Copyright 2017 Pearson Education, Inc.

1 Copyright © 2017 Pearson Education, Inc.Auditing and Assurance Services, 16e (Arens/Elder/Beasley) Chapter 1 The Demand for Audit and Other Assurance Services 1.1 Learning Objective 1-1 1) In the auditing process

• the types and amounts of evidence remain constant from audit to audit.
• the criteria for evaluating information will not vary depending on the information being

audited.

• the audit report communicates the auditor's findings to users.
• records are gathered by the auditor to determine whether the audited information is stated in

accordance with SEC standards.

Answer: C

Terms: Audit process

Diff: Moderate

Objective: LO 1-1

AACSB: Reflective thinking

2) Which of the following is considered audit evidence?A) Oral statements made by management Written Communications Auditor Observation Y N N B) Oral statements made by management Written Communications Auditor Observation N Y Y C) Oral statements made by management Written Communications Auditor Observation Y Y Y D) Oral statements made by management Written Communications Auditor Observation N N Y

Answer: C

Terms: Audit evidence

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking

Auditing and Assurance Services, 16e Alvin Arens, Randal Elder, Mark Beasley, Chris Hogan (Test Bank All Chapters. 100% Original Verified, A+ Grade) 1 / 4

2 Copyright © 2017 Pearson Education, Inc.3) Which of the following can be used as a criteria for evaluating information being audited?

• International Financial Reporting Standards (IFRS)
• Generally Accepted Accounting Principles (GAAP)
• Internal Revenue Code (IRC)
• all of the above

Answer: D

Terms: Criteria by which an auditor evaluates information

Diff: Moderate

Objective: LO 1-1

AACSB: Reflective thinking

4) Evidence is paramount to audit and attestation engagements. List the four basic types of audit evidence.

Answer: The four types of audit and attestation evidence include

• Electronic and documentary data about transactions
• Written and electronic communications with outsiders
• Observations by the auditor
• Oral testimony of the auditee (client)

Terms: Basic types of audit evidence

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking

5) The criteria by which an auditor evaluates the information under audit may vary with the information being audited.

Answer: TRUE

Terms: Criteria by which an auditor evaluates information

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking

6) One criteria used by an external auditor to evaluate published financial statements is known as generally accepted auditing standards.

Answer: FALSE

Terms: Criteria used by external auditor to evaluate published financial statements

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking

7) Auditors strive to maintain a high level of independence to keep the confidence of users relying on their reports.

Answer: TRUE

Terms: Independence

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking

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3 Copyright © 2017 Pearson Education, Inc.8) To perform an audit, there must be information in a verifiable form and some criteria by which the auditor can evaluate the information.

Answer: TRUE

Terms: Independence

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking

9) An auditor must be competent and have an independent mental attitude.

Answer: TRUE

Terms: Criteria used by external auditor to evaluate published financial statements

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking

1.2 Learning Objective 1-2

1) Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called

• finance.
• auditing.
• accounting.
• economics.

Answer: C

Terms: Recording, classifying, and summarizing economic events

Diff: Easy

Objective: LO 1-2

AACSB: Reflective thinking

2) An accountant

• must possess expertise in the accumulation of audit evidence.
• must decide the number and types of items to test.
• must have an understanding of the principles and rules that provide the basis for preparing the

accounting information.

• must be a CPA.

Answer: C

Terms: Distinguishes auditors from accountants

Diff: Moderate

Objective: LO 1-2

AACSB: Reflective thinking

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4 Copyright © 2017 Pearson Education, Inc.3) When auditing accounting data, auditors focus on

• determining whether recorded information properly reflects the economic events that

occurred during the accounting period.

• determining if fraud has occurred.
• determining if taxable income has been calculated correctly.
• analyzing the financial information to be sure that it complies with government requirements.

Answer: A

Terms: Auditing financial accounting data primary concern

Diff: Moderate

Objective: LO 1-2

AACSB: Reflective thinking

4) The trait that distinguishes auditors from accountants is the

• auditor's ability to interpret accounting principles generally accepted in the United States.
• auditor's education beyond the bachelor's degree.
• auditor's ability to interpret FASB Statements.
• auditor's expertise in the accumulation and interpretation of audit evidence.

Answer: D

Terms: Distinguishes auditors from accountants

Diff: Challenging

Objective: LO 1-2

AACSB: Reflective thinking

5) Discuss the differences and similarities between the roles of accountants and auditors. What additional expertise must an auditor possess beyond that of an accountant?Answer: The role of accountants is to record, classify, and summarize economic events in a logical manner for the purpose of providing financial information for decision making. To provide relevant information, accountants must have a thorough understanding of the principles and rules that provide the basis for preparing the accounting information. In addition, accountants must develop a system to ensure that the entity's economic events are properly recorded on a timely basis and at a reasonable cost.

The role of auditors is to determine whether the recorded information prepared by accountants properly reflects the economic events that occurred during the accounting period. Because U.S.or international accounting standards provide the criteria for evaluating whether financial information is properly recorded, auditors must thoroughly understand those accounting standards. In addition to understanding accounting, the auditor must possess expertise in the accumulation and interpretation of audit evidence. It is this expertise that distinguishes auditors from accountants. Determining the proper audit procedures, deciding the number and types of items to test, and evaluating the results are unique to the auditor.

Terms: Roles of accountants and auditors

Diff: Moderate

Objective: LO 1-2

AACSB: Reflective thinking

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