C) The internal auditor issues reports that are used by the stakeholders and other users to understand the financial statements of an organization.
D) The budgets, cash flow statements, income statement, and balance sheet of an organization is prepared by the internal auditor.
Answer: A
Explanation: A) Aside from management, the first line of defense against accounting failures within an organization is the internal auditor, whose responsibilities extend beyond the processing functions of a transactional accountant.
Diff: 1
LO: 1-3
AACSB: Analytical Thinking
22) The purpose of the ________ is to form and express an opinion as to whether the 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.
A) forensic accountant
B) external auditor
C) transactional accountant
D) internal auditor
Answer: B
Explanation: B) The purpose of the external auditor is to form and express an opinion as to whether the 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.
Diff: 2
LO: 1-3
AACSB: Analytical Thinking
23) A ________ records, classifies and summarizes the financial transactions a company.
A) transactional accountant
B) internal auditor
C) external auditor
D) management accountant
Answer: A
Explanation: A) Accountants working for an organization employ generally accepted accounting principles (GAAP) to process information useful in decision making. The accounting process has three basic steps: recording, classifying, and summarizing. To facilitate this process, transactional accountants require core accounting skills.
Diff: 1
LO: 1-3
AACSB: Reflective Thinking
24) Which of the following exemplifies the role of an internal auditor?
A) Chloe classifies the transactions of Pole Star, Inc. and records it in the books of accounts.
B) Chloe reports on the sufficiency of the insurance policies taken out on the assets of Pole Star, Inc.
C) Chloe reports on the financial position of Pole Star, Inc. at the end of the accounting period.
D) Chloe assists the management of Pole Star, Inc. to determine the taxes and tax benefits..
Answer: B
Explanation: B) 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.
Diff: 2
LO: 1-3
AACSB: Reflective Thinking
25) Which of the following exemplifies the role of an external auditor?
A) Victor recorded the transactions entered in to by Trident, Inc. in the proper accounting period.
B) Victor prepared the annual budget of Trident, Inc., and he also helped the department heads prepare budgets for each department.
C) Victor evaluated the internal controls of Trident, Inc. and reported on the financial position as at the year end.
D) Victor conducted an investigation into the affairs of Trident, Inc. to allay suspicions of mismanagement of funds.
Answer: C
Explanation: C) External auditors, who work for CPA firms, are hired by organizations to evaluate their internal control systems and test their transactions and accounts to ensure that all economic events are recorded and reported in the proper accounting period.
Diff: 2
LO: 1-3
AACSB: Reflective Thinking
26) Which of the following is the objective of an external auditor?
A) form an opinion on the overall financial statements taken as a whole