Auditing: An International Approach Seventh Canadian Edition Test Bank

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ExamName___________________________________MULTIPLE CHOICE.Choose the one alternative that best completes the statement or answers the question.1)Which of the following best describes the main reason that independent auditors reporton a company's financial statements?1)_______A)The accounting system from which the financial statements are derived may have apoorly designed system of internal control.B)Management fraud may exist within the company and it is likely that theindependent auditors will detect it.C)Users of financial statements need confidence in the numbers they base theirdecisions on.D)Misstated account balances may be corrected as the result of the independent auditwork.2)Reducing information risk means the same as ________.2)_______A)serving the public interestB)improving the credibility of informationC)ensuring generally accepted accounting principles are used to measure profitD)monitoring economic activities3)Three-party accountability is a special case of which economic theory problem?3)_______A)independenceB)forensicsC)agencyD)business risk4)The agency problem can be mitigated by ________.4)_______A)internal auditingB)design of contractsC)a higher degree of independenceD)greater transparency5)The underlying conditions that create demand by users for reliable financial informationinclude the fact that ________.5)_______A)governments rely on such information to create tax policiesB)there is a need for the expression of an opinion as to the fairness of financialstatementsC)more reliable information will allow investors to calculate the rate of return on theirinvestmentD)users are separated from accounting records by distance and time6)The auditee is the person or company ________.6)_______A)who will use the audited informationB)who pays the audit feeC)who performs an auditD)whose information is being audited7)Professional judgment is a widely used concept in accounting and auditing. How is itdefined in the audit standards?7)_______A)Professional judgment includes consideration of key principles and concepts ofdisciplines underlying the professional standards, such as economics, psychology,law, finance, statistics and philosophy.B)Professional judgment involves specialized concepts and language integratingseveral disciplines in order to provide appropriate justification for audit decisions.C)There is no definition of professional judgment in the auditing standards.D)Professional judgment means reaching a complex decision by incorporatingauditing standards, accounting standards, and rules of professional ethics in a

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