Assurance Services Practice Exam
Course Introduction
Assurance Services focuses on the broad range of professional services designed to improve the quality and reliability of information for decision makers. This course covers the concepts, standards, and procedures applied in assurance engagements, emphasizing the role of external and internal auditors in providing independent assessments of financial statements, compliance, internal controls, and other subject matter. Students will explore ethical and legal responsibilities, risk assessment, evidence collection, reporting, and contemporary issues such as sustainability and information systems assurance, preparing them to critically evaluate assurance needs and contribute to organizational transparency and accountability.
Recommended Textbook
Auditing Assurance Services A Systematic Approach 11th Edition by William F Messier Jr
Available Study Resources on Quizplus
21 Chapters
1456 Verified Questions
1456 Flashcards
Source URL: https://quizplus.com/study-set/2400 Page 2
Chapter 1: An Introduction to Assurance and Financial Statement Auditing
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/47722
Sample Questions
Q1) 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 auditee to maintain independence.
D)The auditor's relationship with the auditee is generally adversarial, so the auditor will not have access to all of the financial information of the company.
Answer: B
Q2) When obtaining an understanding of the entity and its environment, the auditor should obtain an understanding of internal controls primarily to:
A)identify areas of relatively high risk of misstatement and plan the audit accordingly.
B)provide suggestions for improvement to the company.
C)serve as a basis for setting audit risk and materiality.
D)decide whether to perform an audit for the company.
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: The Financial Statement Auditing Environment
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/47723
Sample Questions
Q1) The Performance section of the "Principles Underlying an Audit" is concerned with:
A)proper planning and supervision, appropriate materiality levels, and sufficient appropriate audit evidence.
B)an audit opinion in accordance with the auditor's findings, whether the financials are presented fairly, and whether the financial are in accordance with the applicable financial reporting framework.
C)whether the auditor has unrestricted access to those within the entity from whom the auditor needs to obtain audit evidence.
D)complying with ethical requirement, appropriate competence and maintaining professional skepticism.
Answer: A
Q2) The ASB's auditing standards contain a preface that includes Principles Underlying an Audit Conducted in Accordance with GAAS.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Audit Planning, Types of Audit Tests, and Materiality
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/47724
Sample Questions
Q1) How would an auditor identify related parties and what is the importance of doing so?
Answer: Transactions between an entity and any related parties may not be made at "arm's length." Accordingly, the auditor must scrutinize such transactions and ensure proper disclosures regarding related parties are made in accordance with GAAP. The auditor can identify related parties by evaluating the client's procedures for identifying related parties, requesting a list of related parties from management and for publicly traded clients, and reviewing filings with the Securities and Exchange Commission and other regulatory agencies. It is important that the auditor attempts to identify all related parties during the planning phase of the audit so that the auditor can properly plan for evaluating transactions that may have occurred between the entity and any related parties.
Q2) The engagement partner is typically responsible for doing the detailed audit testing.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Risk Assessment
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/47725
Sample Questions
Q1) You are the senior on an audit of Two Be Gone, a large public company. The company recently completed an acquisition of its fifth largest competitor. What risks might this present? How will you, the auditor, respond to these risks (i.e., what actions should you take)?
Q2) The achieved (actual)level of audit risk:
A)can always be accurately assessed by the auditor.
B)should be greater than or equal to acceptable audit risk.
C)can never be known with certainty.
D)is the same for all audit engagements.
Q3) When assessing the risk of material misstatement, auditors evaluate the reasonableness of an entity's accounting estimates. An auditor normally would be concerned about assumptions that are:
A)susceptible to bias.
B)consistent with prior periods.
C)insensitive to variations.
D)similar to industry guidelines.
Q4) The combination of inherent risk and control risk is referred to as client risk.
A)True
B)False
Q5) What is the difference between audit risk and engagement risk?
Page 6
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Evidence and Documentation
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/47726
Sample Questions
Q1) Which of the following would be least likely to be comparable between similar corporations in the same industry or line of business?
A)Earnings per share.
B)Return on total assets before interest and taxes.
C)Accounts receivable turnover.
D)Operating cash flow.
Q2) In designing written audit programs, an auditor should plan specific audit procedures to test:
A)Timing of audit procedures.
B)Cost-benefit of gathering evidence.
C)Selected audit techniques.
D)Management assertions.
Q3) Each of the following might, by itself, form a valid basis for an auditor to reduce substantive testing except for the:
A)difficulty and expense involved in testing a particular item.
B)assessment of control risk at a low level.
C)low inherent risk involved.
D)high quality of the evidence gathered.
Q4) For an auditor, how are management assertions useful?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Internal Control in a Financial Statement Audit
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/47727
Sample Questions
Q1) A procedure that would most likely be used by an auditor in performing tests of control activities that involve segregation of functions but which leave no transaction trail is:
A)Inspection.
B)Observation.
C)Reperformance.
D)Reconciliation.
Q2) Auditors are most likely to gather audit evidence solely using substantive procedures:
A)if transactions are recurring.
B)if the implemented controls are assessed as ineffective.
C)if control risk is very low.
D)if the entity has a well-designed automated system.
Q3) Where computer processing is used in significant accounting applications, internal control activities may be defined by classifying control activities into two types: general and
A)Administrative.
B)Specific.
C)Application.
D)Authorization.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Auditing Internal Control Over Financial Reporting
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/47728
Sample Questions
Q1) Which of the following is least likely to represent a material weakness in internal control for Flynt Corporation?
A)Flynt Corporation's computer systems were not working properly for two days; consequently, employees needed to do all reconciliations manually.
B)Flynt Corporation's CFO was arrested last year for embezzling money from the entity.
C)For the current year, the auditor found a material misstatement in Flynt's sales recognition that was undetected by the internal controls.
D)Flynt's audit committee is deemed to be ineffective.
Q2) An auditor performing an audit of internal control over financial reporting would be required to:
A)rely on the work of internal auditors.
B)test all of the entity's internal controls.
C)form an opinion on the effectiveness of internal control.
D)randomly identify accounts for an audit of internal control.
Q3) Discuss entity-level controls and provide examples of these types of controls.
Q4) Identify indicators of a material weakness in internal control over financial reporting.
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Audit Sampling: An Overview and Application to
Tests of Controls
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/47729
Sample Questions
Q1) Auditing standards permit both statistical and nonstatistical methods of audit sampling.
A)True
B)False
Q2) Which of the following best illustrates the concept of sampling risk?
A)A randomly chosen sample may not be representative of the population as a whole (regarding the characteristic being tested).
B)An auditor may select audit procedures that are not appropriate to achieve the specific objective.
C)An auditor may fail to recognize errors in the documents examined for the chosen sample.
D)The documents related to the chosen sample may not be available for inspection.
Q3) Define Type I and Type II errors.
Q4) For a particular audit, the sample size for testing controls over the revenue cycle is relatively large. What can you infer about the desired confidence level, the tolerable deviation rate, and the expected population deviation rate?
Q5) Define sampling risk and nonsampling risk.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Audit Sampling: An Application to Substantive
Tests of Account Balances
Available Study Resources on Quizplus for this Chatper
53 Verified Questions
53 Flashcards
Source URL: https://quizplus.com/quiz/47730
Sample Questions
Q1) Which one of the following statements is true regarding two random samples, drawn in the same way, from the same population, one of size 30 and one of size 300?
A)The two samples are expected to have the same sample mean.
B)The larger sample is more likely to produce a large sample mean.
C)The smaller sample will have a smaller 95% confidence interval for the mean.
D)The smaller sample will, on average, produce a lower estimate of the variance of the population.
Q2) In monetary-unit sampling, population size is:
A)the dollar balance in an account.
B)the number of items in an account.
C)unrelated to sample size.
D)included in the denominator of the formula to determine sample size.
Q3) Match each factor of sample size to (1)its relationship to sample size (A-Direct or B-Inverse)and (2)the appropriate effect on the sample size if the factor increases (C-Increase or D-Decrease).
1. Tolerable misstatement
2. Population size
3. Desired confidence level
4. Expected misstatement
11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Auditing the Revenue Process
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/47731
Sample Questions
Q1) Assume you are working on a 12/31 year-end audit. It is now March 31 and the 12/31 accounts receivable aging shows a large receivable that was outstanding on 12/31 for 120 days. Further, the entity's receivables are typically collected in less than 45 days. You anticipate that the entity's allowance for doubtful account should be increased and inform the entity about your disposition. Management disagrees. Is there an alternative substantive procedure that you could perform that would provide convincing evidence that this balance is collectible? If so, explain.
Q2) A positive confirmation requests that customers respond whether they agree or not with the amount due to the entity stated in the confirmation.
A)True
B)False
Q3) Once a CPA has determined that accounts receivable has increased because of slow collection in a "tight money" environment, the CPA would be likely to:
A)increase the balance in the allowance for bad debts account.
B)review the going concern ramifications.
C)require the entity to tighten its credit policy.
D)expand tests regarding the collectability of receivables.
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Auditing the Purchasing Process
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/47732
Sample Questions
Q1) Which of the following accounts is not affected by cash disbursement transactions?
A)Cash.
B)Accounts payable.
C)Purchase discounts.
D)Purchase returns.
Q2) To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is:
A)supported by a vendor's invoice.
B)stamped "paid" by the check signer.
C)prenumbered and accounted for.
D)approved for authorized purchases.
Q3) The auditor can often obtain sufficient appropriate evidence in the audit of a tax provision without the use of a specialist. However, several situations may indicate a need for the auditor to involve a tax specialist. Identify three of these situations.
Q4) The key inherent risk factors an auditor must consider when auditing the purchasing process are industry factors. Which two are most important and why?
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Auditing the Human Resource Management Process
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/47733
Sample Questions
Q1) Which of the following is the best way for an auditor to determine that every name on a company's payroll is that of a bona fide employee presently on the job?
A)Examine personnel records for accuracy and completeness.
B)Examine employees' names listed on payroll accounting records.
C)Make a surprise observation of the company's regular distribution of paychecks.
D)Visit the working areas and confirm with employees their badge or identification numbers.
Q2) Which of the following circumstances most likely would cause an auditor to suspect an employee payroll fraud scheme?
A)There are significant unexplained variances between standard and actual labor cost.
B)Payroll checks are disbursed by the same employee each payday.
C)Employee time sheets are approved by individual departmental supervisors.
D)A separate payroll bank account is maintained on an imprest basis.
Q3) Tests of details of transactions are often conducted in conjunction with tests of controls.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Auditing the Inventory Management Process
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/47734
Sample Questions
Q1) An inventory turnover analysis is useful to the auditor because it may detect:
A)inadequacies in inventory pricing.
B)methods of avoiding cyclical holding costs.
C)the optimum automatic reorder points.
D)the existence of obsolete merchandise.
Q2) When the entity's perpetual inventory master files are inadequate, the auditor will probably choose to test the physical inventory prior to the balance sheet date.
A)True
B)False
Q3) Tracing costs used to price inventory to vendors' invoices test which of the following assertions?
A)Occurrence.
B)Cutoff.
C)Accuracy.
D)Classification.
Q4) The audit of inventory is often the most involved aspect of an audit. Describe at least three inherent risk factors that affect the audit of inventory.
Q5) Explain the importance of observing physical inventory during an audit.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Auditing the Financinginvesting Process:
Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/47735
Sample Questions
Q1) Determining that proper amounts of depreciation are expensed provides assurance about management's assertions of presentation and disclosure and:
A)valuation and allocation.
B)completeness.
C)rights and obligations.
D)existence.
Q2) Generally, auditors rely on controls when auditing the property management function and therefore less substantive testing is used.
A)True
B)False
Q3) Describe the types of information that should be included in the insurance register that is used by the auditor for auditing prepaid insurance.
Q4) Property, plant, and equipment is often a significant portion of a company's assets. Describe the inherent risk factors that can affect the audit of this account.
Q5) Auditors can usually gather sufficient, competent evidence on prepaid insurance by performing substantive analytical procedures. Why is this?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Auditing the Financinginvesting Process:
Long-Term Liabilities, Stockholders' Equity, and Income
Statement Accounts
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/47736
Sample Questions
Q1) Investments
A)Depreciation expense
B)Insurance expense
C)Investment income
D)Interest expense
E)Bad debt expense
Q2) A substantive strategy is typically used to audit stockholders' equity because:
A)the number of transactions is small.
B)controls over stockholders' equity transactions typically are weak.
C)a reliance strategy is most efficient.
D)a substantive strategy likely was used in prior years.
Q3) Reviewing notes paid or renewed after the balance sheet date to determine if there are unrecorded liabilities at year-end can be used to test the assertion of:
A)existence.
B)completeness.
C)rights and obligations.
D)valuation and allocation.
To view all questions and flashcards with answers, click on the resource link above. Page 17
Q4) Identify the three major types of transactions that occur in stockholders' equity.
Chapter 16: Auditing the Financinginvesting Process: Cash and Investments
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/47737
Sample Questions
Q1) Which of the following control activities would an entity most likely use to assist in satisfying the completeness assertion related to long-term investments?
A)Senior management verifies that securities in the bank safe-deposit box are registered in the entity's name.
B)Maintenance of a securities ledger that records all securities owned by the entity.
C)The treasurer vouches the acquisition of securities by comparing brokers' advices with canceled checks.
D)The controller compares the current market prices of recorded investments with the brokers' advices on file.
Q2) In establishing the existence and ownership of a long-term investment in stock of a publicly traded company, an auditor should inspect the securities or:
A)correspond with the investee company to verify the number of shares owned.
B)inspect the audited financial statements of the investee company.
C)confirm the number of shares owned that are held by an independent custodian.
D)determine that the investment is carried at the lower-of-cost-or-market.
Q3) Explain how cash plays a role in all business processes.
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 17: Completing the Audit Engagement
Available Study Resources on Quizplus for this Chatper
81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/47738
Sample Questions
Q1) Which of the following matters is an auditor required to communicate to those charged with governance?
A)The basis for assessing control risk at low.
B)The disagreements with management, if any.
C)The auditor's preliminary judgments about materiality levels.
D)The justification for performing substantive procedures at interim dates.
Q2) The adverse effects of events causing an auditor to believe there is substantial doubt about an entity's ability to continue as a going concern would most likely be mitigated by evidence relating to the:
A)ability to expand operations into new product lines in the future.
B)feasibility of plans to purchase leased equipment at less than market value.
C)marketability of assets that management plans to sell.
D)committed arrangements to convert preferred stock to long-term debt.
Q3) Reading contracts and loan agreements is one way to identify unrecorded contingent liabilities.
A)True
B)False
Q4) State the two primary purposes of the management representation letter.
Q5) What is the difference between a contingent liability and a commitment?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Reports on Audited Financial Statements
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/47739
Sample Questions
Q1) When the entity fails to include information that is necessary for the fair presentation of financial statements in the body of the statements or in the related footnotes, it is the responsibility of the auditor to present the nature and impact of the faulty accounting or misstatement in the auditor's report and express a(n):
A)qualified opinion or a disclaimer of opinion.
B)qualified opinion or an adverse opinion.
C)adverse opinion or a disclaimer of opinion.
D)qualified opinion or an unqualified opinion.
Q2) Identify the special purpose framework used in each of the following situations.
1. A real estate company reports to its partners on the basis used to complete the income tax return.
2. A company has its financial statements prepared on a price-level adjusted basis as required by its lender.
3. An insurance company reports in compliance with the rules of a state insurance commission.
4. A partnership reports on revenues received and expenses paid. What modifications must be made to the non-public company standard auditor's report for these situations?
To view all questions and flashcards with answers, click on the resource link above.
20
Chapter 19: Professional Conduct, Independence, and Quality Control
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/47740
Sample Questions
Q1) What is a purpose of the acceptance and continuance of client relationships and specific engagements element of quality control?
A)Guarantee that firms do not associate with clients whose management lacks integrity.
B)Provide reasonable assurance that firms do not associate with clients whose management lacks integrity.
C)Guarantee that firms will not be sued as a result of association with a client.
D)Provide reasonable assurance that firms will not be sued as a result of association with a client.
Q2) A CPA firm evaluates its personnel advancement experience to ascertain whether individuals assigned to increased degrees of responsibility meet predetermined criteria. This policy is evidence of the firm's adherence to which of the following prescribed standards?
A)Professional ethics.
B)Supervision and review.
C)Accounting and review services.
D)Quality control.
Q3) When can a CPA disclose confidential information without the client's consent?
To view all questions and flashcards with answers, click on the resource link above.
Page 21
Chapter 20: Legal Liability
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/47741
Sample Questions
Q1) The auditor failing to complete the services agreed to in the contract with the client is subject to liability under breach of contract.
A)True
B)False
Q2) An auditor can be held criminally liable for:
A)illegal acts under common law.
B)illegal acts under statutory law.
C)negligent acts when the third party has privity status.
D)tort of contract for failing to follow due professional care.
Q3) Auditors can be held liable under two classes of law when sued by clients, investors, creditors, or the government. Identify and briefly explain both classes of law.
Q4) Privity of contract is the most restrictive view for plaintiffs under common law. A)True
B)False
Q5) Common law is written law enacted by the legislative branches of governments. A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Assurance, Attestation, and Internal Auditing Services
Available Study Resources on Quizplus for this Chatper
76 Verified Questions
76 Flashcards
Source URL: https://quizplus.com/quiz/47742
Sample Questions
Q1) Accepting an engagement to examine an entity's financial projections would most likely be appropriate if distribution of the projections were limited to:
A)the general public on the entity's website.
B)potential stockholders who request a prospectus or a registration statement.
C)a bank with which the entity is negotiating for a loan.
D)all stockholders of record as of the report date.
Q2) An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that:
A)distribution of the report is restricted to the specified users involved.
B)the prospective financial statements also are examined.
C)responsibility for the adequacy of the procedures performed is taken by the accountant.
D)negative assurance is expressed on the prospective financial statements taken as a whole.
Q3) Electronic commerce is an example of a category of assurance services.
A)True
B)False
Q4) How has the advancement in technology led to the creation of the Trust Services?
Page 23
To view all questions and flashcards with answers, click on the resource link above.