Chapter 02 – The Financial Statement Auditing Environment
41. The objective of the second PCAOB Standard of Reporting is to provide assurance that
42. An internal auditor is likely to be more concerned with _________________ than the
external auditor.
Chapter 02 – The Financial Statement Auditing Environment
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43. Which of the following is not included in the broad category of assurance services?
44. Which of the following is not explicitly a part of the IIA’s definition of internal auditing?
45. Which of the following statements regarding the PCAOB is incorrect?
Chapter 02 – The Financial Statement Auditing Environment
46. Due professional care requires
47. Which of the following best describes the role of corporate governance?
Chapter 02 – The Financial Statement Auditing Environment
48. The four PCAOB standards of reporting are concerned with all of the following except
49. Which of the following best describes what is meant by generally accepted auditing
standards?
Chapter 02 – The Financial Statement Auditing Environment
50. The fourth PCAOB standard of reporting requires an auditor to render a report whenever an
auditor’s name is associated with financial statements. The overall purpose of the fourth
standard of reporting is to require that reports
51. The three PCAOB standards of fieldwork are concerned with
Chapter 02 – The Financial Statement Auditing Environment
52. 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
53. The IAASB and the ASB have collaborated on the principles underlying an audit conducted
in accordance with generally accepted auditing standards. These principles are grouped into
four categories. What are the four categories?
Chapter 02 – The Financial Statement Auditing Environment
54. 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.
Chapter 02 – The Financial Statement Auditing Environment
55. You are the owner of a small grocery store, Corner Marketplace. Explain the five process
categories and how they apply to your business.
Chapter 02 – The Financial Statement Auditing Environment
56. Define corporate governance, the board of directors, and the audit committee and explain
how they relate to each other.
Chapter 02 – The Financial Statement Auditing Environment
57. Describe the organizations involved in standard setting for auditors in the United States and
what their respective roles are in setting current auditing standards for companies in the United
States.
Chapter 02 – The Financial Statement Auditing Environment
58. 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?
Chapter 02 – The Financial Statement Auditing Environment
59. Jane Goodperson performed an audit on the Quagmire Corporation and issued an
unqualified opinion. Jane performed the audit with due professional care and in accordance
with generally accepted auditing standards. Two months after the report is issued, Jane
discovers on the news that the CEO of Quagmire, Johnny Best, had been stealing small amounts
of inventory. The amount, however, is immaterial compared to the overall inventory of the
corporation. Jane soon receives a call from Quagmire’s CFO, Mark Beastly. Mark wants Jane to
refund her audit fees. Mark thinks Jane did not properly perform the audit, as she did not
discover this fraud. Further, he feels that now Quagmire’s financial statements are not fairly
stated because of Jane. How should Jane respond to this claim?
Chapter 02 – The Financial Statement Auditing Environment
60. 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.
61. With respect to an entity’s financial statements, describe both the responsibility of
management and of the auditor.
Chapter 02 – The Financial Statement Auditing Environment
62. What auditing standards are used to conduct an audit for a privately-held corporation? What
auditing standards are used to conduct an audit for a publicly-traded corporation? What
organization is responsible for setting each of these sets of standards?
Chapter 02 – The Financial Statement Auditing Environment
63. There are several types of audit services that are provided by auditors. Identify and define
three of these types of audits.