Auditing · Topic 1

Principles and Concepts of Auditing Quiz

Work through 25 multiple-choice questions, one at a time. Submit each answer for feedback. At the end, review your score and see which concepts to revisit.

Review the Q&AAuditing quiz learning path
1. A lender asks whether an audited set of accounts can be treated as error-free. Which auditing concept best fits this case?
2. The board asks the external auditor to prepare the financial statements and accept responsibility for them. Which auditing concept best fits this case?
3. A small expense misclassification conceals a breach of a lending covenant. Which auditing concept best fits this case?
4. The CFO’s explanation for a new revenue stream conflicts with dispatch records. Which auditing concept best fits this case?
5. A risky account contains complex subjective estimates and the team has only planned basic inquiry. Which auditing concept best fits this case?
6. A lender asks whether an audited set of accounts can be treated as error-free. What is the most appropriate response?
7. The board asks the external auditor to prepare the financial statements and accept responsibility for them. What is the most appropriate response?
8. A small expense misclassification conceals a breach of a lending covenant. What is the most appropriate response?
9. The CFO’s explanation for a new revenue stream conflicts with dispatch records. What is the most appropriate response?
10. A risky account contains complex subjective estimates and the team has only planned basic inquiry. What is the most appropriate response?
11. A lender asks whether an audited set of accounts can be treated as error-free. Which evidence would be most directly useful?
12. The board asks the external auditor to prepare the financial statements and accept responsibility for them. Which evidence would be most directly useful?
13. A small expense misclassification conceals a breach of a lending covenant. Which evidence would be most directly useful?
14. The CFO’s explanation for a new revenue stream conflicts with dispatch records. Which evidence would be most directly useful?
15. A risky account contains complex subjective estimates and the team has only planned basic inquiry. Which evidence would be most directly useful?
16. A lender asks whether an audited set of accounts can be treated as error-free. Which conclusion is best supported by the case?
17. The board asks the external auditor to prepare the financial statements and accept responsibility for them. Which conclusion is best supported by the case?
18. A small expense misclassification conceals a breach of a lending covenant. Which conclusion is best supported by the case?
19. The CFO’s explanation for a new revenue stream conflicts with dispatch records. Which conclusion is best supported by the case?
20. A risky account contains complex subjective estimates and the team has only planned basic inquiry. Which conclusion is best supported by the case?
21. A lender asks whether an audited set of accounts can be treated as error-free. Which shortcut would most directly undermine the work in this case?
22. The board asks the external auditor to prepare the financial statements and accept responsibility for them. Which shortcut would most directly undermine the work in this case?
23. A small expense misclassification conceals a breach of a lending covenant. Which shortcut would most directly undermine the work in this case?
24. The CFO’s explanation for a new revenue stream conflicts with dispatch records. Which shortcut would most directly undermine the work in this case?
25. A risky account contains complex subjective estimates and the team has only planned basic inquiry. Which shortcut would most directly undermine the work in this case?
Show the answer key
  1. Reasonable assurance Residual audit risk remains after appropriate work.
  2. Management responsibility Management remains responsible for the statements.
  3. Qualitative materiality The nature of a misstatement can make it material.
  4. Professional skepticism An explanation needs support when evidence disagrees.
  5. Audit risk Planned detection risk should reflect assessed risk of material misstatement.
  6. Explain the level and purpose of a financial statement audit Residual audit risk remains after appropriate work.
  7. Clarify responsibilities before accepting the engagement Management remains responsible for the statements.
  8. Consider the impact of the classification on users’ decisions The nature of a misstatement can make it material.
  9. Investigate the contradiction and corroborate the explanation An explanation needs support when evidence disagrees.
  10. Strengthen procedures to address the assessed risk Planned detection risk should reflect assessed risk of material misstatement.
  11. The scope and opinion sections of the audit report Explain the level and purpose of a financial statement audit.
  12. Management’s acknowledgment of its financial reporting responsibilities Clarify responsibilities before accepting the engagement.
  13. The covenant agreement and recalculation under its terms Consider the impact of the classification on users’ decisions.
  14. Customer contracts and independent shipping evidence Investigate the contradiction and corroborate the explanation.
  15. Independent expectation and support for key inputs Strengthen procedures to address the assessed risk.
  16. Residual audit risk remains after appropriate work The scope and opinion sections of the audit report would support this assessment.
  17. Management remains responsible for the statements Management’s acknowledgment of its financial reporting responsibilities would support this assessment.
  18. The nature of a misstatement can make it material The covenant agreement and recalculation under its terms would support this assessment.
  19. An explanation needs support when evidence disagrees Customer contracts and independent shipping evidence would support this assessment.
  20. Planned detection risk should reflect assessed risk of material misstatement Independent expectation and support for key inputs would support this assessment.
  21. Promising to find every error Residual audit risk remains after appropriate work.
  22. Transferring ownership of the statements to the auditor Management remains responsible for the statements.
  23. Dismissing the breach solely because the amount is small The nature of a misstatement can make it material.
  24. Accepting an explanation because the CFO is experienced An explanation needs support when evidence disagrees.
  25. Leaving weak procedures in place after identifying high risk Planned detection risk should reflect assessed risk of material misstatement.

These cases use general auditing principles. Apply the relevant local law and professional standards when evaluating a real engagement. Reference: IAASB standards and pronouncements.