Professional Documents
Culture Documents
Asuprin Activity Worksheet
Asuprin Activity Worksheet
Asuprin Activity Worksheet
ACTIVITY WORKSHEET
I. SHORT ANSWER QUESTIONS: Answer each question in a clear and organized paragraph. One or two
sentences that directly answer the short-answer question. Each question is worth 2 points.
2. Explain what is meant by information risk, and give at least two (2) causes of this risk.
Information risk reflects the possibility that the information upon which the business risk
decision was made was inaccurate.
3. Many people confuse the responsibilities of the independent auditors and the client's management with
respect to audited financial statements. Describe management's responsibility and auditors’ responsibility
regarding audited financial statements.
Management has primary responsibility for the fairness of the financial statements.
4. Explain the concept of “Reasonable Assurance” in the context of financial statement audit.
Reasonable assurance refers to the degree of satisfaction of the auditor that the evidence
acquired during auditing backs the declarations embodied in the financial reports.
Reasonable assurance is important because it gives directions on the valuations of the
soundness and dependability of the financial reports by auditors.
5. What is the major difference between auditing services and assurance services?
Audit checks the accuracy of financial reports. On the other hand, assurance is the process
that requires analyzing and using the assessments from accounting entries and financial
records.
II. TRUE OR FALSE: Write the word TRUE for each correct statement; otherwise, write FALSE.
C _ 1. The American Accounting Association has formulated a general definition of auditing. What is
not a characteristic of this general definition?
A. Auditing is a systematic process.
B. Auditors are responsible for objectively obtaining and evaluating evidence
regarding assertions about economic actions and events.
C. Auditors are responsible for financial management and the investment of corporate assets.
D. Auditors are responsible for communicating the results of audits to interested users.
____B_____ 4. The auditor communicates the results of his or her work through the medium of the
A. Engagement Letter C. Management Letter
B. Independent Auditor’s Report D. Financial Statements
____D_____ 6. Absolute assurance is generally not attainable as a result of such factors as:
A. The use of selective testing C. The use of judgment
B. The inherent limitations of controls systems D. All of these.
____B_____ 7. Which of the following would not represent one of the primary problems that create the
demand for independent audits of a company’s financial statements?
A. Management’s bias in preparing financial statements.
B. The downsizing of business and financial markets.
C. The complexity of transactions affecting financial statements.
D. The remoteness of the user from the organization and thus the inability of the user
to directly obtain financial information from the company.
B_ 8. Which of the following services provide the lowest level of assurance on a financial statement?
A. An audit.
B. A review.
C. Neither service provides assurance on financial statements.
D. Each service provides the same level of assurance on financial statements.
____B_____ 9. Which of the following types of auditing uses laws and regulations as its criteria?
A. Operational audit C. Financial statement audit
B. Compliance audit D. Independent audit
Page 2 of 3
IV. SITUATIONAL PROBLEM (10 points)
You recently attended your five-year college reunion. At the main reception, you encountered an old friend, Pedro
Quarantina, who recently graduated from law school and is now practicing with a large law firm in town. When you
told him that you were an independent auditor and employed by a regional audit firm, he made the following
statement and snickered. “You know, if a statutory audit requirement did not exist, no one would be interested in
having an audit performed. You auditors are just creatures of regulation.” Since you did not wish to cause a scene at
the reunion, you let his comment pass. You and Pedro agreed to have lunch the following week to talk over old times.
However, you were still unhappy with Pedro’s comment.
Required:
In preparation for your luncheon with Pedro Quarantina, create a concept map or a graphic organizer that
highlights your thoughts about why auditors are not “creatures of regulation”. Cite any relevant evidence of a
demand for audit services outside of legal and regulatory requirements. Focus on the value that auditing provides.
Be sure to consider the concept of information risk.
Reduce
significant Information Risk
Why Auditor's
Audit Avoid
are not A "Creatures of Regulations" frauds and errors
benefits the Public
Provides
reliable and fair information