Test Item File for Arens, Auditing, 13CE 1-1

Test Item File for Arens, Auditing, 13CE 1-1

Copyright © 2016 Pearson Education, Inc.Chapter 1 The Demand for Audit and Other Assurance Services

1.1 Describe Auditing

1) Which of the following illustrates the definition of auditing with respect to the evidence analysis process?

• accumulation and evaluation of evidence about balance sheet accounts
• learning about different types of computing technology, such as mainframes
• writing an operational audit report that is tailored to the client's situation
• making sure that the auditor is competent and understands evidence gathering

Answer: A

Diff: 1 Type: MC Page Ref: 3

Learning Obj.: 1-1 Describe auditing

2) Auditing should be done by a qualified

• chartered accountant.
• certified management accountant.
• competent and independent person.
• professional accountant.

Answer: C

Diff: 2 Type: MC Page Ref: 3

Learning Obj.: 1-1 Describe auditing

3) Which of the following illustrates the definition of auditing with respect to the reporting process?

• accumulation and evaluation of evidence about balance sheet accounts
• reporting on the degree of correspondence between financial statements and ASPE
• writing an operational audit report that is tailored to the client's situation
• making sure that the auditor is competent and understands evidence gathering

Answer: B

Diff: 2 Type: MC Page Ref: 4

Learning Obj.: 1-1 Describe auditing

4) In the audit of historical financial statements by PA firms, the criteria used are

• generally accepted auditing standards.
• generally accepted accounting principles.
• regulations of the Canada Revenue Agency.
• regulations of the provincial securities commissions.

Answer: B

Diff: 1 Type: MC Page Ref: 4

Learning Obj.: 1-1 Describe auditing

Auditing Art and Science of Assurance Engagements 13th Edition Aren Test Bank Visit TestBankDeal.com to get complete for all chapters

Test Item File for Arens, Auditing, 13CE 1-2

Copyright © 2016 Pearson Education, Inc.5) A large PA firm has assessed evidence collected during an engagement. Criteria used to assess the financial statements were International Financial Reporting Standards (IFRS). A high level of assurance was obtained. The type of engagement conducted was

• an audit.
• a review.
• management consulting.
• a compilation.

Answer: A

Diff: 2 Type: MC Page Ref: 4

Learning Obj.: 1-1 Describe auditing

6) The auditor and the entities should agree on the criteria to be used in the audit

• before the audit starts.
• after the audit planning has been done.
• as they progress with the audit, as they can determine which criteria are most suitable.
• at the end of the audit.

Answer: A

Diff: 1 Type: MC Page Ref: 4

Learning Obj.: 1-1 Describe auditing

7) George had a conversation with the accounting personnel and documented information about how the accounting systems function. He has also placed copies of accounting forms in his files. George is performing which task?

• accounting procedures
• evidence gathering
• tax audit
• audit report preparation

Answer: B

Diff: 3 Type: MC Page Ref: 4

Learning Obj.: 1-1 Describe auditing

8) One of the reasons that an auditor must be competent is so that they can

• understand the engagement risks and the criteria used by the client.
• explain to staff how the bookkeeping should be done.
• record the transactions properly for the underlying records.
• capture the information properly in the computer files.

Answer: A

Diff: 2 Type: MC Page Ref: 4

Learning Obj.: 1-1 Describe auditing

Test Item File for Arens, Auditing, 13CE 1-3

Copyright © 2016 Pearson Education, Inc.9) One of the reasons that an auditor must be competent is so that they can

• select the type and amount of evidence to accumulate.
• explain to staff how the bookkeeping should be done.
• record the transactions properly for the underlying records.
• capture the information properly in the computer files.

Answer: A

Diff: 2 Type: MC Page Ref: 4

Learning Obj.: 1-1 Describe auditing

10) It is important for the auditor to be independent because

• otherwise the auditor would not charge a fair rate to the client.
• otherwise the auditor might not be as knowledgeable of the subject matter and the criteria.
• this will prevent bias in accumulating and evaluating evidence.
• the Canadian tax authorities require that the auditor be independent.

Answer: C

Diff: 2 Type: MC Page Ref: 5

Learning Obj.: 1-1 Describe auditing

11) Because an external auditor is paid a fee by a client company, he or she

• is absolutely independent and may conduct an audit.
• may be sufficiently independent to conduct an audit.
• is never considered to be independent.
• must receive approval from the relevant provincial securities commission before conducting

an audit.

Answer: B

Diff: 1 Type: MC Page Ref: 5

Learning Obj.: 1-1 Describe auditing

12) The independent auditor's report is the

• communication of the result of the audit to the users.
• set of audited financial statements.
• invoice of the auditor detailing the work they have performed.
• report presented to management about the possible improvements.

Answer: A

Diff: 2 Type: MC Page Ref: 5

Learning Obj.: 1-1 Describe auditing

13) In the audit of an individual's tax return, the auditor should demonstrate competence in the use of

• external databases that contain economic statistics.
• standard personal and corporate tax preparation software.
• the Income Tax Act and accompanying regulations.
• database management software for the use of client based research.

Answer: C

Diff: 1 Type: MC Page Ref: 5

Learning Obj.: 1-1 Describe auditing

Test Item File for Arens, Auditing, 13CE 1-4

Copyright © 2016 Pearson Education, Inc.14) In the audit of an individual's tax return, the criteria used would be

• an accounting framework.
• the Income Tax Act.
• the client's policies for taxable income.
• the auditor's judgment.

Answer: B

Diff: 2 Type: MC Page Ref: 5

Learning Obj.: 1-1 Describe auditing

15) In the audit of a corporate tax return, the report provided by the Canada Revenue Agency auditor would describe

• an opinion on the likelihood of tax return error.
• the likely accounting errors that could contribute to tax errors.
• management issues with respect to accurately reporting taxes.
• corporate income tax overages or income tax underpayments.

Answer: D

Diff: 2 Type: MC Page Ref: 5

Learning Obj.: 1-1 Describe auditing