Auditing Chapter 6

William Outlar

AC555

Homework 3

Chapter 6

6-19 A. Which of the following best describes the reason why an independent auditor reports on financial statements?

Ans. (2) Different interests may exist between the company preparing the statements and the persons using the statements.

B. An independent audit aids in the communication of economic data because the audit

Ans. (2) lends credibility to the financial statements.

C. The major reason an independent auditor gathers audit evidence is to

Ans. (1) form an opinion on the financial statements.

6-20 A. An independent auditor has the responsibility to design the audit to provide reasonable assurance of detecting errors and fraud that might have a material effect on the financial statements. Which of the following, if material, is a fraud as defined in auditing standards?

Ans. (1) Misappropriation of an asset or groups of assets.

B. What assurance does the auditor provide that errors, fraud, and direct effect illegal acts that are material to the financial statements will be detected?

Ans. (2) Errors-Reasonable, Fraud-Reasonable, Direct Effect Illegal Acts-Reasonable

C. Which of the following statements describes why a properly designed and executed audit may not detect a material misstatement in the financial statements resulting from fraud?

Ans. (1) Audit procedures that are effective for detecting unintentional misstatements may be ineffective for an intentional misstatement that is concealed through collusion.

6-27 A. Explain the difference among management assertions about classes of transactions and events, general transaction-related audit objectives, and specific transaction related audit objectives and their relationships to each other.

Ans. Management assertions are unforeseen or expressed representations by management about the classes of transactions and related accounts in the financial statements. These claims are the same for every transaction cycle and account. General...