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Audit Chapter 1 MC
Terms in this set (11)
An independent audit aids in the communication of economic data because the audit
lends credibility to the financial statements
Which of the following best describes the reason why an independent auditor is often retained to report on financial statements?
different interests may exist between the entity preparing the statements and the persons using the statements, and thus outside assurance is needed to enhance the credibility of the statements
Which of the following best describes relationships among auditing, attest, and assurance services?
Auditing is a type of assurance service
Which of the following statements relating to attest and assurance services is not correct?
Financial statement auditing is a form of attest service but it is not an assurance service.
For what primary purpose does the auditor obtain an understanding of the entity and its environment?
to plan the audit and determine the scope of audit procedures to be performed
Which of the following statements best describes the role of materiality in a financial statement audit?
the lower the level at which the auditor assesses materiality, the greater the amount of evidence the auditor must gather
Which of the following is the most important reason for an auditor to gain an understanding of an audit client's system of internal control over financial reporting?
understanding a client's system of internal control can help the auditor assess risk and identify areas where financial statement misstatements might be more likely
Preliminary engagement activities include
All of the above. (Understanding the client and the client's industry. Determining audit engagement team requirements. Ensuring the independence of the audit team and audit firm.
Which of the following statements best describes what is meant by an unqualified audit opinion?
Issuance of a standard unqualified auditor's report indicates that in the auditor's opinion the client's financial statements are fairly presented in accordance with agreed-upon criteria, with no need for the inclusion of qualifying phrases.
The auditing standards used to guide the conduct of the audit are
implicitly referred to in the scope paragraph of the auditor's standard report
A client has used an inappropriate method of accounting for its pension liability on the balance sheet. The resulting misstatement is moderately material, but the auditor does not consider it to be pervasive. The auditor is unable to convince the client to alter its accounting treatment. The rest of the financial statements are fairly stated in the auditor's opinion. Which kind of audit report would an auditor most likely issue under these circumstances?
qualified opinion due to departure from GAAP
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