Accounting Week 3 Homework
6-19. The following questions concern the reasons auditors do audits. Choose the best response.
a. Which of the following best describes the reason why an independent auditor reports on financial statements?
(1) A misappropriation of assets may exist, and it is more likely to be detected by independent auditors.
(2) Different interests may exist between the company preparing the statements and the persons using the statements.
(3) A misstatement of account balances may exist and is generally corrected as the result of the independent auditor’s work.
(4) Poorly designed internal controls may be in existence.
b. An independent audit aids in the communication of economic data because the audit
(1) confirms the accuracy of management’s financial representations.
(2) lends credibility to the financial statements.
(3) guarantees that financial data are fairly presented.
(4) assures the readers of financial statements that any fraudulent activity has been corrected.
c. The major reason an independent auditor gathers audit evidence is to
(1) form an opinion on the financial statements.
(2) detect fraud.
(3) evaluate management.
(4) assess control risk.
6-20. The following questions deal with errors and fraud. Choose the best response.
a. An independent auditor has the responsibility to design the audit to provide reasonable assurance of detecting errors and fraud that might have a material effect on the financial statements. Which of the following, if material, is a fraud as defined in auditing standards?
(1) Misappropriation of an asset or groups of assets.
(2) Clerical mistakes in the accounting data underlying the financial statements.
(3) Mistakes in the application of accounting principles.
(4) Misinterpretation of facts that existed when the financial statements were prepared.
b. What assurance does the auditor provide that errors, fraud, and direct-effect illegal acts that are material to the financial statements
a. Which of the following best describes the reason why an independent auditor reports on financial statements?
(1) A misappropriation of assets may exist, and it is more likely to be detected by independent auditors.
(2) Different interests may exist between the company preparing the statements and the persons using the statements.
(3) A misstatement of account balances may exist and is generally corrected as the result of the independent auditor’s work.
(4) Poorly designed internal controls may be in existence.
b. An independent audit aids in the communication of economic data because the audit
(1) confirms the accuracy of management’s financial representations.
(2) lends credibility to the financial statements.
(3) guarantees that financial data are fairly presented.
(4) assures the readers of financial statements that any fraudulent activity has been corrected.
c. The major reason an independent auditor gathers audit evidence is to
(1) form an opinion on the financial statements.
(2) detect fraud.
(3) evaluate management.
(4) assess control risk.
6-20. The following questions deal with errors and fraud. Choose the best response.
a. An independent auditor has the responsibility to design the audit to provide reasonable assurance of detecting errors and fraud that might have a material effect on the financial statements. Which of the following, if material, is a fraud as defined in auditing standards?
(1) Misappropriation of an asset or groups of assets.
(2) Clerical mistakes in the accounting data underlying the financial statements.
(3) Mistakes in the application of accounting principles.
(4) Misinterpretation of facts that existed when the financial statements were prepared.
b. What assurance does the auditor provide that errors, fraud, and direct-effect illegal acts that are material to the financial statements