Auditing Study Guide

Lends credibility to the financial statements

Confirms the exact accuracy of management's financial representations

guarantees that financial data are fairly presented

Assures the readers of financial statements that any fraudulent activity has been corrected

Different interests may exist between the entity preparing the statements and the persons using the statements, and thus outside assurance is needed to enhance the credibility of the statements.

1. An entity may have a poorly designed internal control system.

1. Management fraud may exist, and it is more likely to be detected by independent auditors than by internal auditors.

1. A misstatement of account balances may exist, and all misstatements are generally corrected as a result of the independent auditor's work.

To limit audit risk to an appropriately high level

To determine the audit fee

To plan the audit and determine the nature, timing, and extent of audit procedures to be performed

To decide which facts about the entity to include in the audit report

The lower the level at which the auditor assesses materiality, the greater the amount of evidence the auditor must gather.

The higher the level at which the auditor assesses materiality, the greater the amount of evidence the auditor must gather.

Materiality refers to the material from which audit evidence is developed.

The level of materiality has no bearing on the amount of evidence the auditor must gather.

Understanding a clients system of internal control can help the auditor make valuable recommendations to management at the end of the engagement.

Understanding a clients system of internal control is not a required part of the audit process.

Understanding a clients system of internal control can help the auditor assess risk and identify areas where financial statement misstatements might be more likely.

Understanding a clients system of internal control can help the auditor sell consulting services to the client.

Understanding the client and the clients industry

determining the audit engagement team requirements

ensuring the independence of the audit team and audit firm

all of these

An unqualified auditor's opinion indicates that the auditor is expressing different opinions on each of the basic financial statements regarding whether the client's financial statements are fairly presented in accordance with agreed-upon criteria.

1. An unqualified auditor's opinion indicates that the auditor is not qualified to express an opinion that the client's financial statements are fairly presented in accordance with agreed-upon criteria.

1. An unqualified auditor's opinion indicates that in the auditor's opinion the client's financial statements are not fairly enough presented in accordance with agreed-upon criteria to qualify for a clean opinion.

1. An unqualified auditor's opinion indicates that in the auditor's opinion the client's financial statements are fairly presented in accordance with agreed-upon criteria, with no need for the inclusion of qualifying phrases.

implicitly referred to in the basis for opinion section of the auditors standard report

Explicitly referred to in the basis for opinion section of the auditors standard report

explicitly referred to in the critical audit matters section of the auditors standard report

explicitly refered to in the opinions section of the auditors standard report

implicitly referred to in the critical audit matters section of the auditors standard report

No opinion at all

Adverse opinion

Qualified opinion due to departure from GAAP

Standard unqualified opinion