Which management assertion questions – Flashcards

3. During an audit of an entity's stockholders' equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements or state law. This audit procedure most likely is intended to verify management's assertion of A. existence or occurrence. B. completeness. C. valuation or allocation. D. presentation and disclosure.

The confirmation of an account payable balance selected from the general ledger provides primary evidence regarding which management assertion? A. Completeness B. Valuation C. Allocation D. Existence

Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance? A. The entity has rights to the inventory. B. Inventory is properly valued. C. Inventory is properly presented in the financial statements. D. Inventory is complete.

Which of the following is a management assertion regarding account balances at the period end? A. Transactions and events that have been recorded have occurred and pertain to the entity. B. Transactions and events have been recorded in the proper accounts. C. The entity holds or controls the rights to assets, and liabilities are obligations of the entity. D. Amounts and other data related to the transactions and events have been recorded appropriately.

To be proficient as an auditor, a person must first be able to accomplish which of these tasks in a decision-making process? A. Identify audit evidence relevant to the verification of assertions management makes in its unaudited financial statements and notes. B. Formulate evidence-gathering procedures (audit plan) designed to obtain sufficient, competent evidence about assertions management makes in financial statements and notes. C. Recognize the financial assertions made in management's financial statements and footnotes. D. Evaluate the evidence produced by the performance of procedures and decide whether management's assertions conform to generally accepted accounting principles and reality.

The audit objective that all the transactions and accounts presented in the financial statements represent real assets, liabilities, revenues, and expenses is related most closely to which of the PCAOB assertions? A. Existence or occurrence B. Rights and obligations C. Completeness D. Presentation and disclosure

The auditor's judgment concerning the overall fairness of the presentation of financial position, results of operations, and cash flows is applied within the framework of A. quality control. B. generally accepted auditing standards, which include the concept of materiality. C. the auditor's evaluation of the audited company's internal control. D. the applicable financial reporting framework (i.e., GAAP in the United States).

Which of the following best describes assurance services? A. Independent professional services that report on the client's financial statements B. Independent professional services that improve the quality of information for decision makers C. Independent professional services that report on specific written management assertions D. Independent professional services that improve the operations of the client

Which of the following is not a PCAOB assertion about inventory related to presentation and disclosure? A. Inventory is properly classified as a current asset on the balance sheet. B. Inventory is properly stated at its cost on the balance sheet. C. Major inventory categories and their valuation bases are adequately disclosed in notes. D. All of these are PCAOB presentation and disclosure assertions about inventory

The underlying conditions that create demand by users for reliable information include all of the following, except A. transactions are numerous and complex. B. users lack professional skepticism. C. users are separated from accounting records by distance and time. D. financial decisions are important to investors and users. E. decisions are time-sensitive.

Inquiries of warehouse personnel concerning possible obsolete or slow moving inventory items provide assurance about the PCAOB assertion of A. completeness. B. existence. C. presentation. D. valuation. E. rights and obligations.

The risk an entity will fail to meet its objectives is referred to as A. business risk. B. information risk. C. assurance risk. D. audit risk.

Which of the PCAOB assertions (A-E) are best verified by the following audit procedures (1-4)? A. Existence or occurrence B. Rights and obligations C. Valuation or allocation D. Completeness E. Presentation and disclosure 1. Confirming inventory held on consignment by the client with independent third party. 2. Consulting the Wall Street Journal for year-end prices of securities held by the client. 3. Physically examine all major property and equipment additions. 4. Review the aged trial balance for significant past due accounts.

Which of the PCAOB assertions (A-E) are best verified by the following audit procedures (1-4)? A. Existence or occurrence B. Rights and obligations C. Valuation or allocation D. Completeness E. Presentation and disclosure 2. Consulting the Wall Street Journal for year-end prices of securities held by the client.

Which of the PCAOB assertions (A-E) are best verified by the following audit procedures (1-4)? A. Existence or occurrence B. Rights and obligations C. Valuation or allocation D. Completeness E. Presentation and disclosure 3. Physically examine all major property and equipment additions.

Which of the PCAOB assertions (A-E) are best verified by the following audit procedures (1-4)? A. Existence or occurrence B. Rights and obligations C. Valuation or allocation D. Completeness E. Presentation and disclosure 4. Review the aged trial balance for significant past due accounts.