Question 1

Which is not an attribute of an external auditor?

Accepted Answer

A)   Independence.
B)   Auditee advocacy.
C)   Objectivity.
D)   Concern for the public interest.E) None of the above
F) All of the above

Question 2

The Audit Committee consists of

Accepted Answer

A)   Members of management.
B)   A subcommittee of the AICPA who establish the SAS.
C)   Members of the Board of Directors.
D)   Appointed government overseers.E) B) and D)
F) B) and C)

Question 3

The principles underlying an audit conducted in accordance with generally accepted auditing standards are grouped into four categories.The second category is that of "personal responsibility of the auditor." Generally explain what is intended by this principle.

Accepted Answer

Auditors are responsible for having appr...

Question 4

The fourth PCAOB reporting standard requires the auditor's report to contain either an expression of opinion regarding the financial statements taken as a whole or an assertion to the effect that an opinion cannot be expressed.The objective of the fourth standard is to prevent

Accepted Answer

A)   An auditor from reporting on one basic financial statement and not the others.
B)   An auditor from expressing different opinions on each of the basic financial statements.
C)   Management from reducing its final responsibility for the basic financial statements.
D)   Misinterpretations regarding the degree of responsibility the auditor is assuming.E) All of the above
F) None of the above

Question 5

What organization is responsible for setting auditing standards for audits of publicly-traded companies in the U.S.?

Accepted Answer

A)   AICPA.
B)   FASB.
C)   GASB.
D)   PCAOB.E) B) and C)
F) A) and D)

Question 6

The authoritative body designed to promulgate standards concerning a CPA's association with audited financial statements of an entity that is required to file financial statements with the SEC is the

Accepted Answer

A)   Financial Accounting Standards Board.
B)   General Accounting Office.
C)   Public Company Accounting Oversight Board.
D)   Auditing Standards Board.E) A) and D)
F) All of the above

Question 7

Mike has just graduated from State University with a bachelor's degree in accounting.He would like to pursue a career in auditing.What options does Mike have? Describe three auditing career options,including a description of the organization Mike would work for.

Accepted Answer

Answer could include any three of the fo...

Question 8

A typical objective of an operational audit is for the auditor to

Accepted Answer

A)   Determine whether the financial statements present fairly the entity's operations.
B)   Evaluate the feasibility of attaining the entity's operational objectives.
C)   Make recommendations for improving performance.
D)   Report on the entity's relative success in attaining profit maximization.E) B) and D)
F) A) and B)

Question 9

The four PCAOB standards of reporting are concerned with all of the following except

Accepted Answer

A)   The presentation of the financial statements based on GAAS.
B)   The presentation of the financial statements based on GAAP.
C)   Whether principles are consistently applied, whether all informative disclosures have been made, and the degree of responsibility the auditor is taking.
D)   The degree of responsibility the auditor is taking.E) B) and C)
F) A) and D)

Question 10

The three PCAOB general standards are concerned with

Accepted Answer

A)   Adequate training and proficiency of the auditor, proper planning and supervision, and due professional care.
B)   Adequate training and independence.
C)   Due professional care.
D)   Independence, adequate training and due professional care.E) A) and B)
F) A) and C)

Question 11

Because of the risk of material misstatement,an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

Accepted Answer

A)   Objective cynicism.
B)   Independent differentialism.
C)   Professional skepticism.
D)   Impartial conservatism.E) A) and B)
F) A) and C)

Question 12

Which of the following is not included in the broad category of assurance services?

Accepted Answer

A)   Operational audit.
B)   Reporting on internal control.
C)   Accounting or review services.
D)   Evaluation of the auditee's risk management framework.E) None of the above
F) All of the above

Question 13

A series of business and related auditing failures led to the passage of the Sarbanes-Oxley Act (2002).

Accepted Answer

A) True 
 B)False

Question 14

The largest public accounting firms typically are structured as

Accepted Answer

A)   Subchapter S corporations.
B)   Professional corporations.
C)   Limited liability partnerships.
D)   Limited liability corporations.E) B) and C)
F) None of the above

Question 15

The objective of the second PCAOB Standard of Reporting is to provide assurance that

Accepted Answer

A)   There are no variations in the format and presentation of financial statements.
B)   Substantially different transactions and events are not accounted for on an identical basis.
C)   The auditor is consulted before material changes are made in the application of accounting principles.
D)   The comparability of financial statements between periods is not materially affected by changes in accounting principles that are not disclosed.E) B) and C)
F) A) and D)

Question 16

What are the three PCAOB general auditing standards found within the 10 GAAS (NOT the three main categories of GAAS)and why is each important?

Accepted Answer

The first standard states that an audito...

Question 17

External auditors are referred to as "external" because

Accepted Answer

A)   They report to users outside of the audited entity.
B)   They are paid by parties outside of the audited entity.
C)   They are not employees of the entity being audited.
D)   Their offices are not at the entity's place of business.E) All of the above
F) A) and B)

Question 18

Which of the following best describes the general character of the three PCAOB generally accepted auditing standards that are classified as standards of fieldwork?

Accepted Answer

A)   The competence, independence, and professional care of persons performing the audit.
B)   Criteria for the content of the auditor's report on financial statements and related footnote disclosures.
C)   The criteria of audit planning and evidence-gathering.
D)   The need to maintain independence in mental attitude in all matters relating to the audit.E) A) and C)
F) C) and D)

Question 19

Due professional care requires auditors to

Accepted Answer

A)   Obtain independent, third party (non-auditee)  documentation as evidence for all information presented in the financial statements.
B)   Exercise professional skepticism during the audit.
C)   Disregard any evidence generated by the auditee during the audit.
D)   Find every error contained in the financial statements prepared by management.E) B) and C)
F) A) and D)

Question 20

PCAOB auditing standards must be followed on all audits of public companies' financial statements.

Accepted Answer

A) True 
 B)False

Exam 2: The Financial Statement Auditing Environment

The Audit Committee consists of

Correct AnswerverifiedShow Answer

The objective of the second PCAOB Standard of Reporting is to provide assurance that

Correct AnswerverifiedShow Answer

Because of the risk of material misstatement,an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

Correct AnswerverifiedShow Answer

A series of business and related auditing failures led to the passage of the Sarbanes-Oxley Act (2002).

Correct AnswerverifiedShow Answer

The largest public accounting firms typically are structured as

Correct AnswerverifiedShow Answer

Which of the following is not included in the broad category of assurance services?

Correct AnswerverifiedShow Answer

A typical objective of an operational audit is for the auditor to

Correct AnswerverifiedShow Answer

Due professional care requires auditors to

Correct AnswerverifiedShow Answer

What organization is responsible for setting auditing standards for audits of publicly-traded companies in the U.S.?

Correct AnswerverifiedShow Answer

The three PCAOB general standards are concerned with

Correct AnswerverifiedShow Answer

Which is not an attribute of an external auditor?

Correct AnswerverifiedShow Answer

Which of the following best describes the general character of the three PCAOB generally accepted auditing standards that are classified as standards of fieldwork?

Correct AnswerverifiedShow Answer

Mike has just graduated from State University with a bachelor's degree in accounting.He would like to pursue a career in auditing.What options does Mike have? Describe three auditing career options,including a description of the organization Mike would work for.

Correct AnswerverifiedAnswer could include any three of the fo...View AnswerShow Answer

What are the three PCAOB general auditing standards found within the 10 GAAS (NOT the three main categories of GAAS)and why is each important?

Correct AnswerverifiedThe first standard states that an audito...View AnswerShow Answer

PCAOB auditing standards must be followed on all audits of public companies' financial statements.

Correct AnswerverifiedShow Answer

External auditors are referred to as "external" because

Correct AnswerverifiedShow Answer

The four PCAOB standards of reporting are concerned with all of the following except

Correct AnswerverifiedShow Answer

The principles underlying an audit conducted in accordance with generally accepted auditing standards are grouped into four categories.The second category is that of "personal responsibility of the auditor." Generally explain what is intended by this principle.

Correct AnswerverifiedAuditors are responsible for having appr...View AnswerShow Answer

The authoritative body designed to promulgate standards concerning a CPA's association with audited financial statements of an entity that is required to file financial statements with the SEC is the

Correct AnswerverifiedShow Answer

The fourth PCAOB reporting standard requires the auditor's report to contain either an expression of opinion regarding the financial statements taken as a whole or an assertion to the effect that an opinion cannot be expressed.The objective of the fourth standard is to prevent

Correct AnswerverifiedShow Answer

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Answer could include any three of the fo...
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Correct Answer
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The first standard states that an audito...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Auditors are responsible for having appr...
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Correct Answer
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Correct Answer
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