5.

The auditor's judgment concerning the overall

fairness of
the presentation of financial position, results of
operations, and changes in financial position is
applied
within the framework of
a. Generally accepted accounting principles.
b. Generally accepted auditing standards.
c. Internal control.
d. Information systems control.

ANSWER: A

6. Which of the following is not considered an

assertion as formulated by the Auditing Standards
Board?
a. Valuation or allocation.
b. Mathematical accuracy.
c. Rights and obligations.
d. Presentation and disclosure.

ANSWER: B

7. Which of the following is not a distinguishing feature

of
risk-based auditing?
a. Identifying areas posing the highest risk of
financial statement errors.
b. Analysis of internal control.
c. Collecting and evaluating evidence.
d. Concentrating audit resources in those areas
presenting the highest risk of financial
statement errors.

ANSWER: C

8. To maximize independence, the director of internal

auditing should report to the
a. Audit committee.
b. Controller.
c. Chief financial officer.
d. Director of information systems.

ANSWER: A

9. The auditor communicates the results of his or her

work
through the medium of the
a. Engagement letter.
b. Management letter.
 c. Audit report.
d. Financial statements.

ANSWER: C

10. The best description of the scope of internal

auditing is that it encompasses
a. Primarily operational auditing.
b. Both financial and operational auditing.
c. Primarily the safeguarding of assets and
verifying the existence of such assets.
d. Primarily financial auditing.

ANSWER: B

11. A typical objective of an operational audit is to

determine whether an entity's
a. Financial statements fairly present financial
position
and cash flows.
b. Financial statements present fairly the results
of
operations.
c. Financial statements fairly present financial
position, results of operations, and cash
flows.
d. Specific operating units are functioning
efficiently
and effectively.

ANSWER: D

12. The scope and nature of an auditor's contractual

obligation to a client is ordinarily set forth
in the
a. Scope paragraph of the auditor’s report.
b. Opinion paragraph of the auditor’s report.
c. Management letter.
d. Engagement letter.

ANSWER: D

13. The four major steps in conducting an audit are:

a. Testing internal controls
b. Audit report
c. Planning
d. Testing transactions and balances

The proper sequence in applying the above steps is:

a. cadb
b. cdab
c. bcda
d. adcb