Question

1. Which of the following services provides the lowest level of assurance on a financial statement?

a. An audit.

b. A review.

c. Neither service provides assurance on financial statements.

d. Each service provides the same level of assurance on financial statements.

2. The auditor has no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by errors or fraud, that are not ________ are detected.

a. important to the financial statements

b. statistically significant to the financial statements

c. material to the financial statements

d. identified by the client

3. When determining whether an exception is “highly material,” the extent to which the exception affects different elements of the financial statements must be considered. This concept is called:

a. materiality.

b. pervasiveness.

c. financial analysis.

d. ratio analysis.

4. An auditor determines the financial statements include a material limitation of scope. Which type(s) of opinion may be issued?

Disclaimer Qualified Adverse

a. Yes No No

b. No Yes Yes

c. Yes No Yes

d. Yes Yes No

5. Conditions requiring a qualified audit report include all but which of the following?

a. Management decided not to allow the auditor to confirm significant accounts receivable, but the auditor obtained sufficient appropriate evidence by examining subsequent cash receipts.

b. Management refused to allow the auditor to confirm significant accounts receivable for which there were no alternative procedures performed.

c. Auditor disagreed with the amount of provision made by the management and management was reluctant to make more provision.

d. Management has determined that fixed assets should be reported in the balance sheet at their replacement values rather than historical costs. The auditors do not concur.

Answer 1

QUESTION : [1] WHICH OF THE FOLLOWING SERVICE PROVIDES LOWEST LEVEL OF ASSURANCE TO FINANCIAL STATEMENTS ?

ANSWER : [B] REVIEW

Review of financial statements provides limited assurance that the statements are free from material misstatementa and complied with GAAP. Reviewed statements are always includes footnotes disclosures and cash flow statements. But the accountant is not necessarily required to evaluate internal controls or physically inspect assets.Thus it is a lowest assurance provider service of financial statements when compared to auditing.

option a : audit

An asudit always provides reasonable assurance that your financial statements are free from the material misstatements and conform with GAAP. The security exchange control requires public companies to prepare annual audit report. This is also applied by the large private companies to satisfy the outside lendors and investors.