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Chapter 3 Audit Reports
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Chapter 3 Audit Reports Auditing and Assurance Services 14th Edition Test Bank
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Auditing and Assurance Services, 14e (Arens)
Chapter 3 Audit Reports
Learning Objective 3-1
1) An audit of historical financial statements most commonly includes the:
A) balance sheet, statement of retained earnings, and the statement of cash flows.
B)income statement, the statement of cash flows, and the statement of net working capital.
C) statement of cash flows, balance sheet, and the statement of retained earnings.
D) balance sheet, income statement, and the statement of cash flows.
Answer: D
Terms: Audit of historical financial statements
Diff: Moderate
Objective: LO 3-1
AACSB: Reflective thinking skills
2)Auditing standards require that the audit report must be titled and that
the title must: A) include the word "independent."
B) indicate if the auditor is a CPA.
C) indicate if the auditor is a proprietorship, partnership, or
incorporated. D) indicate the type of audit opinion issued.
Answer: A
Terms: Auditing standards require audit report title
Diff: Easy
Objective: LO 3-1
AACSB: Reflective thinking skills
1
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3)To emphasize the fact that the auditor is independent, a typical addressee of the audit
report could be: A)
Company Controller Shareholders Board of Directors
No Yes Yes
B)
Company Controller Shareholders Board of Directors
No No Yes
C)
Company Controller Shareholders Board of Directors
Yes Yes No
D)
Company Controller Shareholders Board of Directors
Yes No No
Answer: A
Terms: Audit report
addressee
Diff: Easy
Objective: LO 3-1
AACSB: Reflective thinking skills
4)The scope paragraph of the standard unqualified audit report states that the audit
is designed to: A) discover all errors and/or irregularities.
B) discover material errors and/or irregularities.
C) conform to generally accepted accounting principles.
D) obtain reasonable assurance whether the statements are free of material
misstatement. Answer: D
Terms: Scope paragraph of standard unqualified audit report states
Diff: Easy
Objective: LO 3-1
AACSB: Reflective thinking skills
5)The audit report date on a standard unqualified report indicates:
A) the last day of the fiscal period.
B)the date on which the financial statements were filed with the Securities and Exchange
Commission.
C) the last date on which users may institute a lawsuit against either client or auditor.
D) the last day of the auditor's responsibility for the review of significant events that
occurred subsequent to the date of the financial statements.
Answer: D
Terms: Audit report date on standard unqualified report
Diff: Easy
Objective: LO 3-1
AACSB: Reflective thinking skills
2
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6)The standard audit report refers to GAAS and GAAP in which
paragraphs? A)
GAAS GAAP
Scope only Opinion only
B)
GAAS GAAP
Intro only Scope and Opinion
C)
GAAS GAAP
Intro and Scope Opinion only
D)
GAAS GAAP
Intro only All paragraphs
Answer: A
Terms: Standard audit report; GAAS and GAAP
Diff: Easy
Objective: LO 3-1
AACSB: Reflective thinking skills
7)Which of the following is not explicitly stated in the standard unqualified
audit report? A) The financial statements are the responsibility of
management.
B) The audit was conducted in accordance with generally accepted accounting
principles. C) The auditors believe that the audit provides a reasonable basis for
their opinion.
D) An audit includes assessing the accounting
estimates used. Answer: B
Terms: Standard unqualified audit report
Diff: Easy
Objective: LO 3-1
AACSB: Reflective thinking skills
8)If an auditor performs an audit of a public company, the scope paragraph should
make reference to which standards?
A)
GAAP.
B)
GAAS.
C) Standards issued by the PCAOB
(U.S.). D) International Audit
Standards. Answer: C
Terms: Audit of public company, scope paragraph
Diff: Easy
Objective: LO 3-1
AACSB: Reflective thinking skills
Topic: Public
3
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
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9)The introductory paragraph of the standard audit report states that the financial
statements are: A) the responsibility of the auditor.
B) the responsibility of management.
C) the joint responsibility of management and the
auditor. D) none of the above.
Answer: B
Terms: Introductory paragraph of standard audit report
Diff: Moderate
Objective: LO 3-1
AACSB: Reflective thinking skills
10) The introductory paragraph of the standard audit report performs which functions?
I. State the CPA has performed an audit.
II. Lists the financials being audited.
III. States the financials are the responsibility of the
auditor. A) I and II
B) I and III
C) II and III
D) I, II and
III Answer:
C
Terms: Introductory paragraph of standard audit report
Diff: Moderate
Objective: LO 3-1
AACSB: Reflective thinking skills
11) Which of the following statements are true?
I. The introductory paragraph states that management is responsible for the preparation
and content of the financial statements.
II. The scope paragraph states that the auditor evaluates the appropriateness of
those accounting principles, estimates, and financial statement disclosures.
A) I only
B) II
only C) I
and II
D) Neither I
nor II Answer:
C
Terms: Introductory paragraph and scope paragraph
Diff: Moderate
Objective: LO 3-1
AACSB: Reflective thinking skills
12) The introductory paragraph of the standard audit report states
that the auditor is: A) responsible for the financial statements and the
opinion on them.
B) responsible for the financial statements.
C) responsible for the opinion on the financial statements.
D) jointly responsible for the financial statements with
management. Answer: C
Terms: Introductory paragraph of standard audit report
Diff: Moderate
Objective: LO 3-1
AACSB: Reflective thinking skills
4
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
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