Auditing: A Business Risk Approach Chapters 1,2 & 17 Exam

Question 1

4 / 4 points Internal auditing is an objective evaluation function. Internal auditing is established within an organization. Internal auditing's purpose is to provide assurance regarding the company's compliance with stated policies and procedures.

Which one of the following statements is not true about internal auditing?

Internal auditing is established as an independent service to regulatory bodies and creditors. Question 2 4 / 4 points
An integrated audit includes an audit of

the companys internal controls. the companys financial statements. the companys compliance with its rules and policies. Both A and B. Question 3
Auditing is a systematic process that includes all of the following except:

4 / 4 points

communicating results to users procuring and evaluating evidence providing important managerial decisions for a client comparing evidence regarding assertions to certain established criteria Chapter 2 Multiple Choice Question 4 4 / 4 points
Which one of the following will provide auditing standards of public companies?

GAO AICPA GAAP PCAOB Question 5 4 / 4 points

It is expected that the external auditor report the following to the audit committee except:

critical accounting policies and practices used by

management materiality methodology and thresholds used by the auditor material alternative GAAP treatments that have been discussed with management material written communications between the auditor and management Question 6 4 / 4 points
The audit committees major areas of responsibility include all of the following except:

oversight of the internal control system oversight of the internal audit function and external auditor preparation of financial statements establishment and oversight of a whistleblower process Question 7
Specific activities performed by external auditors include(s):

4 / 4 points preparation of client financial statements in conformity with GAAP services such as audit, tax or consulting creating and specifying independence standards all of the above are performed

Question 8
Which of the following board of directors of Robbins Corporation should not serve on the audit committee?

4 / 4 points John Williams, professor at the University of Kalamazoo Tyrone Marks, treasurer of Robbins Corporation Stacy Bobbitt, member of the board of directors of the First National Bank and Trust

Jill Cemoss, chairman of the board of Big Brothers and Sisters, a non-profit organization Question 9 4 / 4 points
Specific activities performed by management include the following except:

formulating strategy and risk management implementing effective internal controls hiring of the external auditors all of the above are performed

View Feedback Question 10

The PCAOB has the authority to do all of the following except:

4 / 4 points perform peer reviews on public accounting firms establish quality control standards for auditors of public companies take responsibility for an organization's financial statements set audit standards

Question 11
All of the following groups have responsibility for ensuring proper corporate governance except:

4 / 4 points

stockholders board of directors regulatory agencies all of the above have responsibility Chapter 17 Multiple Choice Question 12 0 / 4 points
Which of the following most likely constitutes breach of contract of the auditor with a client?

Withholding client information from interested external parties. Withdrawing from the engagement due to accepting a new client. Failing to discover immaterial fraud in the client's payroll department. Providing the audit opinion to the client prior to the due date. Question 13 0 / 4 points
Who may sue an auditor under common law for breach of contract?

clients foreseeable parties foreseen parties anyone with grounds Question 14 0 / 4 points

Which of the following is one method utilized by the auditing profession to assist in maintaining independence?

quality continuing education in relevant areas.

screening of auditors by the Federal Trade Commission. partner rotation on public engagements every five years. prohibition of audit services on any public client. Question 15
The Securities Exchange Act of 1934 places the burden of proof on which of the following parties?

0 / 4 points

third-party plaintiff. attorney defendant. auditor defendant. client plaintiff. Question 16 Chapter 2 Long Answer 20 / 20 points

Characteristics of an effective audit committee List and discuss at least four attributes of an effective audit committee that provides important oversight functions. An effective audit committee is comprised of outside directors that are dedicated to the oversight of an organization's financial framework. The following four items are evaluated: the internal control system, internal audit function and external auditor, financial filings and the implementation and oversight of a 'whistleblower' process. The audit committee acts the monitor of the management team and the auditors that carry out the requested audit investigation. While the audit committee oversees these functions, it does not assist or provide the necessary systems and documents needed to comply with an audit. The correct answer is not displayed for Long Answer type questions.

Chapter 17 LA Question 17
Defensive auditing A. What is meant by the term "defensive auditing"? B. Present examples of defensive auditing practices.

20 / 20 points

(A) Audit firms take make intentional business decisions with intent that they will reduce the risk of a lawsuit and minimize potential damage if the firm has found themselves in litigation. (B) Prior to engaging in client work, a firm can be established as a limited liability corporation and maintain insurance coverage that is most appropriate. A high level of discretion should be considered when screening clients for possible engagement. Working with a risk prone client has a higher potential of ending up in court as compared to a transparent and healthy organization. The requirement of engagement letters for all clients and document retention must be also keep a top propriety of a firm's competent staff. These are a few examples of how and audit firm uses defensive auditing to protect its future.