Auditing Practice
Chapter 1 - Multiple Choice Questions
1. Why do auditors generally use a sampling approach to evidence gathering?
A. Auditors are experts and do not need to look at much to know whether the financial statements are correct or not.
B. Auditors must balance the cost of the audit with the need for precision.
C. Auditors must limit their exposure to their client to maintain independence.
D. The auditor's relationship with the client is generally adversarial, so the auditor will not have access to all of the financial information of the company. 2. Which of the following statements best describes a relationship between sample size and other elements of auditing?
A. If materiality increases, so will the sample size.
B. If the desired level of assurance increases, sample sizes can be smaller.
C. If materiality decreases, sample size will need to increase.
D. There is no relationship between sample size and materiality or the desired level of assurance. 3. Which of the following statements about the study of auditing is NOT true?
A. The study of auditing can be valuable to future accountants and business decision makers whether or not they plan to become auditors.
B. The study of auditing focuses on learning the analytical and logical skills necessary to evaluate the relevance and reliability of information.
C. The study of auditing focuses on learning the rules, techniques, and computations required to analyze financial statements.
D. The study of auditing begins with the understanding of a coherent logical framework and techniques useful for gathering and analyzing evidence about others' assertions. 4. The basic purpose of a financial statement audit is to
A. Detect fraud.
B. Examine individual transactions so that the auditor may certify as to their validity.
C. Provide assurance regarding whether the client's financial statements are fairly stated.
D. Assure the consistent application of correct accounting procedures. 5. Assurance
1. Why do auditors generally use a sampling approach to evidence gathering?
A. Auditors are experts and do not need to look at much to know whether the financial statements are correct or not.
B. Auditors must balance the cost of the audit with the need for precision.
C. Auditors must limit their exposure to their client to maintain independence.
D. The auditor's relationship with the client is generally adversarial, so the auditor will not have access to all of the financial information of the company. 2. Which of the following statements best describes a relationship between sample size and other elements of auditing?
A. If materiality increases, so will the sample size.
B. If the desired level of assurance increases, sample sizes can be smaller.
C. If materiality decreases, sample size will need to increase.
D. There is no relationship between sample size and materiality or the desired level of assurance. 3. Which of the following statements about the study of auditing is NOT true?
A. The study of auditing can be valuable to future accountants and business decision makers whether or not they plan to become auditors.
B. The study of auditing focuses on learning the analytical and logical skills necessary to evaluate the relevance and reliability of information.
C. The study of auditing focuses on learning the rules, techniques, and computations required to analyze financial statements.
D. The study of auditing begins with the understanding of a coherent logical framework and techniques useful for gathering and analyzing evidence about others' assertions. 4. The basic purpose of a financial statement audit is to
A. Detect fraud.
B. Examine individual transactions so that the auditor may certify as to their validity.
C. Provide assurance regarding whether the client's financial statements are fairly stated.
D. Assure the consistent application of correct accounting procedures. 5. Assurance