Which of these statements is true about the audit opinion formulation process presented in this chapter?
The audit opinion formulation process is different for the financial statement only audit and the integrated audit.
The audit opinion formulation process is based on the premise that management has responsibility to prepare the financial statements and maintain internal control over financial reporting.
The audit opinion formulation process is comprised of seven phases.
All of these are true statements regarding the audit opinion formulation process.
Which of the following accounts would not be included in the Acquisition and Payment for Long-Lived Assets Cycle?
Equipment
Revenue
Depreciation expense
Gain on disposal
Which of the following information should be included in audit documentation?
Procedures performed.
Audit evidence examined.
Conclusions reached with respect to relevant financial statement assertions.
All of this information should be included.
Which of the following statements regarding client acceptance/continuance decisions is false?
Auditors are not required to perform audits for any organization that asks for an audit.
An audit firm's client portfolio is impacted by both audit firm decisions and client decisions.
Auditors should assess the background and experience of accounting personnel of a potential client.
It would not be appropriate for audit firms to perform background checks on management of a potential client.
Which of the following procedures is least likely to be performed during Phase V of the audit opinion formulation process?
Performance of an engagement quality review.
Performance of preliminary analytical review procedures.
Assessment of misstatements detected during the performance of substantive procedures and tests of controls.
Determination of the appropriate audit opinion(s) to issue.
There is not much overlap; i.e., things in common among the auditing standards set by the PCAOB, AICPA, and IAASB.
A classic inventory fraud involves management understating ending inventory, thereby yielding a reduction in cost of goods sold and an overstatement of profitability.
Risk assessment procedures provide sufficient appropriate audit evidence on which to base an audit opinion.
In conducting a substantive audit, the auditor uses only substantive procedures, and does not rely on tests of internal controls.
Substantive procedures include substantive analytical procedures and tests of details.
