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1Copyright©2016PearsonEducation,Inc.AuditingandAssuranceServices,15e(Arens)Chapter6AuditResponsibilitiesandObjectivesLearningObjective6-11)Theobjectiveofanauditofthefinancialstatementsisanexpressionofanopinionon:A)thefairnessofthefinancialstatementsinallmaterialrespects.B)theaccuracyofthefinancialstatements.C)theaccuracyoftheannualreport.D)theaccuracyofthebalancesheetandincomestatement.Answer:ATerms:ObjectiveofordinaryauditoffinancialstatementsDiff:EasyObjective:LO6-1AACSB:Reflectivethinkingskills2)Iftheauditorbelievesthatthefinancialstatementsarenotfairlystatedorisunabletoreachaconclusionbecauseofinsufficientevidence,theauditor:A)shouldwithdrawfromtheengagement.B)shouldrequestanincreaseinauditfeessothatmoreresourcescanbeusedtoconducttheaudit.C)hastheresponsibilityofnotifyingfinancialstatementusersthroughtheauditor'sreport.D)shouldnotifyregulatorsofthecircumstances.Answer:CTerms:AuditorbelievesthatfinancialstatementsarenorfairlypresentedDiff:EasyObjective:LO6-1AACSB:Reflectivethinkingskills3)Auditorsaccumulateevidenceto:A)defendthemselvesintheeventofalawsuit.B)determineifthefinancialstatementsarecorrect.C)satisfytherequirementsoftheSecuritiesActsof1933and1934.D)reachaconclusionaboutthefairnessofthefinancialstatements.Answer:DTerms:AuditorsaccumulateevidenceDiff:EasyObjective:LO6-1AACSB:Reflectivethinkingskills2Copyright©2016PearsonEducation,Inc.LearningObjective6-21)Theresponsibilityforadoptingsoundaccountingpoliciesandmaintainingadequateinternalcontrolrestswiththe:A)boardofdirectors.B)companymanagement.C)financialstatementauditor.D)company'sinternalauditdepartment.Answer:BTerms:ResponsibilityforadoptingsoundaccountingpoliciesandmaintainingadequateinternalcontrolsDiff:EasyObjective:LO6-2AACSB:Reflectivethinkingskills2)Ifmanagementinsistsonfinancialstatementdisclosuresthattheauditorfindsunacceptable,theauditorcanwithdrawfromtheengagementor:A)IssueanadverseauditreportIssueaqualifiedauditreportYesYesB)IssueanadverseauditreportIssueaqualifiedauditreportNoNoC)IssueanadverseauditreportIssueaqualifiedauditreportYesNoD)IssueanadverseauditreportIssueaqualifiedauditreportNoYesAnswer:ATerms:AuditorinsistsonfinancialstatementdisclosuresthatmanagementfindsunacceptableDiff:EasyObjective:LO6-2AACSB:Reflectivethinkingskills3)Incertifyingtheirannualfinancialstatements,theCEOandCFOofapubliccompanycertifythatthefinancialstatementscomplywiththerequirementsof:A)GAAP.B)theSarbanes-OxleyAct.C)theSecuritiesExchangeActof1934.D)GAAS.Answer:CTerms:CertifyingannualfinancialstatementsbyCEOandCFODiff:EasyObjective:LO6-2AACSB:ReflectivethinkingskillsTopic:Public3Copyright©2016PearsonEducation,Inc.4)Whichofthefollowingstatementsistrueofapubliccompany'sfinancialstatements?A)Sarbanes-OxleyrequirestheCEOonlytocertifythefinancialstatements.B)Sarbanes-OxleyrequirestheCFOonlytocertifythefinancialstatements.C)Sarbanes-OxleyrequirestheCEOandCFOtocertifythefinancialstatements.D)Sarbanes-OxleyrequiresneithertheCEOnortheCFOtocertifythefinancialstatements.Answer:CTerms:Publiccompany'sfinancialstatementsDiff:EasyObjective:LO6-2AACSB:ReflectivethinkingskillsTopic:SOX5)Theresponsibilityforthepreparationofthefinancialstatementsandtheaccompanyingfootnotesbelongsto:A)theauditor.B)management.C)bothmanagementandtheauditorequally.D)managementforthestatementsandtheauditorforthenotes.Answer:BTerms:ResponsibilityforpreparationofthefinancialstatementsandtheaccompanyingfootnotesDiff:ModerateObjective:LO6-2AACSB:Reflectivethinkingskills6)Becausetheyoperatethebusinessonadailybasis,acompany'smanagementknowsmoreaboutthecompany'stransactionsandrelatedassets,liabilities,andequitythantheauditors.Answer:TRUETerms:ResponsibilityforfairpresentationoffinancialstatementsDiff:EasyObjective:LO6-2AACSB:Reflectivethinkingskills7)Theannualreportsofmanypubliccompaniesincludeastatementaboutmanagement'sresponsibilitiesandrelationshipwiththeCPAfirm.Answer:TRUETerms:Management'sresponsibilityandrelationshipwithCPAfirmDiff:EasyObjective:LO6-2AACSB:Reflectivethinkingskills8)Theauditorsdeterminewhichdisclosuresmustbepresentedinthefinancialstatements.Answer:FALSETerms:ResponsibilityforfairpresentationoffinancialstatementsDiff:EasyObjective:LO6-2AACSB:Reflectivethinkingskills4Copyright©2016PearsonEducation,Inc.LearningObjective6-31)Theauditor'sbestdefensewhenmaterialmisstatementsarenotuncoveredistohaveconductedtheaudit:A)inaccordancewithgenerallyacceptedauditingstandards.B)aseffectivelyasreasonablypossible.C)inatimelymanner.D)onlyafteranadequateinvestigationofthemanagementteam.Answer:ATerms:Auditors'bestdefensewhenmaterialmisstatementsarenotuncoveredDiff:EasyObjective:LO6-3AACSB:Reflectivethinkingskills2)Anauditmustbeperformedwithanattitudeofprofessionalskepticism.Professionalskepticismconsistsoftwoprimarycomponents:aquestioningmindand:A)theassumptionthatupper-levelmanagementisdishonest.B)acriticalassessmentoftheauditevidence.C)theassumptionthatallemployeesaremotivatedbygreed.D)verificationofallcriticalinformationbyindependentthirdparties.Answer:BTerms:AttitudeofprofessionalskepticismDiff:E