Auditing Exam 1|359 Questions with Verified Answers,100% CORRECT

Auditing Exam 1|359 Questions with Verified Answers 1. Which of the following would be considered an assurance engagement? a. Giving an opinion on a prize promoter's claims about the amount of sweepstakes prizes awarded in the past. b. Giving an opinion on the conformity of the financial statements of a university with generally accepted accounting principles. c. Giving an opinion on the fair presentation of a newspaper's circulation data. d. Giving assurance about the average drive length achieved by golfers with a client's golf balls. e. All of the above. - CORRECT ANSWER E 2. It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that a. A potential conflict of interest always exists between the auditor and the management of the enterprise under audit. b. In audits of financial statements, the auditor acts exclusively in the capacity of an auditor. c. The professional status of the independent auditor imposes commensurate professional obligations. d. Financial statements and financial data are verifiable. - CORRECT ANSWER A 3. In an attestation engagement, a CPA practitioner is engaged to a. Compile a company's financial forecast based on management's assumptions without expressing any form of assurance. b. Prepare a written report containing a conclusion about the reliability of a management assertion. c. Prepare a tax return using information the CPA has not audited or reviewed. d. Give expert testimony in court on particular facts in a corporate income tax controversy. - CORRECT ANSWER C 4. A determination of cost savings obtained by outsourcing cafeteria services is most likely to be an objective of a. Environmental auditing. b. Financial auditing. c. Compliance auditing. d. Operational auditing. - CORRECT ANSWER D 5. The primary difference between operational auditing and financial auditing is that in operational auditing a. The operational auditor is not concerned with whether the audited activity is generating information in compliance with financial accounting standards. b. The operational auditor is seeking to help management use resources in the most effective manner possible. c. The operational auditor starts with the financial statements of an activity being audited and works backward to the basic processes involved in producing them. d. The operational auditor can use analytical skills and tools that are not necessary in financial auditing. - CORRECT ANSWER B 6. According to the AICPA, the purpose of an audit of financial statements is to a. Enhance the degree of confidence that intended users can place in the financial statements. b. Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the Financial Accounting Standards Board. c. Express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the U.S. Securities and Exchange Commission. d. Obtain systematic and objective evidence about financial assertions and report the results to interested users. - CORRECT ANSWER A 7. Bankers who are processing loan applications from companies seeking large loans will probably ask for financial statements audited by an independent CPA because a. Financial statements are too complex for the bankers to analyze themselves. b. They are too far away from company headquarters to perform accounting and auditing themselves. c. The consequences of making a bad loan are very undesirable. d. They generally see a potential conflict of interest between company managers who want to get loans and the bank's needs for reliable financial statements. - CORRECT ANSWER D 8. The Sarbanes-Oxley Act of 2002 prohibits public accounting firms from providing which of the following services to an audit client? a. Bookkeeping services. b. Internal auditing services. c. Valuation services. d. All of the above. - CORRECT ANSWER D 9. Independent auditors of financial statements perform audits that reduce a. Business risks faced by investors. b. Information risk faced by investors. c. Complexity of financial statements. d. Timeliness of financial statements. - CORRECT ANSWER B 10. The primary objective of compliance auditing is to a. Give an opinion on financial statements. b. Develop a basis for a report on internal control. c. Perform a study of effective and efficient use of resources. d. Determine whether client personnel are following laws, rules, regulations, and policies. - CORRECT ANSWER D 11. What requirements are usually necessary to become licensed as a certified public accountant? a. Successful completion of the Uniform CPA Examination. b. Experience in the accounting field. c. Education. d. All of the above. - CORRECT ANSWER D 12. The organization primarily responsible for ensuring that public officials are using public funds efficiently, economically, and effectively is the a. Governmental Internal Audit Agency (GIAA). b. Central Internal Auditors (CIA). c. Securities and Exchange Commission (SEC). d. Government Accountability Office (GAO). - CORRECT ANSWER D 13. Performance audits usually include [two answers] a. Financial audits. b. Economy and efficiency audits. c. Compliance audits. d. Program audits. - CORRECT ANSWER B & D 14. The objective in an auditor's review of credit ratings of a client's customers is to obtain evidence related to management's assertion about a. Completeness. b. Existence. c. Valuation and allocation. d. Rights and obligations. e. Occurrence. - CORRECT ANSWER C 15. Jones, CPA, is planning the audit of Rhonda's Company. Rhonda verbally asserts to Jones that all expenses for the year have been recorded in the accounts. Rhonda's representation in this regard a. Is sufficient evidence for Jones to conclude that the completeness assertion is supported for expenses. b. Can enable Jones to minimize the work on the gathering of evidence to support Rhonda's completeness assertion. c. Should be disregarded because it is not in writing. d. Is not considered a sufficient basis for Jones to conclude that all expenses have been recorded. - CORRECT ANSWER D 16. The risk to investors that a company's financial statements may be materially misleading is called a. Client acceptance risk. b. Information risk. c. Moral hazard. d. Business risk. - CORRECT ANSWER B 17. When auditing merchandise inventory at year-end, the auditor performs audit procedures to ensure that all goods purchased before year-end are received before the physical inventory count. This audit procedure provides assurance about which management assertion? a. Cutoff. b. Existence. c. Valuation and allocation. d. Rights and obligations. e. Occurrence. - CORRECT ANSWER A 18. When auditing merchandise inventory at year-end, the auditor performs audit procedures to obtain evidence that no goods held on consignment are included in the client's ending inventory balance. This audit procedure provides assurance about which management assertion? a. Completeness. b. Existence. c. Valuation and allocation. d. Rights and obligations. e. Occurrence. - CORRECT ANSWER D 19. When an auditor reviews additions to the equipment (fixed asset) account to make sure that fixed assets are not overstated, she wants to obtain evidence as to management's assertion regarding a. Completeness. b. Existence. c. Valuation and allocation. d. Rights and obligations. e. Occurrence. - CORRECT ANSWER B 20. The Sarbanes-Oxley Act of 2002 generally prohibits public accounting firms from a. Acting in a managerial decision-making role for an audit client. b. Auditing the firm's own work on an audit client. c. Providing tax consulting to an audit client without audit committee approval. d. All of the above. - CORRECT ANSWER D 21. Substantial equivalency refers to a. An auditor's tendency not to believe management's assertions without sufficient corroboration. b. Providing consulting work for another firm's audit client in exchange for the other firm's providing consulting services to one of your clients. c. The waiving of certification exam parts for an individual holding an equivalent certification from another professional organization. d. Permitting a CPA to practice in another state without having to obtain a license in that state. - CORRECT ANSWER D 22. Which of the following best describes the relationship between auditing and attestation engagements? a. Auditing is a subset of attestation engagements that focuses on the certification of financial statements. b. Attestation is a subset of auditing that provides lower assurance than that provided by an audit engagement. c. Auditing is a subset of attestation engagements that focuses on providing clients with advice and decision support. d. Attestation is a subset of auditing that improves the quality of information or its context for decision makers. - CORRECT ANSWER A 23. During an audit of a company's cash balance on a company with operations in only one country, the auditor is most concerned with which management assertion? a. Existence. b. Rights and obligations. c. Valuation or allocation. d. Occurrence. - CORRECT ANSWER A 24. When auditing an investment in another company, an auditor most likely would seek to conduct which audit procedure to help satisfy the valuation assertion? a. Inspect the stock certificates evidencing the investment. b. Examine the audited financial statements of the investee company. c. Review the broker's advice or canceled check for the investment's acquisition. d. Obtain market quotations from The Wall Street Journal or another independent source. - CORRECT ANSWER D 25. Cutoff tests designed to detect valid sales that occurred before the end of the year but have been recorded in the subsequent year would provide assurance about management's assertion of a. Presentation and disclosure. b. Completeness. c. Rights and obligations. d. Existence. - CORRECT ANSWER B 26. Which of the following audit procedures probably would provide the most reliable evidence related to the entity's assertion of rights and obligations for the inventory account? a. Trace test counts noted during physical count to the summarization of quantities. b. Inspect agreements for evidence of inventory held on consignment. c. Select the last few shipping advices used before the physical count and determine whether the shipments were recorded as sales. d. Inspect the open purchase order file for significant commitments to consider for disclosure. - CORRECT ANSWER B 27. In auditing the accrued liabilities account on the Balance Sheet, an auditor's procedures most likely would focus primarily on management's assertion of a. Existence or occurrence. b. Completeness. c. Presentation and disclosure. d. Valuation or allocation. - CORRECT ANSWER B 1. Auditing Engagement 2. Attestation Engagement 3. Assurance Engagement 4. Consulting Services Engagement a. Any information Financial statements Advice and decision support Financial information b. Financial information Advice and decision support Financial statements Any information c. Advice and decision support Any information Financial information Financial statements d. Financial statements Financial information Any information Advice and decision support - CORRECT ANSWER D 29. Which of the following is a reason to obtain professional certification? a. Certification provides credibility that an individual is technically competent. b. Certification often is a necessary condition for advancement and promotion within a professional services firm. c. Obtaining certification is often monetarily rewarded by an individual's employer. d. All of the above. - CORRECT ANSWER D 30. During an audit of an entity's stockholders' equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify management's assertion of a. Existence or occurrence. b. Completeness. c. Valuation or allocation. d. Presentation and disclosure. - CORRECT ANSWER D 31. When auditing the accounts receivable account on the balance sheet, an auditor's procedures most likely would focus primarily on management's assertion of a. Existence. b. Completeness. c. Presentation and disclosure. d. Rights and obligations. - CORRECT ANSWER A 32. An auditor selected items for test counts from the client's warehouse during the physical inventory observation. The auditor then traced these test counts into the detailed inventory listing that agreed to the financial statements. This procedure most likely provided evidence concerning management's assertion of a. Rights and obligations. b. Completeness. c. Existence. d. Valuation. - CORRECT ANSWER B 33. An auditor's purpose in auditing the information contained in the pension footnote most likely is to obtain evidence concerning management's assertion about a. Rights and obligations. b. Existence. c. Presentation and disclosure. d. Valuation. - CORRECT ANSWER C 34. Which of the following categories of principles is most closely related to gathering audit evidence? a. Performance. b. Reasonable assurance. c. Reporting. d. Responsibilities. - CORRECT ANSWER A 35. Which of the following is not related to ethical requirements of auditors? a. Due care. b. Independence in appearance. c. Independence in fact. d. Professional judgment. - CORRECT ANSWER D 36. One of an accounting firm's basic objectives is to provide professional services that conform to professional standards. Reasonable assurance of achieving this objective can be obtained by following a. Generally accepted auditing standards. b. Standards within a system of quality control. c. Generally accepted accounting principles. d. International auditing standards. - CORRECT ANSWER B 37. Which of the following best demonstrates the concept of professional skepticism? a. Relying more extensively on external evidence rather than internal evidence. b. Focusing on items that have a more significant quantitative effect on the entity's financial statements. c. Critically assessing verbal evidence received from the entity's management. d. Evaluating potential financial interests held by auditors in the client. - CORRECT ANSWER C 38. The primary purpose for obtaining an understanding of the entity's environment (including its internal control) in a financial statement audit is a. To determine the nature, timing, and extent of substantive procedures to be performed. b. To make consulting suggestions to the entity's management. c. To obtain direct sufficient appropriate audit evidence to afford a reasonable basis for an opinion on the financial statements. d. To determine whether the entity has changed any accounting principles. - CORRECT ANSWER A 39. Ordinarily, what source of evidence should least affect audit conclusions? a. External documentary evidence. b. Inquiry of management. c. Documentation prepared by the audit team. d. Inquiry of entity legal counsel. - CORRECT ANSWER B 40. The most reliable evidence regarding the existence of newly acquired computer equipment is a. Inquiry of management. b. Documentation prepared externally. c. Evaluation of the client's procedures. d. Physical observation. - CORRECT ANSWER D 41. Which of the following procedures would provide the most reliable audit evidence? a. Inquiries of the client's internal audit staff. b. Inspection of prenumbered client purchase orders filed in the vouchers payable department. c. Inspection of vendor sales invoices received from client personnel. d. Inspection of bank statements obtained directly from the client's financial institution. - CORRECT ANSWER D 42. Breaux & Co. CPAs require that all audit documentation indicate the identity of the preparer and the reviewer. This procedure provides evidence relating to which of the following? a. Independence. b. Adequate competence and capabilities. c. Adequate planning and supervision. d. Gathering sufficient appropriate evidence. - CORRECT ANSWER C 43. Which of the following concepts is least related to the standard of due care? a. Independence in fact. b. Professional skepticism. c. Prudent auditor. d. Reasonable assurance. - CORRECT ANSWER D 44. The evidence considered most appropriate by auditors is best described as a. Internal documents such as sales invoice copies produced under conditions of strong internal control. b. Written representations made by the president of the entity. c. Documentary evidence obtained directly from independent external sources. d. Direct personal knowledge obtained through physical observation and mathematical recalculation. - CORRECT ANSWER D 45. Auditors' understanding of the internal control in an entity provides information for a. Determining whether members of the audit team have the required competence and capabilities to perform the audit. b. Ascertaining the independence in mental attitude of members of the audit team. c. Planning the professional development courses the audit staff needs to keep up to date with new auditing standards. d. Planning the nature, timing, and extent of substantive procedures on an audit. - CORRECT ANSWER D 46. Which of the following elements of a system of quality control is related to firms receiving independence confirmations from its professionals with respect to clients? a. Acceptance and continuance of client relationships and specific engagements. b. Engagement performance. c. Monitoring. d. Relevant ethical requirements. - CORRECT ANSWER D 47. Which of the following is most closely related to the responsibilities principle? a. The auditors' responsibility to issue a report as a result of their examination. b. The requirement that auditors gather sufficient, appropriate evidence upon which to base an opinion on the financial statements. c. The auditors' compliance with relevant ethical requirements of independence and due care. d. The auditors' responsibility to plan the audit and properly supervise assistants. - CORRECT ANSWER C 48. Kramer, CPA, consulted an independent appraiser regarding the valuation of fine art for a not-for-profit museum. Consultation with the appraiser in this case would a. Be considered as exercising proper due care. b. Be considered a failure to follow generally accepted auditing standards because Kramer should have known how to value fine art before accepting the engagement. c. Not be considered a violation of generally accepted auditing standards because generally accepted auditing standards does not apply to not-for-profit entities. d. None of the above. - CORRECT ANSWER A 49. Which of the following topics is not addressed in the auditors' report for a public entity? a. Responsibilities of the auditor and management in the financial reporting process. b. Absolute assurance regarding the fairness of the entity's financial statements in accordance with GAAP. c. A description of an audit engagement. d. A summary of the auditors' opinion on the effectiveness of the entity's internal control over financial reporting. - CORRECT ANSWER B 50. Which of the following recognizes that an audit conducted under generally accepted auditing standards may not detect all material misstatements? a. Absolute assurance. b. Professional judgment. c. Reliability of audit evidence. d. Reasonable assurance. - CORRECT ANSWER D 51. Which of the following combinations would provide the auditor the most reliable evidence? Source of Evidence Effectiveness of Internal Control a. Internal More effective b. Internal Less effective c. External More effective d. External Less effective - CORRECT ANSWER C 52. Which of the following is most closely related to the relevance of audit evidence? a. Auditors decide to physically inspect investment securities held by a custodian instead of obtaining confirmations from the custodian. b. In addition to confirmations of accounts receivable, auditors perform an analysis of the aging of accounts receivable to evaluate the collectability of accounts receivable. c. In response to less effective internal control, auditors increase the number of customer accounts receivable confirmations mailed compared to that in the prior year. d. Because of a large number of transactions occurring near year-end, auditors decide to confirm a larger number of receivables following year-end instead of during the interim period. - CORRECT ANSWER B 53. Which of the following statements is not true with respect to the performance principle? a. Auditors are required to prepare a written audit plan during the planning stages of initial audits but are not required to do so in continuing audits. b. Audit teams consider materiality in planning the audit, performing the audit, and evaluating the effect of misstatements on the entity's financial statements. c. In assessing the risk of material misstatements, the audit team considers the effectiveness of the entity's internal controls in preventing and detecting misstatements. d. Auditors are required to consider both the relevance and the reliability of evidence in evaluating whether the evidence they have gathered is appropriate. - CORRECT ANSWER A 54. Which of the following is true with respect to PCAOB inspections of accounting firms? a. All firms performing audits of public companies are required to have annual inspections conducted by the PCAOB. b. PCAOB inspections review a sample of audits conducted by firms as well as the firm's systems of quality control. c. All results of PCAOB inspections are made available to the public following the inspection. d. Firms performing audits of 100 or fewer public entities may elect to have a peer review conducted through the AICPA in lieu of a PCAOB inspection. - CORRECT ANSWER B 55. The particular and specialized actions that auditors take to obtain evidence during a specific engagement are known as a. Audit procedures. b. Audit standards. c. Interpretive publications. d. Statements on Auditing Standards. - CORRECT ANSWER A 56. Which of the following combinations of standards and types of audits are most closely related to the activities of the Public Company Accounting Oversight Board? a. Develop Auditing Standards for the audits of nonpublic entities. b. Develop Auditing Standards for the audits of public entities. c. Develop Statements on Auditing Standards for the audits of nonpublic entities. d. Develop Statements on Auditing Standards for the audits of public entities. - CORRECT ANSWER B 57. Which of the following best describes the general contents of the introductory paragraph of the auditors' report? a. A description of an audit examination, including the fact that the audit was conducted under standards established by the PCAOB. b. The auditors' conclusion with respect to the fairness of the entity's financial statements. c. Statements identifying the responsibility of auditors and management in the financial reporting process. d. The auditors' conclusion with respect to the effectiveness of the entity's internal control over financial reporting. - CORRECT ANSWER C 58. Which of the following opinions would be issued if auditors believed that the entity's financial statements were not presented in conformity with GAAP? a. Adverse opinion. b. Disclaimer of opinion. c. Qualified opinion. d. Unmodified opinion. - CORRECT ANSWER A 59. Which of the following principles is most closely associated with the auditors' conclusion as to the fair presentation of the entity's financial statements? a. Communication principle. b. Performance principle. c. Reporting principle. d. Responsibilities principle. - CORRECT ANSWER C 60. When initiating communications with predecessor auditors, prospective auditors should expect a. To take responsibility for obtaining the client's consent for the predecessor to give information about prior audits. b. To conduct interviews with the partner and manager in charge of the predecessor public accounting firm's engagement. c. To obtain copies of some or all of the predecessor auditors' audit documentation. d. All of the above. - CORRECT ANSWER D 61. Generally accepted auditing standards require that auditors always prepare and use a. A written planning memorandum explaining the auditors' understanding of the client's business. b. A written client consent to discuss audit matters with prospective auditors. c. A written audit plan. d. The written time budgets and schedules for performing each audit. - CORRECT ANSWER C 62. When planning an audit, which of the following is not a factor that affects auditors' decisions about the quantity, type, and content of audit documentation? a. The auditors' need to document compliance with generally accepted auditing standards. b. The auditors' need to verify the existence of new sales contracts important for the client's business. c. The auditors' judgment about their independence with regard to the client. d. The auditors' judgments about materiality. - CORRECT ANSWER C 63. Audit documentation that shows the detailed evidence and procedures regarding the balance in the accumulated depreciation account for the year under audit will be found in the a. Current file audit documentation. b. Permanent file audit documentation. c. Administrative audit documentation in the current file. d. Planning memorandum in the current file. - CORRECT ANSWER A 64. An auditor's permanent file audit documentation most likely will contain a. Internal control analysis for the current year. b. The most recent engagement letter. c. Memoranda of conference with management. d. Excerpts of the corporate charter and bylaws. - CORRECT ANSWER D 65. Which of the following is not a benefit claimed for the practice of determining materiality in the initial planning stage of an audit? a. Being able to fine-tune the audit work for effectiveness and efficiency. b. Avoiding the problem of doing more work than necessary (overauditing). c. Being able to decide early what type of audit opinion to issue. d. Avoiding the problem of doing too little work (underauditing). - CORRECT ANSWER C 66. Spreadsheet software would be most useful for which of the following audit activities? a. Testing internal controls over computerized accounting applications. b. Preparing an audit plan. c. Preparing a comparison of current-year expenses with those from the previous year. d. Drafting a planning memorandum. - CORRECT ANSWER C 67. Which of the following is an advantage of computer-assisted audit techniques (CAATs)? a. All the CAATs programs are written in one computer language. b. The software can be used for audits of clients that use differing computer equipment and file formats. c. The use of CAATs has reduced the need for the auditor to study input controls for computer-related procedures. d. The use of CAATs can be substituted for a relatively large part of the required testing. - CORRECT ANSWER B 68. A primary advantage of using CAATs in the audit of an advanced computerized system is that it enables the auditor to a. Substantiate the accuracy of data through self-checking digits and hash totals. b. Utilize the speed and accuracy of the computer. c. Verify the performance of machine operations that leave visible evidence of occurrence. d. Gather and store large amounts of supportive audit evidence in machine-readable form. - CORRECT ANSWER B 69. An audit engagement letter should normally include which of the following matters of agreement between the auditor and the client? a. Schedules and analyses to be prepared by the client's employees. b. Methods of statistical sampling the auditor will use. c. Specification of litigation in progress against the client. d. Client representations about availability of all minutes of meetings of the board of directors. - CORRECT ANSWER A 70. When auditing Vandalay Jewelry, Costanza, CPA, was not familiar with the quality and cut of the company's precious jewel inventory. To address this shortcoming, Costanza hired Benes, an expert in jewel valuation, to assist as an audit specialist for the inventory valuation. Should Costanza refer to Benes's work in the audit report? a. Yes, the auditors' report should mention the fact that an audit specialist was used. b. The auditors' report should mention the use of the audit specialist only when the audit specialist's findings affect the auditors' conclusions. c. The use of an audit specialist need not be mentioned if the auditors decide not to take responsibility for the audit specialist's findings. d. The auditors' report should mention the audit specialist only if Vandalay agrees with the audit specialist's findings. - CORRECT ANSWER B 71. Which of the following engagement planning procedures would most likely assist the auditor in identifying related-party transactions before the balance-sheet date? a. Interviewing internal auditors about their reporting responsibilities. b. Reviewing accounting records for recurring transactions occurring near year-end. c. Inspecting communications with the client's legal counsel regarding recorded contingent liabilities. d. Scanning the minutes for significant transactions with members of the board of directors. - CORRECT ANSWER D 72. Which of the following communications is most likely to be written before the balance-sheet date? a. A report to the audit committee on the results of testing of internal control over cash receipts. b. Confirmation letters to vendors confirming the amounts they owe to the client. c. An attorney's letter regarding contingent liabilities. d. An engagement letter. - CORRECT ANSWER D 73. Which of the following procedures would most likely be performed during planning? a. Surprise counting of the client's petty cash fund. b. Reporting internal control deficiencies to the audit committee. c. Performing a search for unrecorded liabilities. d. Identifying related parties. - CORRECT ANSWER D 74. Prior to accepting a new audit engagement, a public accounting firm should a. Attempt to contact the predecessor auditors. b. Evaluate the integrity of management. c. Assess the firm's resources to ensure that they are sufficient to permit the firm to accept the engagement. d. All of the above. - CORRECT ANSWER D 75. An audit plan contains a. Specifications of audit standards relevant to the financial statements being audited. b. Specifications of procedures the auditors believe appropriate for the financial statements under audit. c. Documentation of the assertions under audit, the evidence obtained, and the conclusions reached. d. Reconciliation of the account balances in the financial statements with the account balances in the client's general ledger. - CORRECT ANSWER B 76. The revenue cycle of a company generally includes which accounts? a. Inventory, accounts payable, and general expenses. b. Inventory, general expenses, and payroll. c. Cash, accounts receivable, and sales. d. Cash, notes payable, and capital stock. - CORRECT ANSWER C 77. When auditing the existence assertion for an asset, auditors proceed from the a. Financial statement amounts back to the potentially unrecorded items. b. Potentially unrecorded items forward to the financial statement amounts. c. General ledger back to the supporting original transaction documents. d. Supporting original transaction documents to the general ledger. - CORRECT ANSWER C 78. Confirmations of accounts receivable provide evidence primarily about which two assertions? a. Completeness and valuation. b. Valuation and rights and obligations. c. Existence and rights and obligations. d. Existence and completeness. - CORRECT ANSWER C 79. With respect to the concept of materiality, which of the following statements is correct? a. Materiality depends only on the dollar amount of an item relative to other items in the financial statements. b. Materiality depends on the nature of a transaction rather than the dollar amount of the transaction. c. Materiality is determined by reference to AICPA guidelines. d. Materiality is a matter of professional judgment. - CORRECT ANSWER D 80. When evaluating whether accounting estimates made by management are reasonable, the audit team would be most interested in which of the following? a. Key factors that are consistent with prior periods. b. Assumptions that are similar to industry guidelines. c. Measurements that are objective and not susceptible to bias. d. Evidence of a conservative systematic bias. - CORRECT ANSWER D 81. Which of the following would be considered an analytical procedure? a. Testing purchasing, shipping, and receiving cutoff activities. b. Comparing inventory balances to recent sales activities. c. Projecting the deviation rate of a statistical sample to the population. d. Reconciling physical counts to perpetual records and general ledger balances. - CORRECT ANSWER B 82. Which of the following procedures would a CPA most likely perform in planning a financial statement audit? a. Make inquiries of the client's lawyer concerning pending litigation. b. Perform cutoff tests of cash receipts and disbursements. c. Compare financial information with nonfinancial operating data. d. Recalculate the prior-years' accruals and deferrals. - CORRECT ANSWER C 83. Which of the following statements is correct concerning analytical procedures used in planning an audit engagement? a. They often replace the tests of controls that are performed to assess control risk. b. They typically use financial and nonfinancial data aggregated at a high level. c. They usually involve the comparison of assertions developed by management to ratios calculated by an auditor. d. They are often used to develop an auditor's preliminary judgment about materiality. - CORRECT ANSWER B 84. The company being audited has an internal auditor who is both competent and objective. The independent auditor wants to assign tasks for the internal auditor to perform. Under these circumstances, the independent auditor may a. Allow the internal auditor to perform certain tests of internal controls. b. Allow the internal auditor to audit a major subsidiary of the company. c. Not assign any task to the internal auditor because of the internal auditor's lack of independence. d. Allow the internal auditor to perform analytical procedures but not be involved with any tests of details. - CORRECT ANSWER A 85. Which of the following conditions most likely would pose the greatest risk in accepting a new audit engagement? a. Staff will need to be rescheduled to cover this new client. b. There will be a client-imposed scope limitation. c. The firm will have to hire a specialist in one audit area. d. The client's financial reporting system has been in place for 10 years. - CORRECT ANSWER B 86. Auditors are interested in having independence in appearance because a. They want to impress the public with their independence in fact. b. They want the public at large to have confidence in the profession. c. They need to comply with the fundamental principles of GAAS. d. Audits should be planned and properly supervised. - CORRECT ANSWER B 87. Under Sarbanes-Oxley and PCAOB rules, ensuring that the auditor is independent in appearance is the responsibility of a. The public accounting firm. b. Senior management. c. The audit committee. d. The PCAOB. - CORRECT ANSWER C 88. If a public accounting firm says it always follows the rule that requires adherence to FASB pronouncements in order to give a standard unmodified auditors' report, it is following a philosophy characterized by a. The imperative principle. b. The utilitarian principle. c. Virtue ethics. d. Reliance on members' collective conscience. - CORRECT ANSWER A 89. Which of the following agencies issues independence rules for the auditors of public companies? a. Financial Accounting Standards Board (FASB). b. Government Accountability Office (GAO). c. Public Company Accounting Oversight Board (PCAOB) d. AICPA Accounting and Review Services Committee (ARSC). - CORRECT ANSWER C 90. Audit independence in fact is most clearly lost when a. A public accounting firm audits competitor companies in the same industry (e.g., Coca-Cola and Pepsi). b. An auditor agrees to the argument made by the client's financial vice president that deferring losses on debt refinancing is in accordance with generally accepted accounting principles. c. An audit team fails to discover the client's misleading omission of disclosure about permanent impairment of asset values. d. A public accounting firm issues a standard unmodified report, but the reviewing partner fails to notice that the assistant's observation of inventory was woefully incomplete. - CORRECT ANSWER B 91. The audit committee's responsibility for auditor independence concerns a. Ensuring that partners of the public accounting firm are not stockholders in the company. b. Ensuring that nonaudit services provided by the auditor do not impair independence. c. Reporting on auditor independence to the PCAOB. d. Ensuring that all nonaudit services are provided by auditors who do not perform the financial statement audit. - CORRECT ANSWER B 92. AICPA members who work in industry and government must always uphold which two of the following AICPA rules of conduct? a. The Independence Rule. b. The Integrity and Objectivity Rule. c. The Confidential Client Information Rule. d. The Acts Discreditable Rule. - CORRECT ANSWER B & D 93. A public accounting firm's independence is not impaired when members of the audit engagement team does which of the following for a public company audit client? a. Prepares special purchase orders for active plutonium in secure national defense installations. b. Completes operational internal audit assignments under the directions of the client's director of internal auditing. c. Prepares outsourced internal audit work on the client's financial accounting control monitoring. d. Prepares actuarial assumptions used by the client's actuaries for life insurance actuarial liability determination. e. All of the above would impair the public accounting firm's independence. - CORRECT ANSWER B 94. When a public accounting firm audits FUND-A in a mutual fund complex that has sister funds FUND-B and FUND-C, independence for the audit of FUND-A is not impaired when a. Managerial-level professionals located in the office where the engagement audit partner is located but who are not on the engagement team own shares in FUND-B, which is not an audit client. b. The wife of the FUND-A audit engagement partner owns shares in FUND-C (an audit client of another of the firm's offices), and these shares are held through the wife's employee benefit plan funded by her employer, the AllSteelFence Company. c. Both (a) and (b). d. Neither (a) nor (b). - CORRECT ANSWER C 95. Which of the following is considered a close relative (but not an immediate family member) as defined by the AICPA? a. Spouse. b. Spousal equivalent. c. Parent. d. Uncle. - CORRECT ANSWER C 96. Which of the following is true if an auditor performs nonaudit services for a government entity? a. The scope of the audit must be reduced so that the auditor does not audit the area for which the nonaudit work was performed. b. The auditor is prohibited from providing nonaudit work in areas directly related to the production of accounting information. c. The senior members of the government entity must document their review of the nonaudit service and indicate why it is appropriate for the auditors to perform this service. d. The scope of the audit cannot be reduced because the nonaudit work was performed by the public accounting firm. - CORRECT ANSWER D 97. Which of the following is true? a. Members of an audit engagement team cannot speak with audit client officers about matters outside the scope of the audit while the audit engagement is in progress. b. Audit team members who leave the public accounting firm for employment with audit clients can provide audit efficiencies (next year) because they are very familiar with the firm's audit plans. c. Audit team partners who leave the public accounting firm for employment with audit clients can retain variable annuity retirement accounts established in the person's former firm retirement plan. d. The public accounting firm must discuss with the audit client's board or its audit committee the independence implications of the client's having hired the audit engagement team manager as its financial vice president. - CORRECT ANSWER D 98. Which of the following "bodies designated by Council" have been authorized to promulgate general standards enforceable under the General Standards Rule of the AICPA Code of Professional Conduct? a. AICPA Division of Professional Ethics. b. Financial Accounting Standards Board. c. Government Accounting Standards Board. d. Accounting and Review Services Committee. - CORRECT ANSWER D 99. Which of the following "bodies designated by Council" have been authorized to promulgate accounting principles enforceable under the Accounting Principles Rule of the AICPA Code of Professional Conduct? a. Auditing Standards Board. b. Federal Accounting Standards Advisory Board. c. Consulting Services Executive Committee. d. Accounting and Review Services Committee. - CORRECT ANSWER B 100. Phil Greb has a thriving practice in which he assists attorneys in preparing litigation dealing with accounting and auditing matters. He is "practicing public accounting" if he a. Uses his CPA designation on his letterhead and business card. b. Is in partnership with another CPA. c. Practices in a professional corporation with other CPAs. d. Never lets his clients know that he is a CPA. - CORRECT ANSWER A 101. The AICPA removed its general prohibition of CPAs taking commissions and contingent fees because a. CPAs prefer more price competition to less. b. Commissions and contingent fees enhance audit independence. c. Nothing is inherently wrong about the form of fees charged to nonaudit clients. d. Objectivity is not always necessary in accounting and auditing services. - CORRECT ANSWER C 102. CPA Kara Rambo is the auditor of Ajax Corporation. Her audit independence will not be considered impaired if she a. Owns $1,000 worth of Ajax stock. b. Has a husband who owns $1,000 worth of Ajax stock. c. Has a sister who is the financial vice president of Ajax. d. Owns $1,000 worth of the stock of Pericles Corporation, which is controlled by Ajax as a result of Ajax's ownership of 40 percent of Pericles' stock, and Pericles contributes 3 percent of its total assets and income in Ajax's financial statements. - CORRECT ANSWER D 103. When a client's financial statements contain a material departure from an FASB Statement on Accounting Standards and the public accounting firm believes the departure is necessary to ensure that the statements are not misleading, a. The public accounting firm must qualify the auditors' report for a departure from GAAP. b. The public accounting firm can explain why the departure is necessary and then give an unmodified opinion paragraph in the auditors' report. c. The public accounting firm must give an adverse auditors' report. d. The public accounting firm can give the standard unmodified auditors' report with an unmodified opinion paragraph. - CORRECT ANSWER B 104. Which of the following would not be considered confidential information obtained in the course of an engagement for which the client's consent would be needed for disclosure? a. Information about whether a consulting client has paid the CPA's fees on time. b. The actuarial assumptions used by a tax client in calculating pension expense. c. Management's strategic plan for next year's labor negotiations. d. Information about material contingent liabilities relevant for audited financial statements. - CORRECT ANSWER D 105. Which of the following would probably not be considered an "act discreditable to the profession"? a. Numerous moving traffic violations. b. Failing to file the CPA's own tax return. c. Filing a fraudulent tax return for a client in a severe financial difficulty. d. Refusing to hire Asian Americans in an accounting practice. - CORRECT ANSWER A 106. According to the AICPA Code of Conduct, which of the following acts is generally forbidden to CPAs in public practice? a. Purchasing bookkeeping software from a high-tech development company and reselling it to tax clients. b. Being the author of a "TaxAid" newsletter promoted and sold by a publishing company. c. Having a commission arrangement with an accounting software developer to receive 4 percent of the price of programs recommended and sold to audit clients. d. Engaging a marketing firm to obtain new financial planning clients for a fixed fee of $1,000 for each successful contact. - CORRECT ANSWER C 107. A CPA's legal license to practice public accounting can be revoked by the a. American Institute of Certified Public Accountants. b. State society of CPAs. c. Auditing Standard Board. d. State board of accountancy. - CORRECT ANSWER D 108. According to the Acts Discreditable Rule for accountants in public practice, which of the following is not a "discreditable act"? a. Withholding a client's sales records. b. Failing to file or remit tax payments. c. Failing to follow requirements of the PCAOB during the audit of an SEC client. d. Advertising that indicated the firm can reduce IRS penalties. - CORRECT ANSWER D 109. An auditor's independence would not be considered impaired if she or he had a. Owned common stock of the audit client but sold it before the company became a client. b. Sold short the common stock of an audit client while working on the audit engagement. c. Served as the company's treasurer for six months during the year covered by the audit but resigned before the company became a client. d. Performed the bookkeeping and financial statement preparation for the company, which had no accounting personnel and for which the president had no understanding of accounting principles. - CORRECT ANSWER A 110. When a CPA knows that a tax client has skimmed cash receipts and not reported the income in the federal income tax return but signs the return as a CPA who prepared the return, the CPA has violated which of the following AICPA rules of conduct? a. The Confidential Client Information Rule. b. The Integrity and Objectivity Rule. c. The Independence Rule. d. The Accounting Principles Rule. - CORRECT ANSWER B 111. An accountant recommends a local computer company to a client that is trying to upgrade its computerized sales records. The client purchases $25,000 worth of equipment and sends a check to the accountant for 5 percent of the total sales. This is an example of a a. Commission. b. Contingent fee. c. Referral fee. d. Nonaudit fee. - CORRECT ANSWER A 112. Which of the following ownership situations is permissible for a public accounting firm? a. A partner of the firm is responsible for fraud issues related to audits and audit clients. He owns 20 percent of the firm and is not a CPA. b. Because the firm now specializes in fraud auditing and fraud investigation, the managing partner of the firm has a background in law enforcement and fraud investigation but is not a CPA. c. A partner of the firm who owns 50 shares of stock in an audit client of the firm is responsible for fraud issues related to audits and audit clients. d. A partner of the firm who has 20 years of experience in law enforcement and fraud investigation is responsible for fraud issues related to audits and audit clients. The partner's career began as a police officer after receiving a law enforcement degree from a local community college. - CORRECT ANSWER A assurance demand and supply - CORRECT ANSWER Market Game: Debriefing When both sellers and buyers know quality and price in advance, did market forces move toward socially suboptimal or optimal levels of production for different quality levels? • When both sellers and buyers know quality and price in advance, did society move toward the highest quality grade or was it better off if a grade other than highest quality is traded? • What happened when buyers did not know quality in advance? • Were they more reluctant to engage in trade? • Did any seller try to establish a reputation for credible signaling about quality (by having fair prices)? If so, were you rewarded? - CORRECT ANSWER market game: debriefing part 2 The lower number of trades that do occur typically will include some buyers getting "ripped off" because of their trust of the seller to not sell lower quality products at prices typically associated with higher quality products. • When reputations cannot be established, did sellers who want to provide honest combinations of price for quality produced or did they pull out of the market fearing that buyers will have big doubts about quality? • Was it the case that the only sellers who hang around are those who want to rip off buyers? If so, did you observe that buyers realize this threat and so do not trade (Lemons Market)? • Sellers willing to sell low quality products at low prices stuck around too & buyers were willing to trade with them. - CORRECT ANSWER Market Game: Debriefing pt 3 What happened when we had an independent verifier that could verify quality for a fee? • How much should sellers and/or buyers be willing to pay for the verifier? • Who would be most likely to pay the verifier? • Does the market demand the highest level of financial reporting quality? Why or why not? • Do you think public companies could develop a reputation for accurate or fair reporting to an extent that the market no longer demands an audit? - CORRECT ANSWER what is accounting - CORRECT ANSWER Process of identifying, recording, updating summarizing, and reporting information regarding economic states and events what do accountants do - CORRECT ANSWER We identify, name, record, classify, and report the interactions that occur between individuals and groups of individuals as they engage in the production, distribution, and consumption of goods and services. What kinds of Accounting are you aware of? 6 - CORRECT ANSWER • Managerial • Financial • Tax • Auditors • Internal Auditors • Forensic Accountants accounting vs auditing - CORRECT ANSWER The study of auditing is different from other accounting courses that you have taken in college because ... other courses involve Rules, techniques and computations to prepare and analyze financial information while auditing involves: Analytical and logical skills Much more conceptual in nature public company define managers vs stockholders with principal agent problem - CORRECT ANSWER is a company that sells its stocks or bonds to the public, giving the public a valid interest in the proper use of the company' s resources. managers=agents stockholders=principals asymmetric information with principal agent problem - CORRECT ANSWER agent acts in own self interest when perfroming, principle acts in self interest when hiring, agent impacts principal What Do We Learn from Looking at Financial Statements of an Organization? 1 and 7 (which is most important?) - CORRECT ANSWER Information useful for decision-making ie • Profitability • Liquidity • Leverage/Risk • Cost structure • Value • Information for predicting future cash flows ** • Information for evaluating stewardship what do financial statements represent? - CORRECT ANSWER Financial statements represent management's report to the current and potential owners (stockholders) regarding how well management has managed the owners' assets Information Risk 3 leads to demand for.. - CORRECT ANSWER The likelihood that information is not fairly stated (is false or misleading) • It contains some sort of misstatement or misrepresentation • Either due to error or fraud. • Leads to demand for... auditing?? principal agent with auditor what does info assymetry result in what does principal vs agent do - CORRECT ANSWER principal owner, agent manager info asymmetry and conflicts of interest -- info risk for the principal agent accountable to principal, provides financial reports pricnipal provides capital and hires agent to manage resources agent hires auditor to report on the fairness of agent's financial reports. agent pays auditor to reduce principal's information risk auditor gathers evidence to evaluate fairness of agent's financial reports. auditor issues audit opinon to acocmpnay agent's ifnancial reports, adding credibility to reports and reducing principals info risk Chain of Events Initial problem is Moral Hazard explain result is act in... how battle this? - CORRECT ANSWER Lack of incentive to avoid risk when one is protected from its consequence • e.g., Treasury department let Lehman brothers fail • It is not the CEO's resources that he or she is investing • Acting in self interest • Conflict of Interest • Occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other use accounting to battle this but problem with accounting ?? chain of events starting with principal/agent relationship (6 total) - CORRECT ANSWER principal/agent relationship -- moral hazard problem (includes information asymmetry and potentially conflicting interest) -- demand for accounting -- informaiton risk -- demand for assurance -- demand for auditing ASSURANCE DEMAND & SUPPLY (CONT.) AND THE AUDIT LANDSCAPE - CORRECT ANSWER Why would a company purchase an audit if not required by regulation? 2 , 3 under first 1 under second - CORRECT ANSWER 1.Lower Cost of Capital • Less Discounting by Equity Investors • Lower Interest Rates from Lenders • More Sources of Capital • Some Investors/Lenders are so risk averse that no risk premium is high enough to make an investment without an audit • 2.Monitor CFO and Accounting Department • Fraud, Errors audit hypotheses - wanda wallace 3 - CORRECT ANSWER Stewardship/Monitoring Hypothesis • Information Hypothesis • Insurance Hypothesis What is Auditing? types of audits 6 - CORRECT ANSWER Process of investigating something to ascertain whether it is as it should be • Types of audits • IRS Audit • Compliance Audit • Operational Audit • Fraud Audit • Financial Statement Audit • Internal Control Audit Financial Statement Audit - purpose - CORRECT ANSWER Our focus • Purpose • Process of investigating an organization's financial statements to ascertain whether they are • Fairly stated • In accordance with GAAP What Does Financial Statement Auditing Involve? 7 - CORRECT ANSWER • Understanding financial statements and accounting systems • Understanding accounting principles and accounting standards • Understanding economics and organizations • Understanding internal controls and corporate governance • Understanding misstatement risk and red flags • Understanding materiality • Understanding evidence • What does it mean? • What does it show? What Does Financial Statement Auditing Involve? 8 - CORRECT ANSWER Working with people • Thinking creatively • Practicing skepticism • Using professional judgment • Maintaining objectivity and integrity • Being professional • Dealing with ambiguity Why Study Auditing? - CORRECT ANSWER One perspective on the role of assurance professionals in financial reporting: Substantively, auditors are centrally implicated in the social production of trust in financial markets. Auditors give comfort to people who are vulnerable to erroneous, self-interested, and possibly fraudulent financial statements from corporate management what is auditing more specifically) of what kind of process it is, what doing and of what, goal, what do once gather - CORRECT ANSWER A systematic process • of objectively obtaining and evaluating evidence • regarding assertions about economic actions and events • to ascertain the degree of correspondence between those assertions • and established criteria • and communicating the results to interested users. What is Attestation? define and 2 - CORRECT ANSWER Attest services occur when a practitioner is engaged to issue a report on subject matter, or an assertion about subject matter, that is the responsibility of another party. • The audit of financial statements is a form of attestation. • Not limited to economic events or actions What is Assurance? - CORRECT ANSWER Independent professional services that improve the quality of information, or its context, for decision makers. • What is meant by quality? • What is meant by context? • The approach, concepts, methods that are used for audits generally apply to other attest and assurance engagements assurance universe see slide - CORRECT ANSWER f/s audits smallest circle, attestation circle aroudn it, assurance circle around that, intersecting with consulting and tax Ideal Auditor Characteristics Who would you want to perform this role if you are the investor? - CORRECT ANSWER knowledge +indepedence ^reflection of their reputation How do we maintain reputation? - CORRECT ANSWER AICPA knowledge thru degree in accounting, cpa exam, experience, cpe indepdence through code of professional conduct and indepedence standards see slide 25 slides class 3- figure 21-1 relationshpi bw assurance services attest and audit - CORRECT ANSWER basically audiiting smallest bubble, attest surrounding it, assurance surrounding that types of attest engagements 3 most significant? - CORRECT ANSWER examination review * agreed-upon procedures the three party relationship in an attest engagement - CORRECT ANSWER user, responsible party, cpa cpa expresses conclusion to user on subject matter or assertion responsible party responsible for the subject matter or assertion to the user responsible party acknowledges repsonsibility fo rthe subject matter or assertion to the cpa review procedures in comparison to an audit 3 what does it not entail 4 waht kind of assurance does it provide - CORRECT ANSWER Very Limited as Compared to an Audit 1. Analytical Procedures 2. Inquiries 3. Obtain Representations from Management • Does Not Entail • Tests of Accounting Records Through Inspection, Observation, or Confirmation • Tests of Controls to Evaluate Their Effectiveness • Obtaining Corroborating Evidence In Response to Inquiries • Performing Certain Other Procedures Ordinarily Performed in an Audit • Provides Negative Assurance • Nothing Has Come to the Accountants Attention of an Adverse Nature or Character Regarding the Financial Data Reviewed compilation 4 - CORRECT ANSWER • Random (No) assurance • Read financial statements to ensure they are free from obvious errors (mathematical errors or inappropriate application of accounting principles) • No testing • Use records to put together FS assurance contiuum 4 above and below line left to right - CORRECT ANSWER above compilation -- review -- audit --guarentee below line random/no assurance -- negative assurance -- positive assurance -- absolute assurance what is reasonable assurances? - CORRECT ANSWER why can't auditor provide absolute assurance? 5 - CORRECT ANSWER • Judgment • "on a test basis" • Inherent limitations of IC • Estimates • Evidence is persuasive, not conclusive ethics, independence, professionalism - CORRECT ANSWER Context of Financial Statement Auditing - CORRECT ANSWER The primary context with which an auditor is concerned is the industry or business of his or her auditee. In other words, the context provided by the entity's business impacts the auditor and the audit, and is thus a primary component of the environment in which financial statement auditing is conducted. Example: How would your concerns about operating expenses differ for Wal-Mart versus Facebook? Business organizations exist to... due to way resources are invested in modern business world... - CORRECT ANSWER Business organizations exist to create value for their stakeholders. Due to the way resources are invested and managed in the modern business world, a system of corporate governance is necessary, through which managers are overseen and supervised. audit committee inner circle board of directors larger circle surrounding it • Management, with the guidance of the BOD, decides on 2 teh organization then undertakes certain 1 AID systems capture details of 3 - CORRECT ANSWER Management, with the guidance of the BOD, decides on OBJECTIVES along with STRATEGIES to achieve those objectives. The organization then undertakes certain PROCESSES in order to implement its strategies. AIS systems capture the details of TRANSACTIONS and designs INTERNAL CONTROLS to ensure transactions are handled, recorded, and REPORTED appropriately. a model of business - CORRECT ANSWER objectives -- strategies -- processes (5 broad categories) on side: transactions, controls, reports A Model of Business Processes: Five Components - CORRECT ANSWER financing process purchasing process human resource management process inventory mgt process revenue process ethics - CORRECT ANSWER Ethics refers to a system or code of conduct based on moral duties and obligations that indicate how we should behave. professionalism - CORRECT ANSWER Professionalism refers to the conduct, aims, or qualities that characterize a profession or professional person. All professions operate under some type of code of ethics or code of conduct. audit ocmittee - CORRECT ANSWER from notes audit ocmmittee is a part of the board of directors - must be only indepedent commite/members What does it mean to be a member of a profession? 5 - CORRECT ANSWER Highly trained • Responsibility to the public • Integrity (Independence) • Code of conduct • Judgment Profession - CORRECT ANSWER An occupation founded upon specialized educational training, the purpose of which is to supply disinterested objective counsel and service to others, for a direct and definite compensation, wholly apart from expectation of other business gain. from notes profession is not an occupation, profession has barriers to entry ie education, certification, training -responsibliity to public ie lawyers, doctors,accountants. must use judgement* What is one difference between the auditing profession and others? - CORRECT ANSWER Regulation auditors insanely regulated compared to other professions Necessary Auditor Characteristics • Let us ask this again . . . • Who would you want to perform this role if you are the investor? - CORRECT ANSWER insider trading ie bw herbalife and sketchers - CORRECT ANSWER Shared information on Herbalife and Skechers • Firm earned $3.9 million in audit fees for 2012 and $3.8 million according to the filing for Herbalife • Firm earned $1.7 million in 2011 for Skechers • Friend gave him $50,000 for the tips (London made $900,000/year) • FBI identified abnormal trading patterns by friend • Friend cooperated by recording conversations with London What happened to KPMG? ie with mr london - CORRECT ANSWER KPMG clients intended to sue KPMG because their information was conveyed by Mr. London to Mr. Shaw. • Return audit fees, amounting to tens of millions of dollars • Liable for other damages if the courts determine that the firm was in any way derelict in monitoring and supervising Mr. London, who was in charge of some 50 audit partners and 500 employees Result with scott london ie prison? - CORRECT ANSWER At 51 years old, Scott London should be at the top of his professional career as the audit partner at the Los Angeles office of Big 4 accounting firm KPMG. • Instead, he had to serve a 14-month federal prison sentence after pleading guilty last year to passing inside information from companies he once audited Why did he do it- Interview in Forbes - CORRECT ANSWER "I knew the rules and followed them for 26 years. I take full responsibility for