Ch 1 - Quiz Flashcards
Which of the following is not a primary responsibility of an auditor:
A.) Provide investors with an opinion by the auditor on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
B.) Provide creditors with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
C.) Provide regulators with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
D.) Provide management with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
D.) Provide management with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
The auditor’s primary role is to provide an impartial (independent) report on the reliability of management’s financial statements. These financial statements are distributed to interested parties outside of the reporting entity itself, such as actual or potential shareholders and creditors, major customers and suppliers, employees, regulators, and others for their decision-making (resource allocation) needs. Management prepares the financial statements and represents that they are in fact fairly presented while the auditor is auditing such representations.
Generally accepted auditing standards are
A.) Policies and procedures designed to provide reasonable assurance that the CPA firm and its personnel comply with professional standards.
B.) Rules acknowledged by the accounting profession because of their universal application.
C.) Required procedures to be used to gather evidence to support financial statements.
D.) Pronouncements issued by the Auditing Standards Board.
D.) Pronouncements issued by the Auditing Standards Board.
Generally accepted auditing standards are defined as the Statements on Auditing Standards issued by the Auditing Standards Board.
An attestation engagement is one in which a CPA is engaged to
A.) Provide tax advice or prepare a tax return based on financial information the CPA has not audited or reviewed.
B.) Assemble pro forma financial statements based on the representations of the entity’s management without expressing any assurance.
C.) Testify as an expert witness in accounting, auditing, or tax matters, given certain stipulated facts.
D.) Issue a written communication expressing a conclusion about the reliability of a written assertion that is the responsibility of another party.
D.) Issue a written communication expressing a conclusion about the reliability of a written assertion that is the responsibility of another party.
An attestation engagement is one in which the practitioner is engaged to issue an examination, a review, or an agreed-upon procedures report on subject matter or an assertion about subject matter that is the responsibility of another party.
Under the Sarbanes-Oxley Act of 2002, which of the following is not a stated responsibility of the Public Company Accounting Oversight Board?
A.) Overseeing the registration of public accounting firms.
B.) Issuing accounting standards that must be followed by issuers in financial reporting.
C.) Conducting inspections of registered public accounting firms.
D.) Issuing auditing standards that must be followed by registered public accounting firms in auditing the financial statements of issuers.
B.) Issuing accounting standards that must be followed by issuers in financial reporting.
The PCAOB is a standard-setting body for certain matters related to registered public accounting firms (including auditing and quality control, among other matters). However, the PCAOB is not an accounting standard-setting body and does not promulgate GAAP affecting the financial statements of issuers.
The organization charged with protecting investors and the public by requiring full disclosure of financial information by companies offering securities to the public is the:
A.) Financial Accounting Standards Board.
B.) Securities and Exchange Commission.
C.) Government Accounting Standards Board.
D.) Auditing Standards Board.
B.) Securities and Exchange Commission.
This answer is correct because the Securities and Exchange Commission is the organization charged with protecting investors and the public by requiring full disclosure of financial information by companies offering securities to the public in the United States.
The Public Company Accounting Oversight Board (PCAOB) has authority to establish which of the following relating to public companies?
Attestation standards, Independence standards
A.) No Yes
B.) Yes Yes
C.) Yes No
D.) No No
B.) Yes Yes
This answer is correct because the PCAOB may establish attestation standards, independence standards, auditing standards, and quality control standards.
A financial statement audit report issued for a public company states that the audit was performed in accordance with which of the following standards?
A.) Public Company Accounting Oversight Board standards.
B.) Securities and Exchange Commission standards.
C.) Sarbanes-Oxley standards.
D.) Generally accepted auditing standards.
A.) Public Company Accounting Oversight Board standards.
This answer is correct because PCAOB standards requires that the audit report indicate that the audit was performed in accordance with standards of the Public Company Accounting Oversight Board (United States).
The independent auditor’s plan for an examination in accordance with generally accepted auditing standards is influenced by the possibility of material misstatements. The auditor will therefore conduct the examination with an attitude of
A.) Objective indifference.
B.) Professional skepticism.
C.) Subjective mistrust.
D.) Professional responsiveness.
B.) Professional skepticism.
This answer is correct because the auditor should plan and perform the audit with an attitude of professional skepticism, recognizing that the application of auditing procedures may produce evidential matter indicating the possibility of errors or fraud.
An independent auditor must have which of the following?
A.) A background in many different disciplines.
B.) Technical training that is adequate to meet the requirements of a professional.
C.) Experience in taxation that is sufficient to comply with generally accepted auditing standards.
D.) A pre-existing and well-informed point of view with respect to the audit.
B.) Technical training that is adequate to meet the requirements of a professional.
GAAS requires auditors to have adequate technical training and proficiency in auditing.
Which of the following underlies the application of generally accepted auditing standards, particularly the standards for obtaining sufficient appropriate audit evidence?
A.) The element of absolute assurance.
B.) The element of “cooperative evidence.”
C.) The element of internal control over compliance with laws and regulations.
D.) The elements of materiality and audit risk.
D.) The elements of materiality and audit risk.
This answer is correct because the elements of materiality and audit risk underlie the application of generally accepted auditing standards.
Which of the following is not a characteristic of an assurance service?
A.) The service lends credibility to information.
B.) The service is useful for decision makers.
C.) The subject matter is limited to financial information.
D.) The engagement is conducted by an independent professional.
C.) The subject matter is limited to financial information.
An assurance service that determines whether the entity has conformed with regulations, rules or processes is a (an):
A.) financial statement audit.
B.) operational audit.
C.) internal audit.
D.) compliance audit.
D.) compliance audit.
The function of internal audit is determined by:
A.) the IIA.
B.) the government.
C.) the external auditor.
D.) those charged with governance and management.
D.) those charged with governance and management.
Management is responsible for which of the following?
A.) Designing, implementing, and maintaining internal control relevant to the preparation of the financial statements.
B.) Issuing an opinion on whether the financial statements are presented fairly in accordance with the appropriate financial reporting framework.
C.) Preparing financial statements in accordance with the appropriate auditing standards.
D.) Using professional skepticism in the preparation of the financial statements.
A.) Designing, implementing, and maintaining internal control relevant to the preparation of the financial statements.
Which of the following organizations issues auditing standards for the audits of public companies?
A.) PCAOB.
B.) COSO.
C.) ASB.
D.) SEC.
A.) PCAOB.
