily one-to-one.

Correct answer: There should be a one-to-one relationship between audit objectives and procedures.

Score: 1 out of 1 Yes

Question 6
Determining whether amounts are in conformity with GAAP addresses the proper measurement of assets, liabilities, revenues, and expenses which includes all of the
following except:

Response: The reasonableness of management’s accounting policies 

Feedback: This choice is correct. We evaluate the appropriateness rather than reasonableness of accounting policies.

Correct answer: The reasonableness of management’s accounting policies 

Score: 1 out of 1 Yes

Question 7
Why does a company choose to have an independent auditor report on its financial statements?

Response: Users of financial statements may not be in a position to directly access the financial records of an entity.

Feedback: This choice is correct. This is one of the reasons why users demand that financial statements are audited by an independent auditor.

Correct answer: Users of financial statements may not be in a position to directly access the financial records of an entity.

Score: 1 out of 1 Yes

Question 8
Which of the following is an incorrect statement?

Response: An example of accuracy, valuation and allocation assertion would be that property, plant, and equipment are recorded at market value.

Feedback: This choice is correct. This is an incorrect assertion, since the correct valuation for property, plant, and equipment is not at market value.

Correct answer: An example of accuracy, valuation and allocation assertion would be that property, plant, and equipment are recorded at market value.

Score: 1 out of 1 Yes

Question 9
The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to:

Response: management.

Feedback: This choice is correct. The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to the management.

Correct answer: management.

Score: 1 out of 1 Yes

Question 10
Which of the following best describes an auditor’s professional skepticism?

Response: Auditors should make a critical assessment, with an inquisitive mind, of the sufficiency and appropriateness of audit evidence obtained.

Feedback: This choice is correct. This statement pertains to professional skepticism.

Correct answer: Auditors should make a critical assessment, with an inquisitive mind, of the sufficiency and appropriateness of audit evidence obtained.

Score: 1 out of 1 Yes

Question 11
An audit process is a well-defined methodology for organizing an audit to ensure that

Response: All of the other responses are correct

Correct answer: All of the other responses are correct

Score: 1 out of 1 Yes

Question 12
For a particular assertion, control risk is the risk that

Response: controls will not detect a material misstatement that occurs.

Feedback: This choice is correct. This statement pertains to control risk.

Correct answer: controls will not detect a material misstatement that occurs.

Score: 1 out of 1 Yes

Response: The auditor’s objectives follow and are closely related to management assertions.

Feedback: This choice is correct. The auditor’s objectives follow and are closely related to management assertions.

Correct answer: The auditor’s objectives follow and are closely related to management assertions.

Score: 1 out of 1 Yes

Question 14
Which of the following is not one of the broad categories of assertions?

Response: General or specific transaction objectives

Feedback: This choice is correct. This pertains to types of audit objectives rather than management assertions.

Correct answer: General or specific transaction objectives

Score: 1 out of 1 Yes

Question 15
When an auditor encounters a material GAAP departure that is unresolved at the conclusion of the audit, which of the following opinions are possible?

Response: Qualified, disclaimer, or adverse

Feedback: This choice is incorrect. Material misstatements in the financial statements result to either qualified or adverse opinion, depending on the severity of the
misstatements.

Correct answer: Qualified or adverse

Score: 0 out of 1 No

Notification from Team P.R.T.C.

Congratulations, you were awarded 15 points!

This happened because: You completed assessment AT.03 Risk-based FS Audit Process Drill.

OK