Chapter 66-19a.Which of the following best describes the reason why an independent auditor reports on financial statements? 1.A misappropriation of assets may exist, and it is more likely to be detected by independent auditors. 2.Different interests may exist between the company preparing the statements and the persons using statements. 3.A misstatement of account balances may exist and is generally corrected as the result of the independent auditor’s work. 4.Poorly designed internal controls may be in existence. b.An independent audit aids in the communication of economic data because the audit 1.Confirms the accuracy of management’s financial representations. 2.Lends credibility to the financial statements. 3.Guarantees that financial data are fairly presented. 4.Assures the readers of financial statements that any fraudulent activity has been corrected. c.The major reason an independent auditor gathers audit evidence is to 1.Form an opinion on the financial statements. 2.Detect fraud.3.Evaluate management.4.Assess control risk. 6-20 Show
a.An independent auditors has the responsibility to design the audit to provide reasonable assurance of detecting errors and fraud that might have material effect on financial statements. Which of the following, if material, is a fraud as defined in auditing standards? Get answer to your question and much more Upgrade to remove ads Only ₩37,125/year
Terms in this set (50)Which of the following best describes the reason why an independent auditor reports on financial statements? 1. A misappropriation of assets may exist, and it is more likely to be detected by independent auditors. 2. Different interests may exist between the company preparing the statements and the persons using the statements. Because of the risk of material misstatement, an audit should be planned and performed with an attitude of 1.
objective judgment. 3. professional skepticism. The major reason an independent auditor gathers evidence is to 1. form an opinion on the financial statements. 1. form an opinion on the financial statements. 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 audit standards? 1. Misappropriation of an asset or groups of assets 1. Misappropriation of an asset or groups of assets What assurance does the auditor provide that errors and fraud that are material to the financial statements will be detected? Errors, Fraud 1. Limited, Negative 2. Reasonable, Reasonable Which of the following statements describes why a properly designed and executed audit may not detect a material misstatement in the financial statements resulting from fraud? 1. Audit procedures that are effective for detecting unintentional misstatements may be ineffective for an intentional misstatement that is concealed through collusion. 1. Audit procedures that are effective for detecting unintentional misstatements may be ineffective for an intentional misstatement that is concealed through collusion. An auditor reviews aged accounts receivable to assess likelihood of collection to support managment's assertion about account balances of 1. existence. 3. valuation and allocation. An auditor will most likely review an entity's periodic accounting for the numerical sequence of shipping documents to ensure all documents are included to support management's assertion about classes of transactions of 1. occurrence. 2. completeness. In the audit of accounts payable, an auditor's procedures will most likely focus primarily on management's assertion about account balances of 1. existence. 2. completeness. The auditor's responsibility regarding material misstatements caused by fraud is 1. less than the auditor's responsibility regarding material misstatements caused by
error. 3. the same as the auditor's responsibility regarding material misstatements caused by error. When determining the auditor's or management's responsibility for compliance with laws and regulations during an audit, which of the following statements below would be incorrect? 1. The auditor is not responsible for preventing noncompliance with laws and regulations. 4. The auditor is expected to detect the client's noncompliance with all laws and regulations affecting transaction cycles under review during the audit itself. While auditing a client's accounting estimates used for their specific elements and accounts, the auditor has certain responsibilities. Which of the following is not a required audit procedure that the auditor would perform when evaluating a client's accounting estimates? 1. Verify that all material accounting estimates have been developed. 3. Determine if the accounting estimates used are consistent with those of the client's primary competitors. What is reasonable assurance? A high, but not absolute, level of assurance that the financial statements are free of material misstatements. What does reasonable assurance indicate? Reasonable, but not absolute, assurance indicates that the auditor is not an insurer or guarantor of the correctness of the financial statements. Error Unintentional misstatement of the financial statements Fraud Intentional misstatement of the financial statements Illegal Acts Also known as noncompliance with laws and regulations, failure to comply with applicable laws and regulations What are the 2 primary components of professional skepticism? 1. A questioning mind What are the 6 elements of professional skepticism? 1. Questioning mindset Management or Auditor Responsibility? Adopting sound accounting policies. Management Management or Auditor Responsibility? Maintaining adequate internal control. Management Management or Auditor Responsibility? Making fair representation in the financial statements. Management Management or Auditor Responsibility? Obtain reasonable assurance about whether the financial statements as a whole are free from material misstatements. Auditor Management or Auditor Responsibility? Report on the financial statements. Auditor Management or Auditor Responsibility? Report on the effectiveness of internal control over financial reporting. Auditor Management or Auditor Responsibility? Identify material weaknesses in internal control over financial reporting. Auditor Committed by management or employees? Fraudulent financial reporting Typically committed by management, sometimes without the knowledge of employees. Committed by management or employees? Misappropriation of assets Usually perpetrated by employees and not by management, amounts are often immaterial. What are the 5 Financial Statement Cycles? 1. Sales and collection cycle What are the 5 categories of PCAOB Management Assertions? 1. Existence or occurrence Name the category of PCAOB Management Assertion: Assets or liabilities of the public company exist at a given date, and recorded transactions have occurred during the period. Existence or occurrence Name the category of PCAOB Management Assertion: All transactions and accounts that should be presented in the financial statements are so included. Completeness Name the category of PCAOB Management Assertion: Assets, liability, equity, revenue, and expense components have been included in the financial statements at appropriate amounts. Valuation or allocation Name the category of PCAOB Management Assertion: The public company holds or controls rights to the assets, and liabilities are obligations of the company at a given date. Rights and obligations Name the category of PCAOB Management Assertion: The components of the financial statements are properly classified, described, and disclosed. Presentation and disclosure What are the 3 categories of International and AICPA Management Assertions? 1. Assertions about classes of transactions and events for the
period under audit. Describe the Transaction-Related Audit Objective: Occurrence Related Transactions Exist Describe the Transaction-Related Audit Objective: Completeness Existing Transactions Are Recorded Describe the Transaction-Related Audit Objective: Accuracy Recorded Transactions Are Stated at the Correct Amounts Describe the Transaction-Related Audit Objective: Posting and Summarization Recorded Transactions Are Properly Included in the Master Files and Are Correctly Summarized Describe the Transaction-Related Audit Objective: Classification Transactions Included in the Client's Journals Are Properly Classified Describe the Transaction-Related Audit Objective: Timing Transactions Are Recorded on the Correct Dates Describe the Balance-Related Audit Objective: Existence Amounts Included Exist Describe the Balance-Related Audit Objective: Completeness Existing Amounts Are Included Describe the Balance-Related Audit Objective: Accuracy Amounts Included Are Stated at the Correct Amounts Describe the Balance-Related Audit Objective: Classification Amounts Included in the Client's Listing Are Properly Classified Describe the Balance-Related Audit Objective: Cutoff Transactions Near the Balance Sheet Date Are Recorded in the Proper Period Describe the Balance-Related Audit Objective: Detail Tie-In Details in the Account Balance Agree with Related Master File Amounts, Foot to the Total in the Account Balance, and Agree with the Total in the General Ledger Describe the Balance-Related Audit Objective: Realizable Value Assets Are Included at the Amounts Estimated to Be Realized Describe the Balance-Related Audit Objective: Rights and Obligations Most assets must be owned before it is acceptable to include them in the financial statements. Liabilities must belong to the entity. Rights are always associated with assets and obligations with liabilities. Sets with similar termsChapter 631 terms vvliet Chapter 6: Audit60 terms AMaddesi1995 Chapter 6 ACC 40060 terms taylor_diletto Audit Chapter 644 terms BombChick21__ Sets found in the same folderChapter 258 terms allyson_atkins Audit Exam 2 - Ch 25, 26, 6, 7, 8, 974 terms katelynmielke Ch 6 - Audit Objectives32 terms katelynmielke auditing unit 2 questions76 terms ashmarie14 Other sets by this creatorCost Accounting Final13 terms baileydutch96 Cost Accounting Final Terms20 terms baileydutch96 Cost Accounting Midterm40 terms baileydutch96 Opinion6 terms baileydutch96 Other Quizlet setsMarketing18 terms javondd AP English Lang. Vocab. List 320 terms sabrinapeters14 BIOL1406 Chapter 12 Test Bank45 terms isabellacardenas The revolutions test review41 terms lecroixtwin1 Related questionsQUESTION For generics, the best combination of procurement policy and inventory policy is: 15 answers QUESTION Primary Concern of an Operation Manager 7 answers QUESTION Why is Human Resource Management important to all managers ? 15 answers QUESTION True or False: A typical sales management career path might be hired as a district sales manager, then be promoted to regional sales manager to national sales manager and then to the Vice President of Marketing. 2 answers Why does an independent auditor reports on financial statements?An auditor's report is a written letter from the auditor containing their opinion on whether a company's financial statements comply with generally accepted accounting principles (GAAP) and are free from material misstatement.
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Which of the following best describes the reason why independent auditors report on financial statements?
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