Exam 1
Name: Rahul Rai
1. Which of the following is considered audit evidence? C
A)
Oral statements Written Auditor
made by management Communications Observation
Y N N
B)
Oral statements Written Auditor
made by management Communications Observation
N Y Y
C)
Oral statements Written Auditor
made by management Communications Observation
Y Y Y
D)
Oral statements Written Auditor
made by management Communications Observation
N N Y
2. T or F. One criteria used by an external auditor to evaluate published financial statements
is known as generally accepted auditing standards. FALSE
3. The trait that distinguishes auditors from accountants is the: D
A) auditor's ability to interpret accounting principles generally accepted in the United States.
B) auditor's education beyond the bachelor's degree.
C) auditor's ability to interpret FASB Statements.
D) auditor's expertise in the accumulation and interpretation of audit evidence.
4. A correct relationship among the auditor, the client, and the external users is: D
A) management of a public company hires the independent auditor.
B) the audit committee of a private company hires the independent auditor.
C) the client provides capital to the external users.
D) the external users can rely upon the auditor's report to reduce information risk.
,5. External users of the financial statements : D
A) value the auditor's report because of the auditor's independence from the client.
B) look to the auditor's report as an indication of the statements' reliability.
C) use the audited information on the assumption that it is reasonably complete, accurate, and
unbiased.
D) all of the above
6. Any service that requires a CPA firm to issue a report about the reliability of an assertion that
is made by another party is a(n) : B
A) accounting and bookkeeping service.
B) attestation service.
C) assurance service.
D) tax service.
7. Audits: C
A) are an assurance service, but not an attestation service.
B) are designed to provide absolute assurance that the financial statements are free of material
misstatement.
C) are required for publicly traded companies in the United States.
D) do not require the auditor to express their opinion in a written report.
8. Two types of attestation services provided by CPA firms are audits and reviews. Discuss the
similarities and differences between these two types of attestation services. Which type
provides the least assurance?
In both the review and audit of the historical financial statements, management asserts that
the statements are fairly stated in accordance with accounting standards. The CPA provides a
lower level of assurance for reviews of financial statements compared to the high level for
audits, therefore less evidence is needed. A review is often adequate to meet financial
statement users' needs. It can be provided by a CPA firm at a much lower fee than an audit
because less evidence is needed. An audit is the most common assurance service provided by
CPA firms. Publicly traded companies in the U.S. are required to have audits under the federal
securities acts. Many nonpublic companies have a review to limit audit fees.
9. Which of the following audits can be regarded as generally being a compliance audit? A
A) IRS agents' examinations of taxpayer returns
B) GAO auditor's evaluation of the computer operations of governmental units
C) an internal auditor's review of a company's payroll authorization procedures
D) a CPA firm's audit of a public company
10. Sarbanes-Oxley and the Securities and Exchange Commission restrict auditors from
providing many consulting services to their publicly traded audit clients. Which of the
following
,is true for auditors of publicly traded companies? B
I. They are restricted from providing consulting services to privately held companies.
II. There is no restriction on providing consulting services to non-audit clients.
A) I only
B) II only
C) I and II
D) Neither I nor II
11. Sarbanes-Oxley and the Securities and Exchange Commission restrict auditors from
providing many consulting services to their publicly traded audit clients. Which of the
following is true for auditors of publicly traded companies? B
I. They are restricted from providing consulting services to privately held companies.
II. There is no restriction on providing consulting services to non-audit clients.
A) I only
B) II only
C) I and II
D) Neither I nor II
12. Which staff level in a CPA firm performs most of the detailed audit work? B
A) partner
B) staff assistant
C) senior auditor
D) senior manager
13. The following are definitions of terms that are listed on the right. Match the definition with its
associated term. Each term can be used once, more than once or not at all.
Definition Audit Term
an organizational structure where professional AICPA(4)
services are provided by one or more PCAOB(5)(10)
shareholders(i) Securities Exchange Commission(9)
the grantor of the right to practice public Form 10-K
accounting.(o) IAASB
a report filed to indicate a significant event(n) Form S-1(7)
sets professional standards and rules for members. due professional care(12)
(a) limited liability partnership
oversees accounting firms who audit public professional corporation (1)
companies(b) limited liability company(6)
an organizational structure where the owners are peer review(11)
taxed like a partnership and have limited personal 1933 Securities Act(13)
liability(j) 1934 Securities Act
a report that is filed when a company wishes to Form 8-K(3)
issue new securities(f) state regulation (2)
the methods used to ensure the firm meets its
, professional responsibilities to clients and others(q) Code of Professional Conduct
assists in providing investors with reliable information(c)
quality control standards(8)
requires annual inspections of accounting firms auditing
auditing
morestandards
than 100 public companies(b)
practice monitoring by a CPA firm for another CPA firm(k)
fulfilling duties diligently and carefully(g)
requires a registration statement(l)
14. is an attitude that includes a questioning mind, being alert to conditions that might
indicate possible misstatements due to fraud or error, and a critical assessment of audit
evidence.C
A) Reasonableness
B) Diligence
C) Professional skepticism
D) Competence
15. To obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, the auditor must fulfill several performance responsibilities,
including: B
A) verifying that all audit work is performed by a CPA with a minimum of three
years' experience.
B) obtaining sufficient, appropriate audit evidence.
C) exercising professional judgment.
D) providing an opinion on the financial statements.
16. Which of the following is a true statement regarding auditing standards?D
A) Prior to the passage of Sarbanes-Oxley, the FASB established auditing principles for
U.S. public companies.
B) PCAOB auditing standards are applicable to entities outside the U.S.
C) There are no similarities between PCAOB standards and International Standards on
Auditing. D) The Auditing Standards Board has revised most of its standards to converge
with the international standards.
17. are referred to as U.S. generally accepted auditing standards (GAAS).A
A) AICPA auditing standards
B) SEC auditing standards
C) PCAOB auditing standards
D) Sarbanes-Oxley standards
18. Standards issued by the Public Company Accounting Oversight Board must be followed
by CPAs who audit:B
A) both private and public companies.
B) public companies only.
C) private companies, public companies, and nonprofit entities.
D) private companies only.
Name: Rahul Rai
1. Which of the following is considered audit evidence? C
A)
Oral statements Written Auditor
made by management Communications Observation
Y N N
B)
Oral statements Written Auditor
made by management Communications Observation
N Y Y
C)
Oral statements Written Auditor
made by management Communications Observation
Y Y Y
D)
Oral statements Written Auditor
made by management Communications Observation
N N Y
2. T or F. One criteria used by an external auditor to evaluate published financial statements
is known as generally accepted auditing standards. FALSE
3. The trait that distinguishes auditors from accountants is the: D
A) auditor's ability to interpret accounting principles generally accepted in the United States.
B) auditor's education beyond the bachelor's degree.
C) auditor's ability to interpret FASB Statements.
D) auditor's expertise in the accumulation and interpretation of audit evidence.
4. A correct relationship among the auditor, the client, and the external users is: D
A) management of a public company hires the independent auditor.
B) the audit committee of a private company hires the independent auditor.
C) the client provides capital to the external users.
D) the external users can rely upon the auditor's report to reduce information risk.
,5. External users of the financial statements : D
A) value the auditor's report because of the auditor's independence from the client.
B) look to the auditor's report as an indication of the statements' reliability.
C) use the audited information on the assumption that it is reasonably complete, accurate, and
unbiased.
D) all of the above
6. Any service that requires a CPA firm to issue a report about the reliability of an assertion that
is made by another party is a(n) : B
A) accounting and bookkeeping service.
B) attestation service.
C) assurance service.
D) tax service.
7. Audits: C
A) are an assurance service, but not an attestation service.
B) are designed to provide absolute assurance that the financial statements are free of material
misstatement.
C) are required for publicly traded companies in the United States.
D) do not require the auditor to express their opinion in a written report.
8. Two types of attestation services provided by CPA firms are audits and reviews. Discuss the
similarities and differences between these two types of attestation services. Which type
provides the least assurance?
In both the review and audit of the historical financial statements, management asserts that
the statements are fairly stated in accordance with accounting standards. The CPA provides a
lower level of assurance for reviews of financial statements compared to the high level for
audits, therefore less evidence is needed. A review is often adequate to meet financial
statement users' needs. It can be provided by a CPA firm at a much lower fee than an audit
because less evidence is needed. An audit is the most common assurance service provided by
CPA firms. Publicly traded companies in the U.S. are required to have audits under the federal
securities acts. Many nonpublic companies have a review to limit audit fees.
9. Which of the following audits can be regarded as generally being a compliance audit? A
A) IRS agents' examinations of taxpayer returns
B) GAO auditor's evaluation of the computer operations of governmental units
C) an internal auditor's review of a company's payroll authorization procedures
D) a CPA firm's audit of a public company
10. Sarbanes-Oxley and the Securities and Exchange Commission restrict auditors from
providing many consulting services to their publicly traded audit clients. Which of the
following
,is true for auditors of publicly traded companies? B
I. They are restricted from providing consulting services to privately held companies.
II. There is no restriction on providing consulting services to non-audit clients.
A) I only
B) II only
C) I and II
D) Neither I nor II
11. Sarbanes-Oxley and the Securities and Exchange Commission restrict auditors from
providing many consulting services to their publicly traded audit clients. Which of the
following is true for auditors of publicly traded companies? B
I. They are restricted from providing consulting services to privately held companies.
II. There is no restriction on providing consulting services to non-audit clients.
A) I only
B) II only
C) I and II
D) Neither I nor II
12. Which staff level in a CPA firm performs most of the detailed audit work? B
A) partner
B) staff assistant
C) senior auditor
D) senior manager
13. The following are definitions of terms that are listed on the right. Match the definition with its
associated term. Each term can be used once, more than once or not at all.
Definition Audit Term
an organizational structure where professional AICPA(4)
services are provided by one or more PCAOB(5)(10)
shareholders(i) Securities Exchange Commission(9)
the grantor of the right to practice public Form 10-K
accounting.(o) IAASB
a report filed to indicate a significant event(n) Form S-1(7)
sets professional standards and rules for members. due professional care(12)
(a) limited liability partnership
oversees accounting firms who audit public professional corporation (1)
companies(b) limited liability company(6)
an organizational structure where the owners are peer review(11)
taxed like a partnership and have limited personal 1933 Securities Act(13)
liability(j) 1934 Securities Act
a report that is filed when a company wishes to Form 8-K(3)
issue new securities(f) state regulation (2)
the methods used to ensure the firm meets its
, professional responsibilities to clients and others(q) Code of Professional Conduct
assists in providing investors with reliable information(c)
quality control standards(8)
requires annual inspections of accounting firms auditing
auditing
morestandards
than 100 public companies(b)
practice monitoring by a CPA firm for another CPA firm(k)
fulfilling duties diligently and carefully(g)
requires a registration statement(l)
14. is an attitude that includes a questioning mind, being alert to conditions that might
indicate possible misstatements due to fraud or error, and a critical assessment of audit
evidence.C
A) Reasonableness
B) Diligence
C) Professional skepticism
D) Competence
15. To obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, the auditor must fulfill several performance responsibilities,
including: B
A) verifying that all audit work is performed by a CPA with a minimum of three
years' experience.
B) obtaining sufficient, appropriate audit evidence.
C) exercising professional judgment.
D) providing an opinion on the financial statements.
16. Which of the following is a true statement regarding auditing standards?D
A) Prior to the passage of Sarbanes-Oxley, the FASB established auditing principles for
U.S. public companies.
B) PCAOB auditing standards are applicable to entities outside the U.S.
C) There are no similarities between PCAOB standards and International Standards on
Auditing. D) The Auditing Standards Board has revised most of its standards to converge
with the international standards.
17. are referred to as U.S. generally accepted auditing standards (GAAS).A
A) AICPA auditing standards
B) SEC auditing standards
C) PCAOB auditing standards
D) Sarbanes-Oxley standards
18. Standards issued by the Public Company Accounting Oversight Board must be followed
by CPAs who audit:B
A) both private and public companies.
B) public companies only.
C) private companies, public companies, and nonprofit entities.
D) private companies only.
