Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Question
Chapter 1, Problem 13.3MCQ
To determine
Identify the feature of compliance auditing.
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Compliance auditing often extends beyond audits leading to the expression of opinions on the fairness of financial presentation and includes audits of efficiency, economy, effectiveness, as well as:
Select one:
a. accuracy.
b. evaluation.
c. adherence to specific rules or procedures
d. internal control.
Compliance auditing often extends beyond audits leading to the expression ofopinions on the fairness of financial presentation and includes audits of efficiency,economy, effectiveness, as well as(1) accuracy.(2) adherence to specific rules or procedures.(3) evaluation.(4) internal control
The auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be
considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those
procedures.
Required:
a. Define audit risk.
b. Describe the components of audit risk (e.g., inherent risk, control risk, and detection risk).
c. Explain how these components are interrelated.
(AICPA, adapted)
Chapter 1 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 1 - What are the information and established criteria...Ch. 1 - Prob. 2RQCh. 1 - Discuss changes in accounting and business...Ch. 1 - Prob. 4RQCh. 1 - Identify the three main ways information risk can...Ch. 1 - Prob. 6RQCh. 1 - Prob. 7RQCh. 1 - Prob. 8RQCh. 1 - Prob. 9RQCh. 1 - Prob. 10RQ
Ch. 1 - Prob. 11RQCh. 1 - Prob. 12.1MCQCh. 1 - Prob. 12.2MCQCh. 1 - Prob. 12.3MCQCh. 1 - Prob. 13.1MCQCh. 1 - Prob. 13.2MCQCh. 1 - Prob. 13.3MCQCh. 1 - Prob. 14.1MCQCh. 1 - Prob. 14.2MCQCh. 1 - Prob. 14.3MCQCh. 1 - Prob. 15DQPCh. 1 - Busch Corporation has an existing loan in the...Ch. 1 - Prob. 17DQPCh. 1 - James Burrow is the loan officer for the National...Ch. 1 - Prob. 19DQPCh. 1 - Prob. 20DQPCh. 1 - Prob. 21DQPCh. 1 - Prob. 22DQPCh. 1 - As discussed in the chapter opening vignette and...Ch. 1 - Prob. 24DQP
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Similar questions
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- Management's assertions in the financial statements are of relevance to the audit process because a. they are the procedures that will be performed by the audit team. b. they are utilized by auditors in developing proper tests and procedures c. they are direct evidence that management has prepared financial statements in accordance with GAAS. d. they relate more to the audit while the financial statenent belong to the author.arrow_forwardWhich of the following is required documentation in an audit in accordance with generally acceptedauditing standards? Group of answer choices a. A flowchart or narrative of the accounting system describing the recording and classification of transactions for financial reporting. b. All major stakeholder groups. c. An internal control questionnaire identifying controls that assure specific objectives will be achieved. d. The overall audit strategy and audit plan.arrow_forward2. An auditor is required to obtain sufficient understanding of each component of an entity’s internal control system to plan the audit of the entity’s financial statements and to assess control risk for the associated assertions in the account balance, transaction class, and disclosure components of the financial statements. a. Define Internal Control b. For what purpose should an auditor’s understanding of the internal control components be used in planning an audit? c. What are an auditor’s documentation requirements concerning an entity’s internal control system and the assessed level of control riskarrow_forward
- b. The Responsibilities principle underlying AICPA auditing standards includes a requirement that (1) field work be adequately planned and supervised. (2) the auditor's report state whether or not the financial statements conform to generally accepted accounting principles. (3) professional judgment be exercised by the auditor. (4) informative disclosures in the financial statements be reasonably adequate. c. What is the general character of the responsibilities characterized by the Performance principles? (1) The competence, independence, and professional care of persons performing the audit. (2) Criteria for the content of the auditor's report on financial statements and related footnote disclosures. (3) The criteria of audit planning and evidence gathering. (4) The need to maintain an independence in mental attitude in all matters per- taining to the audit. 2-17 (Objective 2-7) The following questions concern quality control standards. Choose the best response. a. The nature and…arrow_forwardIdentify how each of the following statements relates to the performance principle by considering which element(s) of the principle are related to that statement. (A statement may be related to more than one element.) Use the following elements in providing your response: Reasonable assurance • Planning and supervision • Materiality ⚫ Risk assessment • Audit evidence a. Evaluating the effectiveness of the client's internal control in preventing or detecting misstatements. b. Obtaining an understanding of the client's business and industry. c. Acknowledging that the risk of failing to detect a material misstatement cannot be reduced to zero. d. Obtaining confirmations from the client's customers as to the ending balances in accounts receivable. e. Preparing a written audit plan. f. Designing audit procedures to identify misstatements that would have a significant effect on financial statement users' decisions. g. Considering the likelihood that the account balance contains a material…arrow_forwardTests of controls in a GAAS audit are required fora. Obtaining evidence about the financial statement assertions.b. Accomplishing control over the occurrence of recorded transactions.c. Applying analytical procedures to financial statement balances.d. Obtaining evidence about the operating effectiveness of client control activities.arrow_forward
- Risk assessment procedures are performed by auditors to: a. detect material misstatements in the financial statements. b. distribute the information needed to perform control activities. c. express an opinion on the financial statements. d. identify and assess the risks in achieving the entity’s objectives.arrow_forwardService organization control (SOC) reports may be requested by auditors when a service organization processes transactions related to a client's (user organization) internal control over financial reporting. Required: For each of the following statements related to Service Organization Control (SOC) reports, indicate whether it is appropriately related to a Type 1 report (T1), Type 2 report (T2), both a Type 1 and Type 2 report (B), or neither a Type 1 or Type 2 report (N). a. Disclaims an opinion on the fairness of the entity's financial statements. b. Provides a description of the service organization's internal control over financial reporting. c. Summarizes tests of operating effectiveness of controls at the service organization. d. Expresses an opinion on the suitability of design of internal controls over financial reporting. B e. Use of the service auditor's report is restricted to specified parties. f. Would be requested when client is an issuer. g. Disclaims an opinion on the…arrow_forwardAn auditor uses assessed control risk to(1) evaluate the effectiveness of the entity’s internal controls.(2) identify transactions and account balances where inherent risk is at the maximum.(3) indicate whether materiality thresholds for planning and evaluation purposesare sufficiently high.(4) determine the acceptable level of detection risk for financial statement assertionsarrow_forward
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