Bcom Bachelor of Commerce Auditing

Question 1

What is the primary objective of an external financial statement audit?

Accepted Answer

To express an opinion on whether financial statements are fairly presented in accordance with GAAP

Answer

To detect all fraud within a company

Answer

To prepare the financial statements

Answer

To certify that the company is profitable

Question 2

Which organization sets auditing standards for public companies in the US?

Accepted Answer

Public Company Accounting Oversight Board (PCAOB)

Answer

American Institute of CPAs (AICPA)

Answer

Financial Accounting Standards Board (FASB)

Answer

Securities and Exchange Commission (SEC)

Question 3

What is 'audit risk'?

Accepted Answer

The risk that an auditor issues an inappropriate opinion on materially misstated financial statements

Answer

The risk that a client commits fraud

Answer

The risk that audit fees are too high

Answer

The risk of losing a client to a competitor

Question 4

What does 'materiality' mean in auditing?

Accepted Answer

The magnitude of a misstatement that could influence the decisions of a reasonable financial statement user

Answer

The importance of an audit client to the firm

Answer

The physical existence of an asset

Answer

The relevance of audit evidence

Question 5

Which type of audit opinion indicates that financial statements are fairly presented with no exceptions?

Accepted Answer

Unqualified (clean) opinion

Answer

Qualified opinion

Answer

Adverse opinion

Answer

Disclaimer of opinion

Question 6

What is 'substantive testing' in an audit?

Accepted Answer

Audit procedures designed to detect material misstatements in account balances and transactions

Answer

Testing the design of internal controls

Answer

Reviewing management representations

Answer

Analytical procedures comparing ratios