Auditing: The Art and Science of Assurance Engagements 15th Canadian Edition by Alvin A Arens Test b

Answer: C
32) Information risk can be reduced through any one of the following except
A) providing audited financial statements to users.
B) having the user verify the information.
C) having the user share information risk with management.
D) having the chief financial officer certify and sign off on the financial statements.
Answer: D
33) A bank manager is evaluating a loan application for Leonard & Ebelle, the private parent company with three
subsidiaries in different sectors, including real estate, retail, and banking. The bank manager has received the
unaudited consolidated financial statements for Leonard & Ebelle. The bank manager decides to request audited
financial statements from Leonard & Ebelle as a precondition for approving the loan. The following could
justify the bank manager's request, except
A) audits are mandatory for large private companies.
B) concerns over complex exchange transactions.
C) concerns over voluminous data.
D) concerns over remoteness of information.
Answer: A
34) Blader Ng. Inc. has recently placed new air- cleaning systems in their smokestacks to meet air quality
regulations. An auditing firm has been engaged to assess air quality and compare results to legislated
requirements. What type of audit or engagement is the auditor conducting?
A) financial statement B) operational C) review D) compliance
Answer: D
35) As part of its loan agreement, Big Bank requires that only accounts receivable less than 60 days old be used as
collateral. An auditor has been engaged to provide assurance that the accounts receivable on the list provided to
the bank are indeed less than 60 days old. What type of engagement is the auditor conducting?
A) operational B) financial statement C) review D) compliance
Answer: D
36) A review of any part of an organization's procedures and methods for the purpose of evaluating efficiency and
effectiveness is classified as a(n)
A) audit of financial statements. B) production audit.
C) compliance audit. D) operational audit.
Answer: D
37) Which of the following is most difficult to evaluate objectively?
A) internal controls in use at a small company
B) presentation of financial statements in accordance with a generally accepted accounting framework
C) compliance with government regulations
D) efficiency and effectiveness of operations
Answer: D
38) A typical objective of an operational audit is for the auditor to
A) evaluate the effectiveness of an internal process.
B) report on the entity's relative success in attaining profit maximization.
C) determine whether the financial statements fairly present the entity's operations.
D) evaluate the feasibility of attaining the entity's operational objectives.
Answer: A
39) Which of the following audits can be regarded as being solely "compliance" audits?
A) Canada Revenue Agency's examinations of the returns of taxpayers.
B) an internal auditor's review of his employer's payroll authorization procedures.
C) the Auditor General's evaluation of the computer operations of governmental units.
D) a public accounting firm's audit of the local school district.
Answer: A
40) Which of the following is an example of a financial statement audit?
A) determining whether ABC's overall financial statements are stated in conformity with IFRS
B) evaluating the effectiveness and efficiency of internal controls used to record transactions
C) determining whether ABC's financial statements overall do not violate any debt covenants
D) evaluating the effectiveness and efficiency of internal controls used to create account balance
Answer: A
41) What is the primary difference between internal and external auditors?
A) the parties to whom the auditor is responsible
B) the level of objectivity required
C) the level of competence required
D) the methodology used to conduct financial statement audits
Answer: A
42) Which of the following organizations establishes ethical standards and standards for the practice of Internal
Auditing?
A) Information Systems Audit and Control Association (ISACA).
B) Society of Management Accountants of Canada (SMAC).
C) Chartered Professional Accountants of Canada (CPA).
D) Institute of Internal Auditors (IIA).
Answer: D
43) Auditors General are responsible for auditing which types of organizations?
A) private companies that have loans outstanding to banks or other creditors
B) any organization that submits tax returns to the tax authorities
C) ministries, departments, agencies that report to Government
D) public companies with shares issued to investors
Answer: C
44) The extent and the scope of the audits conducted by Auditors General are determined by