Auditing: Integral to the Economy

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Chapter 1: Auditing: Integral to the Economy

TRUE/FALSE

1.The need for assurance services arises because the interests of the users of information may be different from that of the interests of those responsible for providing information.

ANS:TPTS:1OBJ:Demand for Assurances
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

2.An audit of financial statements is a form of attestation service.

ANS:TPTS:1OBJ:Auditing Defined
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

3.Independence is an attribute necessary to perform assurance services.

ANS:TPTS:1OBJ:Scope of Services
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

4.A bank using Milton Company's financial statements to determine the creditworthiness of a potential loan to Milton is a good example of the need for unbiased reporting.

ANS:TPTS:1OBJ:Auditing Defined
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

5.Independence is only required for assurance service providers.

ANS:TPTS:1OBJ:Scope of Services
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

6.A CPA automatically qualifies as an assurance provider in all areas of business.

ANS:FPTS:1OBJ:Scope of Services
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

7.Attestation services are a subset of assurance services and always involve a report that goes to a third party.

ANS:TPTS:1OBJ:Scope of Services
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

8.The American Institute of Certified Public Accountants has the primary authority to set auditing standards.

ANS:FPTS:1OBJ:Professional and Regulatory Organizations NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

9.The audit function is unique because it exists to perform services on a "client" on behalf of shareholders, directors and other parties.

ANS:TPTS:1OBJ:Auditing Defined
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

10.Auditing is the process of attesting to assertions about economic actions and events.

ANS:TPTS:1OBJ:Auditing Defined
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

11.Auditing is the process of verifying the accuracy of the financial statements.

ANS:FPTS:1OBJ:Auditing Defined
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

12.Internal auditing only provides assurance services to clients.

ANS:FPTS:1OBJ:Changes in Profession
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

13.Auditing exists because users need unbiased information on which to assess management performance and make economic decisions.

ANS:TPTS:1OBJ:Auditing Defined
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

14.Users prefer management's financial statements over audited financial statements because few users have direct knowledge of the company's operations and management is the most knowledgeable about operations.

ANS:FPTS:1OBJ:Auditing: A Special Function
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

15.Users rely on auditors' independent assessment of financial statement presentation because few users have direct knowledge of the company's operations.

ANS:TPTS:1OBJ:Auditing: A Special Function
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

16.An assertion is a positive statement about an action, event, condition, or performance over a specified time period.

ANS:TPTS:1OBJ:Auditing Defined
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

17.Management is required to comment on the fairness of the company's financial presentation. This reduces the auditor's legal responsibility for the opinion rendered on the financial statements.

ANS:FPTS:1OBJ:Auditing Defined
NAT:AACSB-Analytical skills | AICPA BB-Critical thinking

18.Audited financial statements should be free from all errors and fraud.

ANS:F...
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