Multiple Choice Questions 1. Which of the following is the

Multiple Choice Questions

1.Which of the following is the reason that auditors audit companies?

a. To determine whether their financial statements (including footnotes) present financial position, results of operations, and cash flows in accordance with some accounting basis.

b. To determine whether their financial statements (including footnotes) present financial position, results of operations, and cash flows in accordance with international auditing standards.

c. To determine whether their financial statements (including footnotes) present financial position, results of operations, and cash flows in accordance with applicable auditing standards.

d. None of the above.


2.Which of these statements is incorrect?

a. Auditor’s objective is to determine whether the financial statements are free of misstatement whether from error or fraud.

b. Auditors have a responsibility to plan the audit to uncover material misstatements regardless of their character.

c. A given amount of fraud is not as easy to find as is the same amount of error.

d. None of these statements is incorrect.


3.The concept of preliminary judgment of materiality is defined in which of the following?

a. Auditing standards.

b. GAAP standards.

c. Practice.

d. All of the above.


4. What are the three conditions that auditors consider when making a preliminary judgment of materiality?

a. Presence of fraud, consequences arising from equity obligations, and misstatements that affect the financial statements.

b. Presence of fraud, consequences arising from contractual obligations, and errors that affect earnings trends.

c. Likelihood of fraud, consequences arising from contractual obligations, and misstatements that affect earnings trends.

d. Presence of fraud, consequences arising from contractual obligations, and misstatements that affect earnings trends.


5. The suspicion of fraud probably affects which of these?

a. Audit procedures selected by the auditor.

b. Amount of the testing.

c. The timing of procedures selected by the auditor.

d. Both a and b.

e. None of the above.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...

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