Finance and Accounting Auditing & Risk Review 1

Question 1

What is the primary objective of an external audit?

Accepted Answer

Provide an independent assessment of financial statements

Answer

Detect and prevent all fraud

Answer

Ensure compliance with all tax laws

Answer

Manage a company’s internal controls

Question 2

Which of the following is a key component of risk assessment?

Accepted Answer

Identifying and analyzing potential risks

Answer

Ignoring minor financial discrepancies

Answer

Eliminating all risks completely

Answer

Focusing only on regulatory compliance

Question 3

What is the main purpose of internal controls in an organization?

Accepted Answer

To ensure financial reporting accuracy and prevent fraud

Answer

To maximize company profits

Answer

To replace external audits

Answer

To eliminate all business risks

Question 4

Which organization sets international auditing standards?

Accepted Answer

International Auditing and Assurance Standards Board (IAASB)

Answer

Financial Accounting Standards Board (FASB)

Answer

Securities and Exchange Commission (SEC)

Answer

Public Company Accounting Oversight Board (PCAOB)

Question 5

Which type of audit focuses on evaluating a company’s internal controls and operational efficiency?

Accepted Answer

Internal Audit

Answer

Forensic Audit

Answer

Tax Audit

Answer

External Audit

Question 6

What is an inherent risk in auditing?

Accepted Answer

The likelihood of a material misstatement occurring before controls

Answer

Risk eliminated by internal controls

Answer

Risk that remains after external audits

Answer

A risk caused by an auditor’s error