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Principle of auditing - Chapter 1. Review Q

The document consists of a quiz and questions related to the principles of auditing, covering topics such as the importance of independent audits, auditor responsibilities, and the concept of materiality. It includes multiple-choice questions and open-ended questions that require analysis of ethical situations faced by an auditor. The content aims to assess knowledge and understanding of auditing standards and practices.

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9 views

Principle of auditing - Chapter 1. Review Q

The document consists of a quiz and questions related to the principles of auditing, covering topics such as the importance of independent audits, auditor responsibilities, and the concept of materiality. It includes multiple-choice questions and open-ended questions that require analysis of ethical situations faced by an auditor. The content aims to assess knowledge and understanding of auditing standards and practices.

Uploaded by

vynguyen16604
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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PRINCIPLES OF AUDITING - CHAPTER 1

PART 1: CHOOSE THE BEST ANSWER


1. An independent audit is important to readers of financial statements because it
a) Provides a measure of management's stewardship function.
b) Measures and communicates the financial data included in financial statements.
c) Objectively examines and reports on management's financial statements.
d) Reports on the accuracy of information in the financial statements.
2. The evidence available to auditor is _______ in nature, rather _______ in nature.
a) pervasive, conclusive
b) Conclusive, pervasive
c) limited, unlimited
d) None of the above
3. Compliance with the Standard of Auditing is the responsibility of a) Management
b) Those charged with governance
c) Auditor
d) Audit committee
4. An auditor is required to determine the ____ of his audit procedures according to
the requirements of Standards of Auditing.
a) Conduct
b) Nature ,timing and extent
c) Limitation
d) Planning
5. The main object of an audit is
a) Expression of opinion
b) Detection and Prevention of fraud and error
c) Both (1) and (2)
d) Depends on the type of Business.
6. The audit process is
a) Special application of the scientific method of inquiry.
b) Regulated by the PICPA .
c) The only service a CPA is allowed to perform by law.
d) Performed only by CPAs
7. Appropriateness means _______ of audit evidence.
a) Quantity.
b) Quality.
c) Appropriateness.
d) Sufficient.
8. Professional judgment means a judgment taken by the auditor out of his ______ in
an audit situation
a) Past experience.
b) Relation with the management
c) Professional experience.
d) Work experience.
9. A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of _
a) Error of omission.
b) Error of commission.
c) Compensating error.
d) Error of principle.
10. Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an
example of……………………..
a) Error of principle.
b) Error of commission.
c) Error of omission.
d) Error of duplication
11. What is the main objectives of Auditing?
a) To give an opinion as to the truth and fairness of Financial statement.
b) To finds errors.
c) To help taxation departments.
d) To help customers.
12. Meaning of Interim Audit:
a) Audit of 12 months
b) Audit for more than 12 months.
c) Audit for less than 12 months.
d) Audit for long period.
13. Internal Audit is conducted by:
a) Employees of an Organization.
b) Customers
c) Government
d) Employees of other Organization.
14. Which of the following is not a provision of the Sarbanes–Oxley Act of 2002?
a) The auditor of an issuer may not provide internal audit outsourcing services for the
issuer.
b) Audit documentation must be maintained for five years.
c) The lead and reviewing partners must rotate off the audit after five years.
d) Tax services must be preapproved by the audit committee
15. The concept of materiality would be least important to an auditor when
considering the:
a) Effects of a direct financial interest in the client upon the CPA's independence
b) Decision whether to use positive or negative confirmations of accounts receivable
c) Adequacy of disclosure of a client's illegal act
d) Discovery of weaknesses in a client's internal control

PART II: ANSWER THE QUESTIONS


II.1. Why is an auditor’s independence so essential?

.
II.2. Marie Janes encounters the following situations in doing the audit of a large auto
dealership. Janes is not a partner.
1. The sales manager tells her that there is a sale (at a substantial discount) on new
cars that is limited to long-established customers of the dealership. Because her firm has
been doing the audit for several years, the sales manager has decided that Janes should also
be eligible for the discount.
2. The auto dealership has an executive lunchroom that is available free to
employees above a certain level. The controller informs Janes that she can also eat there
any time.
3. Janes is invited to and attends the company’s annual holiday party. When presents
are handed out, she is surprised to find her name included. The present has a value of
approximately $200.
Request: Based on the descriptive data, please analyze and give your opinion?

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