Auditing: Integral to the Economy

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

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

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

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

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

5. Independence is only required for assurance service providers.

ANS: T PTS: 1 OBJ: 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: F PTS: 1 OBJ: 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: T PTS: 1 OBJ: 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: F PTS: 1 OBJ: 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: T PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA