Chapter 01

Auditing and Assurance Services

Multiple Choice Questions

71. CPA certificates and licenses to practice are issued by the

A. AICPA.
B. States or territories.
C. AICPA Examinations Division.
D. GAO.
Matching Questions

Question also found in Study Guide

72. Which of the PCAOB assertions (A - E) are best verified by the following audit procedures
(1-4)?

1. Valuation or Confirming inventory held on consignment by the

allocation client with independent third party. ____
2. Valuation or Consulting the Wall Street Journal for year-end
allocation prices of securities held by the client. ____
3. Existence or Physically examine all major property and
occurrence equipment additions. ____
4. Rights and Review the aged trial balance for significant past
obligations due accounts. ____

73. ABC Company had a major sale to XYZ Company. This sale accounted for 20% of the
revenue of ABC Company. The auditors performed the audit procedures listed 1 - 3. For each
audit procedure select the ASB transaction assertion that is most likely being tested.

The auditor reviewed the shipping documents to check

1. Completeness the date that product was shipped to XYZ Company. ____
The auditor reviewed the shipping documents to
ensure that all product included in the sales revenue to
2. Cutoff XYZ had been shipped. ____
The auditor reviewed the invoice sent to XYZ
3. Accuracy Company to ensure that XYZ had been properly billed. ____
74. Auditors are auditing the warehouse of Huge Lots Corporation. The auditors performed the
audit procedures listed 1 - 5. For each audit procedure select the ASB balance assertion that is
most likely being tested.

The auditors walked through the warehouse looking

1. Valuation for obsolete inventory. ____
The auditors compared invoices received from
2. Rights and suppliers with the cost of inventory listed in the
obligations inventory accounts. ____
The auditors reviewed purchase orders to determine
3. Valuation if any inventory was on consignment. ____
The auditors reviewed vendor invoices to determine
if freight costs, taxes, tariffs or other costs had been
4. Completeness included in inventory costs. ____
The auditors selected items from the inventory and
reviewed inventory records to ensure these items were
5. Accuracy included in those records. ____
True / False Questions

Questions also found in Study Guide

75. Financial decision makers demand reliable information that is provided by accountants.
True False

76. Financial decision makers obtain their accounting information from lenders of funds.
True False

77. Four conditions that create demand for reliable information are complexity, remoteness,
timeliness, and consequences.
True False

78. The lending of credibility to financial information is known as certification.

True False

79. Independent auditors are employees of the client.

True False

80. Assurance service is the systematic process of objectively obtaining and evaluating
evidence.
True False