Which of the following best describes why an independent auditor reports on financial statement

Auditors must balance the cost of the audit with the need for precision.

If materiality decreases, sample size will need to increase.

The study of auditing focuses on learning the rules, techniques, and computations required to analyze financial statements.

C. Provide assurance regarding whether the client's financial statements are fairly stated.

A. Signals the true state of a management assertion.

B. The risk that the auditor will provide an unqualified opinion on financial statements that are, in fact, materially misstated.

B. Obtain a knowledge of matters that relate to the nature of the entity's business.

B. The company's internal controls.

C. Discuss the timing of the audit procedures with the client's management.

C. Management has more information about the entity's true financial position than do the absentee owners (i.e. stockholders).

C. The opinion of an independent party is needed because a company is not likely to be considered objective with respect to its own financial statements.

B. Different interests may exist between the company preparing the statements and the parties using the statements.

B. To enhance auditor independence from the management of the corporation.

C. There should be a well-planned approach for obtaining and evaluating evidence.

C. Offering an opinion concerning the accuracy of statements made on a client's web site relating to the client's online privacy policies.

A. These services are applied only to financial statements and financial statement accounts.

D. Management assertions that are deemed to be of high risk.

A. Identify areas of relatively high risk of misstatement and plan the audit accordingly.

D. Materiality is largely a matter of professional judgment.

A. Make inquiries of the predecessor auditor.

A. Any disputes over significant accounting issues have been settled to the auditor's satisfaction.

D. Determining engagement team requirements.

C. Stockholders of the company.

D. The statements taken as a whole do not fairly present the financial condition and results of operations of the company.

B. The report indicates that the client's financial statements were audited in accordance with applicable auditing standards.

A. The conformance of the financial statements with generally accepted accounting principles.

C. Members of the Board of Directors

B. Oversee the auditors of public companies in order to protect the interests of investors

C. Public Companies Accounting Oversight Board

C. Professional skepticism

B. Management of the company

C. Whether management has systems in place to evaluate and effectively manage the entity's business risks

B. Manufacturers' assertions about product quality

C. Make recommendations for improving performance

C. They are not employees of the entity being audited

B. Detecting or deterring fraudulent activity

D. A certain number of hours, which is based on the size of the company being audited, must be spent on each audit engagement

D. Management of the organization.

C. Defining the minimum standards of performance for an auditor

B. Provide reasonable assurance that the financial statements are not materially misstated because of fraud

C. Efficiency of operations

C. accounting or review services

A. Auditors to plan and perform their duties with the skill and care that is commonly expected of accounting professionals

C. Holding the management team accountable to shareholders and other constituents for the utilization of the entity's resources.

C. Standards of quality for the auditor's performance

B. Existence, rights and obligations, completeness, valuation and allocation

C. Occurrence, completeness, authorization, accuracy, cutoff and classification

D. Occurrence, rights and obligations, completeness, classification and understandability, accuracy and valuation.

B. The auditor's risk of loss from events arising in connection with financial statements audited and reported upon

D. Engagement risk cannot be eliminated

. the overall risk of material misstatement

B. Misinterpretation by management of facts that existed when the financial statements were prepared

C. Management places substantial emphasis on meeting earnings projections

B. A fixed asset being recorded at the incorrect cost

D. Materiality allocated to a specific account

B. The entity's annualized interim (i.e. quarterly) financial

C. Firm policy sets materiality at 4% of pretax income

B. The misstatement is less than 5% of pretax income

C. Exists independently of the actions of the auditor

D. Supplies inventory is difficult to count

C. Extent of substantive tests

D. Both risk of material misstatement and detection risk

C. Verify proper valuation of inventory subject to technological obsolescence

D. Audit standards require the auditor to evaluate the entity's business risk in order to provide suggestions to improve the entity's profitability

A. An illegal payment to a foreign official that was not

B. The auditor's relationship with management is strained

A. Disclose the fraud to the appropriate level of the client's management

C. The misstatement will cause the client to fail to meet an earnings forecast

A. Extent of the substantive procedures

B. Nature of substantive procedures from less effective to more effective

A. Substantive procedures should increase

D. Emphasizing the importance of professional skepticism

C. Inadequate segregation of duties places an employee in a position to perpetrate and conceal theft

A. Inability to generate cash flows from operations while reporting substantial earnings growth

A. Audit procedures that are otherwise effective may be ineffective for fraud that is concealed through collusion

A. Fraud that involves senior management should be reported directly by the auditor to the audit committee regardless of the amount involved

A. The elements of materiality and audit risk

B. An auditor considers materiality for the aggregate level of misstatements that could be material to any one of the financial statements individually

C. a representation from a third party.

D. Be persuasive enough to enable the auditor to form an opinion

C. presentation and disclosure

C. Copies of client sales invoices inspected by the auditor

Compare a sample of shipping documents to related sales invoices

C. To gather corroborative evidence about management's assertions

D. Gather evidence about management's assertions

B. The auditor performs tests to collect convincing evidence that the financial statements are not misstated

A. Difficulty and expense involved in testing a particular item

D. An effective internal control system provides more reliable audit evidence

B. Confirmation of an account payable balance mailed by and returned directly to the auditor

A. Schedules of details of physical inventory counts conducted by the client

A. The more effective the internal control, the more assurance it provides about the reliability of the accounting data and financial statements

C. Bank statements obtained from the client

A. Accounting records belong to the client

D. designed to facilitate the review and supervision of work done by auditors assigned to the engagement

C. Designed in an orderly fashion to facilitate the review of audit work by the senior, manager, and partner on the engagement

C. General ledger information, such as account numbers, prior-year account balances, and current year unadjusted information

D. May be in paper, electronic, or some other form

B. Tracing vendor invoices to accounting records

D. A client's accounting data cannot be considered sufficient audit evidence to support the financial statements

A. Working trial balance.