Auditing: A Practical Approach 4th Canadian Edition by Robyn Moroney Test bank
CPA Competency: Audit and Assurance
AACSB: Analytic
14. All modified audit reports are qualified audit opinions.
Answer: False
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Outline different audit opinions.
Section Reference: 1.5 Different audit opinions
CPA Competency: Audit and Assurance
AACSB: Analytic
15. The expectation gap is caused by unrealistic user expectations such as the auditor providing complete assurance.
Answer: True
Bloomcode: Comprehension
Difficulty: Easy
Learning Objective: Describe the audit expectation gap.
Section Reference: 1.8 The audit expectation gap
CPA Competency: Audit and Assurance
AACSB: Analytic
MULTIPLE CHOICE QUESTIONS
16. Martha Minnati was reviewing the previous year’s audited financial statements of a clothing manufacturer. Her manager explained to her that for a financial statement audit, the clothing company was the accountable party, its shareholders were the users, and the subject matter was the financial statements. What kind of audit engagement was her manager describing?
a) consulting engagement
b) assurance engagement
c) review engagement
d) compliance engagement
Answer: b
Bloomcode: Comprehension
Difficulty: Easy
Learning Objective: Define an assurance engagement.
Section Reference: 1.1 Auditing and assurance defined
CPA Competency: Audit and Assurance
AACSB: Analytic
17. An engagement performed by an auditor or practitioner to enhance the reliability of the subject matter can best be described as a(n)
a) compilation engagement.
b) review engagement.
c) consultancy engagement.
d) assurance engagement.
Answer: d
Bloomcode: Comprehension
Difficulty: Easy
Learning Objective: Define an assurance engagement.
Section Reference: 1.1 Auditing and assurance defined
CPA Competency: Audit and Assurance
AACSB: Analytic
18. An example of the three parties in an assurance engagement would be:
a) audit client, employee, customer.
b) audit client, supplier, auditor.
c) auditor, shareholder, general public.
d) auditor, general public, employees.
Answer: b
Bloomcode: Comprehension
Difficulty: Easy
Learning Objective: Define an assurance engagement.
Section Reference: 1.1 Auditing and assurance defined
CPA Competency: Audit and Assurance
AACSB: Analytic
19. A limitation of an audit is caused by
a) the nature of financial reporting.
b) the nature of audit procedures.
c) the need for the audit to be conducted within a reasonable period of time and at a reasonable cost.
d) all of these answers are correct
Answer: d
Bloomcode: Comprehension
Difficulty: Easy
Learning Objective: Define an assurance engagement.
Section Reference: 1.1 Auditing and assurance defined
CPA Competency: Audit and Assurance
AACSB: Analytic
20. Which of the following groups would be considered users of the financial statements?
a) governments
b) current shareholders
c) general public
d) all of these answers are correct
Answer: d
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain why there is a demand for audit and assurance services.
Section Reference: 1.2 Demand for audit and assurance services
CPA Competency: Audit and Assurance
AACSB: Analytic
21. The causes of information risk do not include
a) independence.
b) complexity.
c) reliability.
d) competing incentives.
Answer: a
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain why there is a demand for audit and assurance services.
Section Reference: 1.2 Demand for audit and assurance services
CPA Competency: Audit and Assurance
AACSB: Analytic
22. An audit is one way for investors to insure against at least part of their loss should the company they invest in fail – this is an example of
a) agency theory.
b) information hypothesis.
c) insurance hypothesis.
d) competing incentives.
Answer: c
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain why there is a demand for audit and assurance services.
Section Reference: 1.2 Demand for audit and assurance services