Ch. 2 -audit Flashcards

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Which of the following organizations can revoke the right of an individual to practice as a CPA?

The applicable state board of accountancy.


The AICPA over time has played an important role in standards setting. Which of the following standards are currently established by the AICPA?

Auditing standards applicable to audits of nonpublic companies.


Which of the following does the FASB consider a source of nonauthoritative guidance for use when there is no authoritative guidance available?

FASB Concept Statements


Financial statement audits performed under PCAOB requirements are designed to provide which types of assurance with respect to the detection of material misstatement due to errors or fraud?

Reasonable: yes

Absolute: no


A basic objective of a CPA firm is to provide professional services that conform with professional standards. Reasonable assurance of achieving this basic objective is provided through:

A system of quality control.


Which of the following is NOT explicitly included in a standard report for a nonpublic company?

That internal control of the client was satisfactory.


The general group of the 10 PCAOB Auditing Standards require that:

The auditors maintain an independent mental attitude.


Which AICPA quality control standard would MOST likely be satisfied when a CPA firm maintains records indicating which partners or employees of the firm were previously employed by the CPA firm's clients?

Relevant ethical requirements


An audit provides reasonable assurance of detecting material:

Fraudulent financial reporting: yes

Misappropriation of assets: yes


Which of the following is NOT included in an integrated audit report on the financial statements of a public company?

The report states that the audit was performed in accordance with AICPA standards.


Audit firms that are subject to inspections by PCAOB staff include:

Audit firms that are registered with the PCAOB.


Which of the following is NOT a difference noted when comparing the AICPA audit report to the international audit report?

The international audit report includes an opinion on internal control.


An attest engagement:

includes a report on subject matter, or on an assertion about subject matter.


Which of the following is one of the elements of AICPA quality control?

engagement performance


A procedure in which a quality control partner periodically tests the application of quality control procedures is most directly related to which quality control element?



Which of the following is a principle underlying an audit conducted in accordance with generally accepted auditing standard?

An auditors opinion enhances the degree of confidence that intended users can place in the financial statements.


A set of criteria used to determine measurement, recognition, representation, and disclosure of all material items appearing in the financial statements is referred to as an?

Financial reporting framework


By definition, proper professional skepticism on an audit requires:

Questioning mind: yes

Subjective assessment of audit evidence: no


Which of the following best describes a portion of the auditors responsibility regarding noncompliance with laws by clients?

If audit procedures reveal noncompliance, the auditor should take appropriate actions.


Which of the following is NOT included as a part of the description of the auditors responsibility in a nonpublic company unmodified report?

The audit was performed in accordance with generally accepted accounting principles.


Which of the following is explicitly included as a part of the description of managements responsibility in a unmodified audit report?

Management is responsible for the maintenance of internal control.


The auditors report for a nonpublic company should indicate:

That the audit was made in accordance with auditing standards generally accepted in the U.S.


A requirement to design recruitment processes and procedures to help the firm select individuals meeting minimum academic requirements established by the firm is an example of a quality control procedure in the area of:

Human Resources


The body that issues international pronouncements providing auditing procedural and reporting guidance is the:

International Auditing and Assurance Standards Board


To present fairly in conformity with generally accepted accounting principles, the financial statement must be:

Reflect transactions and events within a range of reasonable limits.


Which of the following is NOT included in the auditors standard unmodified audit report?

Accounting principles have been consistently applied.


Authoritative GAAP Sources include:

FASB Remediation Statements: no

FASB Codification: yes


An investor reading the financial statements of The Sundby Corporation observes that the statements are accompanied by an unmodified auditors report. From this, the investor may conclude that:

Any disputes over significant accounting issues have been settled to the auditors satisfaction.


The auditors report may be addressed to the company whose financial statements are being examined or to that company's:

Board of Directors


Which of the following best describes what is meant by generally accepted auditing standards?

Measures of the quality of the auditors performance.


Which of the following is the name used to describe financial reporting frameworks other than GAAP which include: cash basis, tax basis, regulatory basis, or contractual basis?

Special purpose


Which of the following statements best describes the primary purpose of Statements on Auditing Standards?

They are authoritative statements, enforced through the Code of Professional Conduct.


The primarily responsibility for the adequacy of disclosure in the financial statements of a publicly held company rests with the:

Management of the company


In pursuing a CPA firm's quality control objectives, a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm's clients. Which quality control objective would this be mot likely to satisfy?

Relevant ethical requirements


A CPA firm establishes quality control policies and procedures for deciding whether to accept a new client or continue to perform services for a current client. The primary purpose for establishing such policies and procedures is:

to minimize the likelihood of association with clients whose managements lack integrity.


The Public Company Accounting Oversight Board has authority to establish which of the following relating to public companies?

Attestation standards: yes

Independence standards: yes


Which of the following is LEAST likely to be directly examined in an inspection performed by the PCAOB?

Compilation engagements


As compared with the US public company audit report, the international audit report:

Includes enhanced explanation of the audit process.


When the auditors express an opinion on financial statements, their responsibilities extend to:

Whether the results of their clients operating decisions are fairly presented in the financial statements.


Generally accepted auditing standards established by the AICPA through april of 2003:

Have been accepted as interim standards by PCAOB.