True/ False Chapter 5

Auditors of U.S. public companies should follow the PCAOB’s auditing standards.
T
There is not much commonality among the auditing standards set by the PCAOB, AICPA, and IAASB.
F
The ten standards underlying the PCAOB’s auditing standards fall within four different categories.
F
The purpose of an audit is to enhance the degree of confidence that users can place on the financial statements.
T
An important aspect of the audit opinion formulation process is the client’s responsibilities for internal control over financial reporting and the financial statements.
T
The audit opinion formulation process is described as consisting of five phases.
T
The cycle approach to auditing provides a way for breaking the audit up into manageable components.
T
Whiting a particular cycle, the auditor focuses on the flow of transactions within that cycle, including how transactions are initiated, authorized, recorded and reported.
T
The completeness assertion is typically the more relevant assertion for assets.
F
Within each cycle the audit is designed to test management assertions.
T
Risk assessment produces alone provide sufficient appropriate audit evidence on which to base an audit opinion.
F
The auditor’s selection of audit procedures depends on the accounts and assertions being tested.
T
Auditors are encouraged, but not required, to prepare audit documentations.
F
Audit checklists and audit programs are examples of audit documentation.
T
Auditors are not required to perform audits for any organization that asks.
T
For an audit firm to accept a client, management needs to agree to provide the auditor with access to all relevant information, such as records, documentation and so on, and unrestricted access to persons within the organization.
T
During risk assessment, the auditor focuses on understanding the risks of all misstatements in the financial statements and related disclosures.
F
The auditor assesses the risk of material misstatements at only the assertion level.
F
The auditor is expected to obtain evidence about the operating effectiveness of internal control on all audits.
F
When testing controls, the auditor tests only transaction controls.
F
The auditor is expected to perform substantive procedures for each relevant assertion of significant account and disclosure.
T
Substantive procedures include substantive analytical procedures and tests of details.
T
Once the auditor completes the substantive procedures in Phase IV, the auditor is in a position to issue the audit opinion.
F
If the auditor issues an opinion on the client’s internal controls and the client’s financial statements, the auditor is required to issue two separate reports.
F