ACCT 431- EXAM 01 Practice QUESTIONS AND ANSWERS
1.1. The basic purpose of a financial statement audit is to D. All the above.
A. Decrease the information asymmetry between
the preparers of the financial reporting and the users
of the financial reporting.
B.Mitigate the conflict of interest created by the fact
that the financial reporting is used to evaluate the
management and management prepares the
financial statements.
C. Decrease the information risk of the users of
the financial reporting.
D. All the above.
E.None of the above
2. Which of the following is a correct statement? D. Auditing is a subset of attestation.
A. Assurance is a subset of auditing.
B. Attestation is a subset of auditing.
C. Assurance is a subset of attestation
D. Auditing is a subset of attestation.
3. The three sections of the audit report on public 1. opinion of financial statements
companies are the 2. basis for opinion
3.critical audit
4.The first phase of an audit of financial statements is c) Client acceptance / continuance process
a) Plan the audit
b)Consider internal control
c) Client acceptance / continuance process
d) Issue an audit report
,5.Independent auditors are also known as b) External auditors
a) Internal auditors
b)External auditors
c) Government auditors
d) Forensic auditors
6.If something is important information for users to B. Material
be able to make a decision it is
A. Not material
B.Material
C. All of the above
D.None of the above
7. In the audit report on a public company, the name C. Both A. and B. are correct.
of the engagement partner and others (from
outside the engagement partner's CPA firm) that
participated in the audit
A. Must be disclosed in Form AP, the AuditorSearch
online database of the PCAOB.
B. May be (it is optional) disclosed in the audit report
C. Both A. and B. are correct.
D. Neither A. nor B. are correct.
9. The auditing standards of which of the following are b) The Auditing Standards Board (ASB) and the International Auditing and
most similar? a) The Public Company Accounting Assurance Standards Board (IAASB)
Oversight Board and the Auditing Standards Board
b)The Auditing Standards Board and the
International Auditing and Assurance Standards
Board
c) The Financial Accounting Standards Board and the
International Accounting Standards Board
d)All of the above
e)None of the above
10. You are the head of the CPA firm and need d) Financial derivatives brokers, their industry, their risks, and how they make money
to put together an audit engagement team for the
audit of a financial derivatives broker. You must put on
the team at least one person highly knowledgeable
about
a) Revenues
b)Expenses
c) Internal controls
d) Financial derivatives brokers, their industry, their risks,
and how they make money
True or False? The audit committee of a public company False
includes its senior executives.
The Big Four CPA firms perform the most audits in the a) Pricewaterhouse Coopers
US. The Big Four are: b)Deloitte
c) Ernst & Young
d) KPMG
, 13. An audit of financial statements in accordance with C. Professional skepticism.
generally accepted auditing standards should be
planned and performed with an attitude of
A. Objective cynicism.
B. Independent differentialism.
C. Professional skepticism.
D. Impartial conservatism
14. A major difference between China and the US is that... d. In China, convergence has been achieved between the national standard setter
a. There is no equivalent to the US Securities for auditing and the international standard setter for auditing; no such
Exchange Commission in China convergence has yet occurred in the US
b.There are no major stock exchanges in China
c. In the US, there is an American Institute of
Certified Public Accountants but in China there is
no Chinese Institute of Certified Public
Accountants
d.In China, convergence has been achieved between the
national standard setter for auditing and the
international standard setter for auditing; no such
convergence has yet occurred in the US
15. What is the general character of the work B. Detecting or deterring fraudulent activity
conducted in performing a forensic audit for a
company?
A. Providing assurance that the financial statements
are not materially misstated.
B.Detecting or deterring fraudulent activity.
C. Offering an opinion on the reliability of the
specific assertions made by management.
D.Identifying the causes of an entity's financial difficulties.
16. The major ethics guidance for accountants and Broadest category - Principles
auditors is the AICPA Code of Professional Conduct. Medium - Rules of Conduct
Show me their correct order by drawing lines to match the Narrowest category- Interpretations of the Rules of Conduct
left and right list
17. An auditor always searches for Related Parties d) All of the above are symptoms that make the auditor suspect a Related Party of
of the company she is auditing. Symptoms that the audit client
suggest a Related Party may possibly exist include
a) Common telephone number for both the audit client
and the suspected Related Party
b)Common ownership of both the audit client and an
entity that owns the suspected Related Party
c) Common occupancy of the same floor of the
same building by both the audit client and anentity
that owns the suspected Related Party
d)All of the above are symptoms that make the
auditor suspect a Related Party of the audit client
1.1. The basic purpose of a financial statement audit is to D. All the above.
A. Decrease the information asymmetry between
the preparers of the financial reporting and the users
of the financial reporting.
B.Mitigate the conflict of interest created by the fact
that the financial reporting is used to evaluate the
management and management prepares the
financial statements.
C. Decrease the information risk of the users of
the financial reporting.
D. All the above.
E.None of the above
2. Which of the following is a correct statement? D. Auditing is a subset of attestation.
A. Assurance is a subset of auditing.
B. Attestation is a subset of auditing.
C. Assurance is a subset of attestation
D. Auditing is a subset of attestation.
3. The three sections of the audit report on public 1. opinion of financial statements
companies are the 2. basis for opinion
3.critical audit
4.The first phase of an audit of financial statements is c) Client acceptance / continuance process
a) Plan the audit
b)Consider internal control
c) Client acceptance / continuance process
d) Issue an audit report
,5.Independent auditors are also known as b) External auditors
a) Internal auditors
b)External auditors
c) Government auditors
d) Forensic auditors
6.If something is important information for users to B. Material
be able to make a decision it is
A. Not material
B.Material
C. All of the above
D.None of the above
7. In the audit report on a public company, the name C. Both A. and B. are correct.
of the engagement partner and others (from
outside the engagement partner's CPA firm) that
participated in the audit
A. Must be disclosed in Form AP, the AuditorSearch
online database of the PCAOB.
B. May be (it is optional) disclosed in the audit report
C. Both A. and B. are correct.
D. Neither A. nor B. are correct.
9. The auditing standards of which of the following are b) The Auditing Standards Board (ASB) and the International Auditing and
most similar? a) The Public Company Accounting Assurance Standards Board (IAASB)
Oversight Board and the Auditing Standards Board
b)The Auditing Standards Board and the
International Auditing and Assurance Standards
Board
c) The Financial Accounting Standards Board and the
International Accounting Standards Board
d)All of the above
e)None of the above
10. You are the head of the CPA firm and need d) Financial derivatives brokers, their industry, their risks, and how they make money
to put together an audit engagement team for the
audit of a financial derivatives broker. You must put on
the team at least one person highly knowledgeable
about
a) Revenues
b)Expenses
c) Internal controls
d) Financial derivatives brokers, their industry, their risks,
and how they make money
True or False? The audit committee of a public company False
includes its senior executives.
The Big Four CPA firms perform the most audits in the a) Pricewaterhouse Coopers
US. The Big Four are: b)Deloitte
c) Ernst & Young
d) KPMG
, 13. An audit of financial statements in accordance with C. Professional skepticism.
generally accepted auditing standards should be
planned and performed with an attitude of
A. Objective cynicism.
B. Independent differentialism.
C. Professional skepticism.
D. Impartial conservatism
14. A major difference between China and the US is that... d. In China, convergence has been achieved between the national standard setter
a. There is no equivalent to the US Securities for auditing and the international standard setter for auditing; no such
Exchange Commission in China convergence has yet occurred in the US
b.There are no major stock exchanges in China
c. In the US, there is an American Institute of
Certified Public Accountants but in China there is
no Chinese Institute of Certified Public
Accountants
d.In China, convergence has been achieved between the
national standard setter for auditing and the
international standard setter for auditing; no such
convergence has yet occurred in the US
15. What is the general character of the work B. Detecting or deterring fraudulent activity
conducted in performing a forensic audit for a
company?
A. Providing assurance that the financial statements
are not materially misstated.
B.Detecting or deterring fraudulent activity.
C. Offering an opinion on the reliability of the
specific assertions made by management.
D.Identifying the causes of an entity's financial difficulties.
16. The major ethics guidance for accountants and Broadest category - Principles
auditors is the AICPA Code of Professional Conduct. Medium - Rules of Conduct
Show me their correct order by drawing lines to match the Narrowest category- Interpretations of the Rules of Conduct
left and right list
17. An auditor always searches for Related Parties d) All of the above are symptoms that make the auditor suspect a Related Party of
of the company she is auditing. Symptoms that the audit client
suggest a Related Party may possibly exist include
a) Common telephone number for both the audit client
and the suspected Related Party
b)Common ownership of both the audit client and an
entity that owns the suspected Related Party
c) Common occupancy of the same floor of the
same building by both the audit client and anentity
that owns the suspected Related Party
d)All of the above are symptoms that make the
auditor suspect a Related Party of the audit client
