Chapter 6: Audit Responsibilities and Objectives

Question 1: State whether each of the following statements is: True/

False

1. One of the auditor′s responsibilities is to maintain adequate internal controls.

2. In financial statement audit, one of the reasons that the auditor is responsible for
reasonable, but not absolute, assurance is that accounting presentations contain
complex estimates.

3. In accordance with GAAS, there is a distinction between the auditor’s

responsibilities for detecting errors versus fraud

4. A mistake in extending price times quantity on a sales invoice is an example of

employee fraud.

5. One of the elements of professional skepticism is "self-esteem", which means

self-direction, moral independence, and conviction to decide for oneself, rather
than accepting the claims of others.

6. The starting point to an effective professional judgment is to gather the facts and
information and identify the relevant literature.

7. Auditors evaluate the client’s recording of transactions by verifying the monetary

amounts of transactions. This process is called a substantive test of transactions.

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Question 2 : Choose the correct answer for each of the following
statements
8. Because of the risk of material misstatements, an audit should be planned and
performed with an attitude of:
a. Objective judgment
b. Professional scepticism
c. Independent integrity
d. Impartial conservatism
9. Which cycle does allowance for uncollectible accounts belong to?

a. Sales and collection cycle

b. Capital Acquisition and repayment
c. Inventory and warehousing
d. Acquisition and payment
Identify the appropriate management assertion for each of the following
specific audit objectives (questions 10-12)
10. Existing cash disbursement transactions are recorded
a. Occurrence
b. Completeness
c. Accuracy
d. Classification
11. Recorded cash disbursement transactions are for the amounts of goods or
services received and are correctly recorded.

a. Occurrence
b. Completeness
c. Accuracy
d. Classification

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 12. Recorded cash disbursements are for goods and services actually received.

a. Cut off
b. Occurrence
c. Completeness
d. Classification
Identify the appropriate general transaction-related audit objective for
each of the following specific audit objectives (questions13-15)

13. Cash disbursement transactions are properly included in the accounts

payable master file and are correctly summarized.
a. Posting and Summarization
b. Classification
c. Accuracy
d. Timing
14. Cash disbursement transactions are properly classified.
a. Posting and Summarization
b. Classification
c. Accuracy
d. Timing
15. Cash disbursement transactions are recorded on the correct dates.

a. Completeness
b. Timing
c. Accuracy
d. Occurrence
Identify the appropriate general balance-related audit objective for each
specific audit objective and each audit procedure (questions 16-17)
16. Add all customer balances in the accounts receivable trial balance and agree

the amount to the general ledger.

a. Accuracy
b. Cut off

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c. Detail tie in
d. Realizable value

17. Inventory quantities on the client′s perpetual records agree with items
physically on hand
a. Accuracy
b. Completeness
c. Rights and Obligations
d. Occurrence

18. An …………………… is a well-defined methodology for organizing an

audit to ensure that the evidence gathered is both sufficient and appropriate and
that all required audit objectives are both specified and met.
a. Audit plan
b. Audit program
c. Audit process
d. Audit test

19. In which phase of the audit process the auditor tests for monetary
misstatements in the balances in the financial statements?

a. Phase 1 b. Phase 2 c. Phase 3 d. Phase 4

20. Direct, written communication with the client's customers to identify whether a
receivable exists is an example of a(n):
a. Substantive tests of transactions.
b. Analytical procedures.
c. Tests of controls.
d. Tests of details of balances.
Answer key

1. False 2.True 3. False 4.False 5.False

6. False 7. True 8. b 9. a 10. b

11. c 12. b 13. a 14.b 15. b

16. c 17. a 18. c 19. c 20. d

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