Question

The objective of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately present the company’s financial position and results of operation.

True

False

Responsibility for the fair presentation of financial statements rests with the client’s management, not with the advisor.

True

False

Errors are usually more difficult for an auditor to detect than irregularities.

True

False

Audits are expected to provide a higher degree of assurance for the detection of material irregularities, such as management fraud, than is provided for an equally material error.

True

False

The auditor’s responsibility for uncovering direct-effect illegal acts is the same as for irregularities.

True

False

Auditors have a higher degree of responsibility for detecting direct-effect illegal acts than indirect-effects illegal acts.

True

False

When an auditor issues a qualified report, he or she must use the term “except for” in the opinion paragraph.

True

False

The auditor’s first course of action when an illegal act is uncovered should be to immediately notify the appropriate authorities, including but limited to, the police, and for publicly-held companies, the U.S. Department of Justice.

True

False

Under the cycle approach to segmenting an audit, transactions recorded in different journals should be never be combined with the general ledger balances that results from those transactions.

True

False

Auditors have found that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing minimal or no tests of ending account balances

True

False

Transactions-related audit objectives vary from audit to audit, depending on the nature and characteristics of the client’s business and industry.

True

False

The audit objective of posting and summarization is associated with the management assertion of presentation and disclosure.

True

False

Answer 1

1. True - The auditor's responsibility is to ascertain whether the financial statement provides a true and fair view of the financial position of the firm. There must not be any material misstatement

2. True - Management of the firm have the sole responsibility to present the financial statements fairly, the auditor is there to assess the same.

3. False - Irregularities and frauds are much more planned and intended to be hidden than errors. Therefore, it is easier to detect errors than irregularities.

4. False - Auditor's assurance is equal for every aspect of the financial statement

5. True - Direct effect illegal acts directly affect the organization. The auditor is supposed to uncover them if he discovers any such act.

6. True - Direct effect illegal acts are more important for going concern of the firm than indirect effect.

7. True - Except for " depicts that the qualification of the auditor is limited to this point only.