ch. 1 - audit Flashcards


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1

which of the following best describes the relationship between assurance services and attest services?

Both attest and assurance services require independence.

2

Which of the following has primarily responsibility for the fairness of the representations made in financial statements?

Clients Management

3

The most important benefit of having an annual audit by a public accounting firm is to:

Provide assurance to investors and other outsiders that the financial statements are reliable

4

The Sarbanes-Oxley Act created PCAOB. Which of the following is NOT one of the responsibilities of the that board?

Review financial reports filed with the SEC.

5

Which of these organizations has the responsibility to perform inspections of auditors of public companies?

Public Company Accounting Oversight Board

6

Governmental auditing, in addition to including audits of financial statements, often includes audits of efficiency, effectiveness, and?

Compliance

7

In general, internal auditors independence will be greatest when they report directly to the?

Audit committee of board of directors

8

Which of the following did NOT precipitate the passage of the Sarbanes-Oxley Act of 2002 to regulate public accounting firms?

Ethical scandals at the AICPA

9

Which of the following organizations establishes accounting standards for U.S. government agencies?

The Federal Accounting Standards Advisory Board (FASAB)

10

Which of the following is correct about forensic audits?

Forensic audits are usually performed in situations in which fraud has been found or is suspected.

11

What best describes the purpose of auditors consideration of internal control in a financial statement audit for a nonpublic company?

To determine the nature, timing, and extent of audit testing.

12

Which of the following is an example of a compliance audit?

An audit of a company's policies and procedures for adhering to environmental laws and regulations.

13

An engagement in which a CPA firm arranges for a critical review of its practices by another CPA firm is referred to as a?

Peer review engagement

14

The serially-numbered pronouncements issued by the Auditing Standard Board over a period of years are known as?

Statements on Auditing Standards (SASs)

15

The risk that a company will NOT be able to meet its obligations when they become due is an aspect of?

Business Risk

16

Which of the following attributes most clearly differentiates a CPA who audits managements financial statements as contrasted to management?

Independence

17

The attest function:

includes the preparation of a report of the CPA's findings.

18

Attestation Risk is limited to a low level in which of the following engagements?

Examinations, but not reviews.

19

Which of the following are issued by the Securities and Exchange Commission?

Financial Reporting Releases.

20

An operational audit differs in many way from an audit of financial statements. Which of the following is the best example of one of those differences?

The boundaries of an operational audit are often drawn from an organization chart and are not limited to a single accounting period.

21

Which statement is correct with respect to continuing professional education (CPE) requirements of members of the AICPA?

Members, regardless of whether they are in public practice, are require to meet such requirements.

22

Which of the following professionals has primary responsibility for the performance of an audit?

The partner in charge of the engagement.

23

Which of the following terms best describes the audit of a taxpayer's tax return by an IRS auditor?

Compliance audit

24

Inquiries and analytical procedures ordinarily form the basis for which type of engagement?

Review

25

Operational auditing is primarily oriented toward:

Future improvements to accomplish the goals of management.

26

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

Make recommendations for improving performance.

27

The review of a company's financial statements by a CPA firm:

Is substantially less in scope of procedures than an audit.

28

Which of the following types of services is generally provided only by CPA firms?

financial statement audits

29

Which of the following best describes the reason why independent auditors report on financial statements?

Different interests may exist between the company preparing the statements and the persons using the statements.

30

An integrated audit performed under the Sarbanes Oxley Act requires that auditors report on?

Financial statements: yes

Internal control: yes