Question

1. Which of the following best describes the reason why independent auditors report on financial statements?

A management fraud may exist and it is more likely to be detected by independent auditors.

An audit provides credibility to the financial statements.

A misstatement of account balances may exist and it is generally corrected as the result of the independent auditors' work.

Poorly designed internal controls may be present.

2. Audits of financial statements are designed to obtain reasonable assurance of detecting misstatements due to:

Fraudulent financial reporting and misappropriation of assets.

Fraudulent financial reporting but not misappropriation of assets.

Misappropriation of assets but not fraudulent financial reporting.

Neither fraudulent financial reporting nor misappropriation of assets

3. The auditor is required to consider whether external confirmation procedures are to be performed as substantive audit procedures and is required to use external confirmation procedures for accounts receivable unless

The overall account balance is immaterial.

External confirmation procedures would be ineffective.

The auditor's assessed level of risk of material misstatement at the relevant assertion level is low, and the other planned substantive procedures address the assessed risk.

All of the above are true.

4. Auditors can mitigate risk, like the failure to detect material dollar errors in the financial statements, by doing what?

Performing substantive tests.

5. Analytical procedures are required at the risk assessment stage and as:

	Tests of internal control.
	Substantive procedures.
	Procedures near the end of the audit.
	Computer generated procedures.

Performing tests of controls.

Assessing control risk.

Obtaining a client representation letter.

.

Answer 1

Audit is an independent examination of financial statement with a view to express an opinion on that financial statement.

After accepting the audit engegement auditor assess the risk of material misstatement and control risk, then perform risk assessement procedure and further audit procedure and collect audit evidence and form an opinion on the basis of audit evidence collect. the audited financial statement used by the user of financial statement in making various decison.