Auditing Principles and Ethical Considerations: A Comprehensive Study

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Auditing Principles and Ethical Considerations: A ComprehensiveStudy1.Which of the following statements is most correct regarding errorsand fraud?**An error is unintentional, whereas fraud is intentional.Fraud occurs more often than errors infinancial statements.Errors are always fraud and fraud is always errors.Auditors have more responsibility for finding fraud than errors.Coaching tip: Fraud is "on purpose." Accidents are "errors."2. If management insists on financialstatement disclosures that the auditorfinds unacceptable, the auditor can:Issue an adverse audit report; Issue aqualified audit report**Yes; YesNo; NoYes; NoNo; YesCoaching tip: He can also withdraw from the audit.3.If management insists on financial statement disclosures that the auditorfinds unacceptable, the auditor can do all but which of the following?issue an adverse audit report** issue a disclaimer of opinionwithdraw from the engagementissue a qualified audit report4. The responsibility for adopting sound accounting policies andmaintaining adequate internal control rests with the:board of directors** company managementfinancial statementauditorcompany's internal audit departmentCoaching tip: Auditors reviews andtest controls but management designsthem.5. The Auditing Standards Board has concluded that analytical proceduresare so important that they are required during:planning and test of control phases**planning and completion phasestest of control and completion phases

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planning, test of control, and completion phasesCoaching tip: The Auditing Standards Board issued of Statement onAuditing Standards (SAS) No. 56 in 1988, which requires that analyticalprocedures be used by auditors as they plan the audit and also in the finalreview of the financial statements.6. An example of an external document is:employee time reports** bank statementspurchase order for companypurchasescarbon copies of checksCoaching tip: External means someone outside the firm created it....in thiscase the bank.7. When auditors use documents to support recorded transactions, theprocess is often called:inquiryconfirmation**vouchingphysical examinationCoaching tip: vouching means checking the underlying document to verifya transaction.8. Analytical procedures must be used during which phase(s) of theaudit?Test of Controls; Planning; CompletionYes; Yes; Yes** No; Yes;YesYes; No; NoNo; No; NoCoaching tip: The Auditing Standards Board issued of Statement onAuditing Standards (SAS) No. 56 in 1988, which requires that analyticalprocedures be used by auditors as they plan the audit and also in the finalreview of the financial statements.9. When the auditor has reason to believe an illegal acthas occurredwithout any corrective action being taken, the auditor should:inquire of management only at one level below those likely to be involvedwith the illegalitybegin communication with the FASB in accordance with PCAOBregulations**consider accumulating additional evidence to determine if there isactually an illegal act(appears as a duplicate response) consider

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