Chapter 1 questions

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According to the AICPA, the purpose of an audit of financial statements is to:
a. Enhance the degree of confidence that intended users can place in the financial statements
b. Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the Financial Accounting Standards Board
c. Express an opinion on the fairness with which they present financial position, result of operations, and cash flows in conformity with accounting standards promulgated by the U.S. Securities and Exchange Commission
d. Obtain systematic and objective evidence about financial statements assertions and report the results to interested users

a. Enhance the degree of confidence that intended users can place in the financial statements

Performance audits usually include (2 answers):
a. Financial audits
b. Economy and efficiency audits
c. Compliance audits
d. Program audits

b. Economy and efficiency audits
d. Program audits

The objective in an auditor's review of credit ratings of a client's customers is to obtain evidence related to management's assertion about:
a. Completeness
b. Existence
c. Valuation and allocation
d. Rights and obligations
e. Occurrence

c. Valuation and allocation

When auditing merchandise inventory at year-end, the auditor performs audit procedures to ensure that all goods purchased before year-end are received before the physical inventory count. This audit procedure provides assurance about which management assertion:
a. Cutoff
b. Existence
c. Valuation and allocation
d. Rights and obligations
e. Occurrence

a. Cutoff

When an auditor reviews additions to the equipment (fixed asset) account to make sure that repair and maintenance expenses are not understated, she wants to obtain evidence as to management's assertion regarding:
a. Completeness
b. Existence
c Valuation and allocation
d. Rights and obligations
e. Occurrence

b. Existence

Which of the following best describes the relationship between auditing and attestation engagements?
a. Auditing is a subset of attestation engagements that focuses on the certification of financial statements.
b. Attestation is a subset of auditing that provides lower assurance than that provided by an attestation engagement.
c. Auditing is a subset of attestation engagements that focuses on providing clients with advice and decision support
d. Attestation is a subset of auditing that improves the quality of information or its context for decision makers

a. Auditing is a subset of attestation engagements that focuses on the certification of financial statements

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