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Auditing Defined
62. Which of the following procedures do third-party users of the audit report not expect the auditor to perform?
a.
Evaluate measurements and disclosures made by management.
b.
Provide a biased evaluation of the financial statements.
c.
Determine whether financial statements are presented in accordance with GAAP.
d.
Gather sufficient appropriate evidence to support their opinion.
b
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Auditing Defined
63. What must audit firms do to perform financial statement audits for public companies?
a.
Register with the American Institute of Certified Public Accountants.
b.
Register with the Institute of Internal Auditors.
c.
Register with the U.S. General Accounting Office.
d.
Register with the Public Company Accounting Oversight Board.
d
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Professional and Regulatory Organizations
64. What must an auditor do in an audit?
a.
Consider how the economic activity is portrayed in the financial statements.
b.
Force management to make operational decisions that will improve the company’s financial
performance.
c.
Disregard independence in order to find the underlying truth of the evidence.
d.
Establish new criteria by which financial statements may be compared.
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Auditing Defined
65. What document communicates the conclusions of the financial statement audit?
a.
The financial statement.
b.
Written management assertion.
Chapter 1 – Auditing: Integral to the Economy
c.
The audit report.
d.
None of the above.
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Auditing Defined
66. Which of the following is a driver of audit quality?
a.
Audit firm culture.
b.
Engagement team skills and attributes.
c.
Factors outside control of auditors.
d.
Investor requirements.
e.
A, B, and C only.
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Auditing Defined
67. In the United States,what is the most common criteria against which the auditor measures the fairness of
financial statement presentation?
a.
Auditing standards.
b.
Generally accepted accounting principles.
c.
Generally accepted accounting standards.
d.
Governmental accounting principles.
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Auditing Defined
68. What is the management of a company is responsible for?
a.
Hiring the auditor.
b.
Preparing the financial statements.
c.
The audit workpapers.
d.
Ensuring auditor independence.
69. Which one of the following is not an example of a typical review program?
a.
Interoffice reviews.
b.
Engagement quality review.
c.
Peer reviews.
d.
Self reviews.
d
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Auditing Defined
70. Which term describes the type of threat which occurs when top management threatens to replace the audit
firm because of a disagreement over an accounting issue?
a.
Management participation threat.
b.
Undue influence threat.
c.
Adverse interest threat.
d.
Financial self-interest threat.
b
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Achieving Audit Quality and Minimizing Lawsuits
71. Who is responsible for internal controls within an organization?
a.
The internal auditor.
b.
The external auditor.
c.
Management.
d.
The PCAOB.
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Auditing Defined
72. According to the AICPA, which of the following is not a safeguard to the auditing profession?
a.
Education.
b.
Professional standards.
c.
External reviews.
d.
Legislation concerning competency requirements.
Auditing Defined
Chapter 1 – Auditing: Integral to the Economy
d
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Auditing Defined
73. Which of the following groups is not typically considered to be a user of the audited financial statements?
a.
Management.
b.
Vendors.
c.
Retired Employees.
d.
Competitors.
d
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Users of Assurance Services
74. What is the audit committee of the board of directors of a company responsible for?
a.
Hiring the auditor.
b.
Preparing the financial statements.
c.
The audit workpapers.
d.
Obtaining evidence.
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Changes in Profession
75. Which of the following is typically an attribute of a smaller audit firm?
a.
The type of work is primarily external audits.
b.
The firm has multiple teams that work on the audit of a single entitiy and then disband.
c.
The firm has multiple teams that overlap across engagements.
d.
The firm has a relatively higher level of staff turnover.
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Types of Audit Providers and the Skill and Knowledge Needed by Professionals
76. The scope of the work to be done by the auditor on the audit is described in which document?
Chapter 1 – Auditing: Integral to the Economy
a.
Contract letter..
b.
Management letter..
c.
Representation letter.
d.
Engagement letter..
d
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Achieving Audit Quality and Minimizing Lawsuits
77. Which governing board performs quality reviews on registered audit firms that audit public companies?
a.
PCAOB.
b.
GAO.
c.
AICPA.
d.
FASB.
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Professional and Regulatory Organizations
78. Congress authorized which of the following organizations to establish generally accepted accounting
principles?
a.
SEC.
b.
APB.
c.
AICPA.
d.
FASB.
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Professional and Regulatory Organizations
79. Which of the following does the public expect of auditors?
a.
Understand and enforce principles that best portray the spirit of FASB concepts.
b.
Be neutral to preparers and users of financial information.
c.
Recognize that the investing public is the primary user of audit services.
d.
Take responsibility for the discovery of fraud.
e.
All of the above are expectations of the public.
80. Who licenses CPAs?
a.
The PCAOB.
b.
The AICPA.
c.
The State Boards of Accountancy.
d.
The SEC.
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Professional and Regulatory Organizations
81. According to the Financial Reporting Council (FRC), when is the culture of an audit firm likely to provide a
positive contribution to audit quality?
a.
When the leadership of the audit firm ensures partners and other staff have sufficient time and
resources to deal with difficult issues as they arise.
b.
When the leadership of the audit firm ensures robust systems for client acceptance and continuation
based on the likelihood of increased audit fees.
c.
When the leadership of the audit firm creates an environment where achieving efficiency is valued,
invested in and rewarded.
d.
When the leadership of the audit firm ensures financial considerations drive actions.
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Audit Quality
82. What is the primary role of the court system for the auditing profession?
a.
To act as a quality-control mechanism.
b.
To provide guidance on unclear legislation.
c.
To punish audit firms that issue the wrong audit report.
d.
To express opinions on the fairness of accounting principles.
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Required Reporting on Internal Controls
83. Which organization issued the Internal Control, Integrated Framework which serves as the primary
criterion for evaluating the quality of a company’s internal control system?
a.
PCAOB.
b.
COSO.
c.
AICPA.
d.
GAO.
b
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Auditing Defined
84. Which of the following is not part of the systematic process called auditing?
a.
Communicating results of the audit to users.
b.
Procuring and evaluating evidence.
c.
Providing important managerial decisions for a client.
d.
Comparing evidence regarding assertions to certain established criteria.
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Auditing Defined
85. As it relates to an audit, which of following statement about professional skepticism is true?
a.
Professional skepticism is not taken into consideration.
b.
Professional skepticism relates only to the nature of procedures performed.
c.
Professional skepticism is an attitude.
d.
Professional skepticism is determined based upon the importance to a user of the financial
statements.
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Auditing Defined
86. Which of the following items should an auditor communicate to an audit committee?
a.
Any meaningful threats to auditor objectivity.
b.
The scope of the audit.
c.
The qualitative aspects of the entity’s accounting and reporting and potential ways of improving
financial reporting.
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Chapter 1 – Auditing: Integral to the Economy
d.
All of the above.
d
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Audit Quality
87. Which organization is responsible for setting International Standards on Auditing?
a.
IASB
b.
IFRS
c.
IAASB
d.
AICPA
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Organizations Affecting the External Auditing Profession
88. The Center for Audit Quality is dedicated to enhancing investor confidence in what?
a.
The financial markets.
b.
Management.
c.
Auditors.
d.
Both B and C.
e.
All of the above.
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Professional and Regulatory Organizations
89. Which of the following is not a goal of auditor independence?
a.
To achieve consistent auditor regulation.
b.
To foster high quality audits.
c.
To promote investor confidence in the financial statements.
d.
To minimize the possibility that external factors will influence auditor’s judgements.
90. What is the primary objective of the independent auditor’s report on financial statements?
a.
To report on all instances of fraud.
b.
To assist the board in evaluating management’s effectiveness.
c.
To attest to the credit-worthiness of the client..
d.
To give credibility to management’s prepared financial statements.
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Auditing Defined
91. Attributes of Auditors
Discuss the three or more attributes that an auditors possess in order to maintain credibility. Explain the
importance of these attributes to the audit.
assurance professional apart from others.
Accounting Principles.
sufficient evidence obtained.
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Auditing Defined
92. Users of financial statements
Identify at least three types of users of financial statements. Describe their primary use of the financial
statements and how the misstatement of those statements might injure the user.
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Achieving Audit Quality and Minimizing Lawsuits
93. Overview of Financial Statement Audit
Define auditing and discuss how its components fit into an overview of a financial statement audit.
94. Professional and regulatory organizations
Identify at least four professional or regulatory organizations. Explain how and why they assist and/or monitor
95. Audit Quality
What are three drivers of audit quality according to the Financial Reporting Council (FRC)’s “The Audit
Quality Framework”?
96. The Need for Audited Financial Statements
Why do financial statement users need independent assurance about information provided by management?
97. Regulatory and professional bodies
Write the full name of the following regulatory and professional acronyms and describe the function of each
entity:
PCAOB
AICPA
SEC
IIA
FASB
98. Requirements of auditors in public accounting
Recent landscape changes in accounting and auditing developed from corporate fraud and, arguably, auditor
failure. In order to continually lead and adapt to the dynamics of regulation, principles based accounting
practices and auditing standards, what types of skills and traits are auditors required to possess?
99. Impact of Sarbanes-Oxley
What are four ways that Sarbanes-Oxley impacted the auditing profession?
100. Audit Quality
What is audit quality?
