Audit Chapter 1 Practice Test
Chapter 01
An Introduction to Assurance and Financial Statement Auditing
True / False Questions
1. Independence standards are required for audits of public companies, but not for audits of private companies.
True False
2. Decision makers demand reliable information that is provided by accountants.
True False
3. Information asymmetry seldom occurs.
True False
4. Conflicts of interest often occur between absentee owners and managers.
True False
5. Auditing services and attestation services are the same.
True False
6. Auditing is a type of attest service.
True False
7. Testing all transactions that occurred during the period is cost prohibitive.
True False
Multiple Choice Questions
8. Why do auditors generally use a sampling approach to evidence gathering?
A. Auditors are experts and do not need to look at much to know whether the financial statements are correct or not.
B. Auditors must balance the cost of the audit with the need for precision.
C. Auditors must limit their exposure to their client to maintain independence.
D. The auditor's relationship with the client is generally adversarial, so the auditor will not have access to all of the financial information of the company.
9. Which of the following statements best describes a relationship between sample size and other elements of auditing?
A. If materiality increases, so will the sample size.
B. If the desired level of assurance increases, sample sizes can be smaller.
C. If materiality decreases, sample size will need to increase.
D. There is no relationship between sample size and materiality or the desired level of assurance.
10. Which of the following statements about the study of auditing is NOT true?
A. The study of auditing can be valuable to future accountants and business decision makers whether or not they plan to become auditors.
B. The study of auditing
An Introduction to Assurance and Financial Statement Auditing
True / False Questions
1. Independence standards are required for audits of public companies, but not for audits of private companies.
True False
2. Decision makers demand reliable information that is provided by accountants.
True False
3. Information asymmetry seldom occurs.
True False
4. Conflicts of interest often occur between absentee owners and managers.
True False
5. Auditing services and attestation services are the same.
True False
6. Auditing is a type of attest service.
True False
7. Testing all transactions that occurred during the period is cost prohibitive.
True False
Multiple Choice Questions
8. Why do auditors generally use a sampling approach to evidence gathering?
A. Auditors are experts and do not need to look at much to know whether the financial statements are correct or not.
B. Auditors must balance the cost of the audit with the need for precision.
C. Auditors must limit their exposure to their client to maintain independence.
D. The auditor's relationship with the client is generally adversarial, so the auditor will not have access to all of the financial information of the company.
9. Which of the following statements best describes a relationship between sample size and other elements of auditing?
A. If materiality increases, so will the sample size.
B. If the desired level of assurance increases, sample sizes can be smaller.
C. If materiality decreases, sample size will need to increase.
D. There is no relationship between sample size and materiality or the desired level of assurance.
10. Which of the following statements about the study of auditing is NOT true?
A. The study of auditing can be valuable to future accountants and business decision makers whether or not they plan to become auditors.
B. The study of auditing