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Flashcards in Chapter 1 Deck (51):
1

Define what an attestation service does

Provides assurance towards reliability

2

Attestation services are ____ services

Assurance services

3

What is a compliance audit?

Audit in which verifiable data is checked against recognized criteria/standards for compliance.

IRS of income tax return
FDIC audit of banks
Federal government audits of departments and nonprofits

4

CPA's must be independent for any ____ (assurance/nonassurance) service

Assurance

5

List out some assurance services

- Audits of financial Statements
- Examinations of Internal Control
- Trust Services (WebTrust)

6

List out some nonassurance services

Bookkeeping
Fraud Investigations
Information Technology Consultiny

7

What is an operational audit?

A specific unit of an organization studied for its performance

8

Are internal auditors independent?

No, even though they are employed by companies

9

Which entity sets standards of financial accounting for state and local government entities?

GASB

10

Describe a general partnership

Entity is same as multiple owners (same as proprietorship but multiple partners)

11

Which entity is considered the Comptrollers of Congress?

GAO - Government Accountability Office

12

Which body Sets GAAP for entities other than federal, state, and local governments?

FASB

13

Describe a proprietorship

Same entity as owner (no indpencdence or limited liability)

14

The ASB's Statements on Auditing Standards (SASs) apply to (public/nonpublic) _______ companies

nonpublic. PCAOB is for public

15

Which entity sets accounting standards for the federal government agencies?

FASAB

16

What is a professional corporation?

Service firm with shareholder owners, limited liability by state

17

What is a limited liability Coompany?

Structured like a partnership, but limited liability like a general corporation (considered best of both worlds)

18

Which type of corporation is typically prohibited for CPA firms?

General corporation

19

Explain a limited liability partnership.

Structured like a general partnership, limited liability less than a general corporation: people are personally liable for their obligations, own acts, negligent acts of other partners, and acts under supervision

20

Which type of audit and what type of auditor? - Evaluate the policies and procedures of the Food and Drug Administration in terms of bringing new drugs to market

Operational - Government

21

Who is considered the head of Government Auditors?

Auditor General

22

Which type of audit and what type of auditor? - Determine the fair presentation of Ajax Chemical’s balance sheet, income statement, and statement of cash flows

Financial Statement - External

23

Which type of audit and what type of auditor? - Investigate the possibility of payroll fraud in a labor union pension fund.

Compliance/Forensic - Government, external, or forensic

24

Are external auditors required to be public accountants?

Yes

25

Government auditors typically perform which types of audits?

Compliance, operational, and financia;

26

Which type of audit and what type of auditor? -
Examine the financial records of a division of a corporation to determine if any accounting irregularities have occurred.

Forensic - Internal/External/Forensic

27

Which type of audit and what type of auditor? -
Evaluate the feasibility of forecasted rental income for a planned low income public housing project

Operational - Government, external, or Internal

28

Which type of audit and what type of auditor? - Evaluate a company’s computer services department in terms of the efficient and effective use of corporate resources.

operational - Internal or External

29

Which type of audit and what type of auditor? -
Audit the partnership tax return of a real estate development company.

Compliance - Government

30

Which group was created to oversee and discipline CPAs and public accounting firms that audit public companies?

PCAOB

31

SASs typically adress

Generally accepted auditing standards

32

What kind of audits do internal auditors typically do?

Operational Audits

33

What is the main goal of the SEC in regards to the public?

Protection of investors

34

All attest functions must be ___ (dependent/independent)

Independent

35

A registration statement containing audited financial statements generally must be filed with the SEC ____ (before/after) a new issue of securities is offered for sale to the public.

Before

36

The Sarbanes-Oxley Act of 2002 restricted the types of consulting services that may be performed by CPA firms for public audit clients. True or False?

True

37

An independent audit on an annual basis is required by the AICPA for all corporations. True or False?

False

38

The internal auditing staff of a large corporation usually reports to a committee of the board of directors, to a member of the top management group, or both. True or False?

True

39

As compared to smaller CPA firms, large CPA firms generally spend a _____ (lesser/greater) percentage of the time performing audits.True or False?

Greater

40

Since corporations have limited liability, CPA firms must be organized as sole proprietorships or partnerships. True or False

False. Many are LLPs or LLCs

41


The Public Company Accounting Oversight Board was established to issue accounting standards for publicly traded companies. True or False?

False. Though for public companies, the PCAOB

42

Some of the following criteria are essential for satisfactory performance in several professions. Which one is unique to audit work by CPAs?

-Due Prof. Care
- Independence
- Familiarity with a complex body of technological knoweledge
- general competence

- independence

43

Define business risk

Risk a company will not be able to meet its commitments

44

Managers are often assigned to supervise several concurrent audit engagements. True or false

True

45

An effect of the Sarbanes-Oxley Act of 2002 was to:

Reduce the circumstances in which one may file securities with the SEC.
require periodic peer reviews of large CPA firms performed by the General Accounting Office.
eliminate SEC involvement with sales of securities.
reduce the accounting profession’s level of self regulation.

reduce the accounting profession’s level of self regulation.

46

Which of the following is not an example of an assurance service?

Auditt of financial statements.
Preparation of a tax return.
Attesting to the reliability of a financial forecast.
Review of internal control over operations

Preparation of a tax return

47

Associations of CPA firms provide their members with many of the benefits of having their own professional development departments. True or False?

True

48

Which of the following is an area in which the Public Company Accounting Oversight Board is not empowered to establish or adopt standards?

-Accounting
- Auditing
-Ethics
-Quality Control

Accounting

49

Independent auditors of the year 1900 differed from the auditors of today in that auditors in 1900 were more concerned with:

- validity of income statement
- minimizing income taxes
- internal control
- accuracy of balance sheet

accuracy of the balance sheet

50

Are senior auditors required to sign the audit report?

No

51

Regulation S-X, is another word for this regulation adopted by the SEC to improve the quality of financial statements filed with it

Sarbanes-Oxley