Test Bank For Auditing A Practical Approach With Data Analytics By Hamilton

Test Bank For Auditing A Practical Approach With Data Analytics, Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton

1. GAAP and IFRS are examples of applicable financial reporting framework.

A. True

B. False

Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB:

Communication, Learning Objective: LO1.1, Solution: The applicable financial reporting

framework refers to the set of standards used in preparing the historical financial statements,

such as GAAP, IFRS or a Federal Income Tax Basis of Accounting.

2. Review of financial forecasts falls under attestation services.

A. True

B. False

Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and

Interpretation, AACSB: Ethics, Learning Objective: LO1.1, Solution: Attestation services (under

the umbrella of assurance services) include review of historical financial statements, review of

financial forecasts, and examination of internal control.

3. Within a U.S. context, the applicable financial reporting framework is typically Generally

Accepted Accounting Principles (GAAP).

A. True

B. False

Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and

Interpretation, AACSB: Ethics, Learning Objective: LO1.2, Solution: Within a U.S. context, the

applicable financial reporting framework is typically generally accepted accounting principles

(GAAP).

4.

Private companies, or non-issuers, are not required by the U.S. government to have an

annual financial statement audit

A. True

B. False

Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Reporting, AACSB: Analytic,

Learning Objective: LO1.2, Solution: Private companies, or non-issuers, are not required by the

U.S. government to have an annual financial statement audit, but often other interested users,

such as a bank or lender, may request that a private company provide audited financial

statements.

5. One of the reasons there is a demand for financial statement audits is that users of

financial statements often lack accounting and legal knowledge to fully understand

complex accounting and disclosure choices. 

A. True

B. False

Answer: A, Taxonomy: Comprehension, Difficulty: Easy, AICPA PC: Communication, AACSB:

Analytic, Learning Objective: LO1.3, Solution: Complexity: Financial statements are complex, the

amounts are often affected by significant estimates, and the disclosures often require significant

knowledge and experience to evaluate. Most financial statement users do not have the

accounting and legal knowledge to assess the reasonableness of complex accounting and

disclosure choices being made by the company.

6.

In financial accounting, the balance sheet is a statement of financial position

A. True

B. False

Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA PC: Communication, AACSB: Analytic,

Learning Objective: LO1.3, Solution: In financial accounting, the financial statements include the

balance sheet (statement of financial position), income statement (statement of comprehensive

income), statement of cash flows, statement of changes in equity and accompanying notes.

7. Business valuation falls within the purview of non-assurance services.

A. True

B. False

Answer: A, Taxonomy: Knowledge, Difficulty: Easy, AICPA FC: Measurement Analysis and

Interpretation, AACSB: Analytic, Learning Objective: LO1.4, Solution: Many of these accounting

firms provide non-assurance (or non-audit) services as well as assurance services. These nonassurance

services

include

management

consulting,

business

valuation,

mergers

and

acquisitions,

insolvency,

tax

and

accounting

services.