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Auditing Principles and Ethical Considerations: A Comprehensive Study

Explores auditing Business Management and core principles in financial audits.

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    Auditing Principles and Ethical Considerations: A Comprehensive Study 1. Which of the following statements is most correct regarding errors and fraud? ** An error is unintentional, whereas fraud is intentional . Fraud occurs more often than errors in financial statements. Errors are always fraud and fraud is always errors. Auditors have more responsibility for finding fraud than errors. Coaching tip: Fraud is "on purpose." Accidents are "errors." 2 . If management insists on financial statement disclosures that the auditor finds unacceptable, the auditor can: Issue an adverse audit report; Issue a qualified audit report **Yes; Yes No; No Yes; No No; Yes Coaching tip: He can also withdraw from the audit. 3. If management insists on financial statement disclosures that the auditor finds unacceptable, the auditor can do all but which of the following? issue an adverse audit report ** issue a disclaimer of opinion withdraw from the engagement issue a qualified audit report 4. The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with the: board of directors ** company management financial statement auditor company's internal audit department Coaching tip: Auditors reviews and test controls but management designs them. 5. The Auditing Standards Board has concluded that analytical procedures are so important that they are required during: planning and test of control phases **planning and completion phases test of control and completion phases

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    planning, test of control, and completion phases Coaching tip: The Auditing Standards Board issued of Statement on Auditing Standards (SAS) No. 56 in 1988, which requires that analytical procedures be used by auditors as they plan the audit and also in the final review of the financial statements. 6. An example of an external document is : employee time reports ** bank statements purchase order for company purchases carbon copies of checks Coaching tip: External means someone outside the firm created it....in this case the bank. 7. When auditors use documents to support recorded transactions, the process is often called : inquiry confirmation **vouching physical examination Coaching tip: vouching means checking the underlying document to verify a transaction. 8. Analytical procedures must be used during which phase(s) of the audit? Test of Controls; Planning; Completion Yes; Yes; Yes ** No; Yes; Yes Yes; No; No No; No; No Coaching tip: The Auditing Standards Board issued of Statement on Auditing Standards (SAS) No. 56 in 1988, which requires that analytical procedures be used by auditors as they plan the audit and also in the final review of the financial statements. 9. When the auditor has reason to believe an illegal act has occurred without any corrective action being taken, the auditor should : inquire of management only at one level below those likely to be involved with the illegality begin communication with the FASB in accordance with PCAOB regulations **consider accumulating additional evidence to determine if there is actually an illegal act (appears as a duplicate response) consider

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