B) An external auditor manages the organization's accounting and internal control system, whereas a forensic accountant validates effectiveness of controls in various processes or areas of the organization.
C) An external auditor adds credibility to reported financial information, whereas a forensic accountant provides assurance that management is adequately identifying and mitigating risks.
D) An external auditor forms an opinion on the overall financial statements taken as a whole, whereas a forensic accountant addresses a specific question/issue.
Answer: D
Explanation: D) An external auditor forms an opinion on the overall financial statements taken as a whole, whereas a forensic accountant addresses a specific question/issue.
Diff: 2
LO: 1-3
AACSB: Analytical Thinking
18) Which of the following is a difference between an internal auditor and an external auditor?
A) An internal auditor conducts the audit because a deficiency has been identified, whereas an external auditor conducts audits on a recurring basis.
B) An internal auditor manages accounting and internal control of an organization, whereas an external auditor examines the financial data of an organization.
C) An internal auditor's reports are used by the users of the financial statements, whereas the external auditor's reports are used by the management and internal auditor.
D) An internal auditor reports on the level of compliance with a company's internal policies, whereas the external auditor reports on the level of compliance with external laws and regulations.
Answer: A
Explanation: A) The internal auditor conducts an audit according to a plan or because a deficiency has been identified. An external auditor conducts an audit on a recurring basis.
Diff: 1
LO: 1-3
AACSB: Analytical Thinking
19) Which of the following is true of transactional accountants?
A) They evaluate the internal control systems of an organization and test the accounts to ensure that all economic events are recorded and reported properly.
B) They form and express an opinion as to whether an organization's financial statements, taken as a whole, reflect its financial position on a given date and the results of its operations for a given period.
C) They report on the adequacy of internal controls, the accuracy and propriety of transactions.
D) They employ generally accepted accounting principles (GAAP) to process information useful in decision making.
Answer: D
Explanation: D) Accountants working for an organization employ generally accepted accounting principles (GAAP) to process information useful in decision making.
Diff: 1
LO: 1-3
AACSB: Analytical Thinking
20) The internal auditor's functions exist to support the other three representatives of an organization:
A) the board of directors, executive management, and the external auditor.
B) the board of directors, executive management, and the transactional accountant.
C) the transactional accountant, board of directors, and the external auditor.
D) the transactional accountant, executive management, and the external auditor.
Answer: A
Explanation: A) The internal auditor's function is to report on the adequacy of internal controls, the accuracy and propriety of transactions, the extent to which assets are accounted for and safeguarded, and the level of compliance with a company's internal policies as well as external laws and regulations. This function exists to support the other three representatives of an organization: the board of directors (BOD), executive management, and the external auditor.
Diff: 2
LO: 1-3
AACSB: Analytical Thinking
21) Which of the following is true of an internal auditor?
A) The responsibilities of an internal auditor extend beyond the processing functions of a transactional accountant.
B) A qualified opinion from the internal auditor adds credibility to the organization and its financial statements.