AACSB: Analytic
AICPA: BB Legal
AICPA: FN Research
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 01-03 Describe and define the assertions that management makes about the recognition; measurement; presentation; and disclosure of the financial statements and explain why auditors use them as the focal point of the audit.
Source: Original
Topic: Management's Financial Statement Assertions
Essay Questions
AICPA: BB Legal
AICPA: FN Research
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 01-03 Describe and define the assertions that management makes about the recognition; measurement; presentation; and disclosure of the financial statements and explain why auditors use them as the focal point of the audit.
Source: Original
Topic: Management's Financial Statement Assertions
| 57. | 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. A. Existence B. Rights and obligations C. Completeness D. Accuracy E. Valuation 1. The auditors walked through the warehouse looking for obsolete inventory. 2. The auditors compared invoices received from suppliers with the cost of inventory listed in the inventory accounts. 3. The auditors reviewed purchase orders to determine if any inventory was on consignment. 4. The auditors reviewed vendor invoices to determine if freight costs, taxes, tariffs or other costs had been included in inventory costs. 5. The auditors selected items from the inventory and reviewed inventory records to ensure these items were included in those records. 1. E, 2. D, 3. B, 4. E, 5. C |
| AACSB: Analytic AICPA: BB Legal AICPA: FN Research Blooms: Understand Difficulty: 3 Hard Learning Objective: 01-03 Describe and define the assertions that management makes about the recognition; measurement; presentation; and disclosure of the financial statements and explain why auditors use them as the focal point of the audit. Source: Original Topic: Management's Financial Statement Assertions |
Essay Questions
| 58. | What are the differences between the American Accounting Association and AICPA definitions and objectives of auditing? The AAA definition is broad and general enough to encompass independent, internal, and governmental auditing. The AICPA has not defined auditing but its statement on objectives of financial audits restricts auditing to independent CPA's audit of the traditional financial statements and their footnotes. The AICPA SAS also offers guides to report on internal control, letters to underwriters, and special reports. |
| AACSB: Analytic AICPA: BB Industry AICPA: FN Research Blooms: Understand Difficulty: 2 Medium Learning Objective: 01-02 Define and contrast financial statement auditing; attestation; and assurance services. Source: Original Topic: Auditing, Attestation, and Assurance Services |
| 59. | What is operational auditing and by whom is it performed? Operational auditing is the evaluation of business operations for various purposes. Operational auditing includes: (1) testing for compliance with laws and regulations and company policies and procedures, (2) evaluating the effectiveness of operations in achieving goals and objectives, and (3) evaluating the efficiency and economy of operations. Operational audits are normally performed by internal auditors. However, operational audits also may be conducted by independent CPA firms as part of their management advisory services. |
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