Chapter 1 SB HW

Question 1

When business owners hire others to manage their business, the demand for auditing can be understood as the need for ______.

Answer 1

accountability

Question 2

What are the three fundamental concepts of a financial statement audit?

Answer 2

Audit risk, evidence, and materiality

Question 3

True or false: Before accepting a new audit client, the auditor is required to conduct a background check on top management.

Answer 3

False

Question 4

When planning an audit, the audit team must determine materiality and make a preliminary analysis of the entity’s ______ to determine the risk of material misstatement (RMM).

Answer 4

business risks

Question 5

The end product of an auditor’s work is the ______.

Answer 5

audit opinion

Question 6

Auditing helps one understand how to evaluate _______.

Answer 6

assertions

Question 7

Auditing focuses on learning the _______ and _______ skills necessary to evaluate the relevance and reliability of financial information.

Answer 7

analytical, logical

Question 8

Auditing is more _______ in nature than financial accounting.

Answer 8

conceptual

Question 9

In 1926, ____% of companies on the NYSE were audited by independent auditors.

Answer 9

82

Question 10

Why is auditing demanded?

Answer 10

It plays a valuable role in monitoring contractual relationships.

Question 11

Purchasing the assurance provided by an audit ______ the cost of capital for a firm.

Answer 11

significantly reduces

Question 12

Predictive audit data analytics combine what three data sources to help identify off information?

Answer 12

Firm, industry, and market data

Question 13

The body of an audit report begins with a section that indicates the _____(3 parts).

Answer 13

1. FS covered by the report
2. Name of the company being audited
3. Auditors opinion regarding fairness of FS

Question 14

The focus of the auditor’s evidence collection efforts is ______.

Answer 14

financial statement assertions

Question 15

Accounting professionals perform various services that provide assurance about the _____ and _____ of information given by one party to another.

Answer 15

relevance, reliability

Question 16

Oral or visual information as well as paper or electronic documents that originate either within or outside the organization are all types of ________.

Answer 16

audit evidence

Question 17

Learning auditing essentially helps to understand how to gather and assess evidence so you can evaluate ________ made by others.

Answer 17

assertions

Question 18

Materiality and sample size have what kind of relationship?

Answer 18

Inverse relationship

Question 19

If the client is a public, rather than a private company, the assessment of internal controls will be more or less thorough?

Answer 19

more

Question 20

In order to reach and justify a conclusion on the fairness of the financial statements, an auditor must obtain evidence that is ______.

Answer 20

appropriate and material

Question 21

What is the most common type of audit report/opinion issued?

Answer 21

Unqualified

Question 22

The paragraph containing the auditor’s opinion emphasizes the concept of _______.

Answer 22

materiality

Question 23

For an audit report to be unqualified ______(4 parts).

Answer 23

1. Auditor must be independent
2. Audit must be done in accordance with applicable standards
3. No significant limitations on procedures
4. FS must be free from material departures from GAAP

Question 24

Does management need to completely agree with findings of audit for an unqualified opinion to be issued?

Answer 24

No

Question 25

Rapid advances in electronic technologies used by many businesses ______ (2 parts).

Answer 25

1. Facilitates efficient corroboration of data reliability
2. Creates automatic audit trails

Question 26

Audit data analytics is using analysis,______, and _______
to discover and analyze patterns, anomalies, and other information in data in the context of the audit.

Answer 26

modeling, visualization

Question 27

A way to automate mundane tasks that is gaining broader acceptance is ______.

Answer 27

robotic process automation (RPA)

Question 28

The auditors assessments of ______ and _______ influence the nature, timing and extent of audit evidence to be gathered.

Answer 28

materiality, audit risk