Copyright 2020 Pearson Education Ltd.

1 Copyright © 2020 Pearson Education Ltd.Auditing and Assurance Services, 17e, Global Edition (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

Difficulty: 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 Observations Y N N B) Oral statements made by management Written Communications Auditor Observations N Y Y C) Oral statements made by management Written Communications Auditor Observations Y Y Y D) Oral statements made by management Written Communications Auditor Observations N N Y Answer: C Terms: Audit evidence Difficulty: Easy Objective: LO 1-1 AACSB: Reflective thinking Auditing and Assurance Services An Integrated Approach, 17e (Global Edition) Arens, Elder, Beasley, Hogan(Test Bank, 100% Original Verified, A+ Grade) 1 / 4

2 Copyright © 2020 Pearson Education Ltd.3) Which of the following can be used as a criterion 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

Difficulty: Moderate

Objective: LO 1-1

AACSB: Reflective thinking

4) Auditors do not provide which of the following?

• assurance on financial statements
• assurance on the effectiveness of internal controls over financial reporting
• assurance on corporate sustainability reports
• absolute assurance on the financial statements including assuming responsibility for them

Answer: D

Terms: Nature of Objectives of Auditing

Difficulty: Moderate

Objective: LO 1-1

AACSB: Reflective thinking

5) The accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and some established criteria is defined as

• accounting.
• financial reporting.
• tax reporting.
• auditing.

Answer: D

Terms: Definition of auditing

Difficulty: Moderate

Objective: LO 1-1

AACSB: Reflective thinking

6) 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

Difficulty: Easy

Objective: LO 1-1

AACSB: Reflective thinking

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3 Copyright © 2020 Pearson Education Ltd.7) One criterion 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

Difficulty: Easy

Objective: LO 1-1

AACSB: Reflective thinking

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

Answer: TRUE

Terms: Independence

Difficulty: Easy

Objective: LO 1-1

AACSB: Reflective thinking

9) 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

Difficulty: Easy

Objective: LO 1-1

AACSB: Reflective thinking

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

Answer: TRUE

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

Difficulty: Easy

Objective: LO 1-1

AACSB: Reflective thinking

11) Auditors are not allowed and should not audit subjective information like the effectiveness of computer controls or the efficiency of manufacturing-related operations.

Answer: FALSE

Terms: Information and Established Criteria for the Performance of Audits

Difficulty: Moderate

Objective: LO 1-1

AACSB: Reflective thinking

12) In an audit of internal controls over financial reporting, the auditor may rely upon Internal Control - Integrated Framework issued by COSO.

Answer: TRUE

Terms: Information and Established Criteria for the Performance of Audits

Difficulty: Moderate

Objective: LO 1-1

AACSB: Reflective thinking

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4 Copyright © 2020 Pearson Education Ltd.13) In circumstances where the auditor is being asked to audit subjective types of information, typically, the auditor and the entities being audited should agree in writing about the criteria being audited after the audit starts.

Answer: FALSE

Terms: Information and Established Criteria for the Performance of Audits

Difficulty: Moderate

Objective: LO 1-1

AACSB: Reflective thinking

14) 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

Difficulty: 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

Difficulty: 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

Difficulty: Moderate

Objective: LO 1-2

AACSB: Reflective thinking

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