Question 1

The fundamental principles developed by the Auditing Standards Board are best described as:

Accepted Answer

A) ten basic standards underlying an audit. 
B) standards that apply only to audits of issuers. 
C) industry-specific guidance on how audit procedures should be conducted. 
D) guidelines for the general conduct of audit engagements. 
A) ten basic standards underlying an audit. 
B) standards that apply only to audits of issuers. 
C) industry-specific guidance on how audit procedures should be conducted. 
D) guidelines for the general conduct of audit engagements.

Question 2

The audit failures of both Enron and WorldCom were examples in which the leadership responsibilities for quality work within the accounting firm were overshadowed by fears that losing a key client would

Accepted Answer

A) result in shareholder losses from reduced company profitability. 
B) require additional audit procedures and increase the fees paid by the companies to the accounting firm. 
C) negatively influence the results of the firm's inspection. 
D) negatively impact individual auditors' performance evaluations. 
A) result in shareholder losses from reduced company profitability. 
B) require additional audit procedures and increase the fees paid by the companies to the accounting firm. 
C) negatively influence the results of the firm's inspection. 
D) negatively impact individual auditors' performance evaluations.

Question 3

A CPA firm would provide itself reasonable assurance of meeting its responsibility to offer professional services that conform with professional standards by

Accepted Answer

A) establishing an understanding with each client concerning individual responsibilities in a signed engagement letter. 
B) assessing the risk that errors and fraud may cause the financial statements to contain material misstatements. 
C) developing specific audit objectives to support management's assertions that are embodied in the financial statements. 
D) maintaining a comprehensive system of quality control that is suitably designed in relation to its organizational structure. 
A) establishing an understanding with each client concerning individual responsibilities in a signed engagement letter. 
B) assessing the risk that errors and fraud may cause the financial statements to contain material misstatements. 
C) developing specific audit objectives to support management's assertions that are embodied in the financial statements. 
D) maintaining a comprehensive system of quality control that is suitably designed in relation to its organizational structure.

Question 4

Which of the following is an element of a system of quality control that should be considered by a public accounting firm in establishing its quality control policies and procedures?

Accepted Answer

A) Lending credibility to a client's financial statements. 
B) Using statistical sampling techniques. 
C) Acceptance and continuance of client relationships and specific engagements. 
D) Membership in the Center for Public Company Audit Firms. 
A) Lending credibility to a client's financial statements. 
B) Using statistical sampling techniques. 
C) Acceptance and continuance of client relationships and specific engagements. 
D) Membership in the Center for Public Company Audit Firms.

Question 5

A vendor's invoice received and held by the client would be considered what type of evidence?

Accepted Answer

A) External. 
B) Internal. 
C) External-internal. 
D) Written representation. 
A) External. 
B) Internal. 
C) External-internal. 
D) Written representation.

Question 6

Which of the following statements is not true with respect to the evidence that would be gathered when assessments of control risk are high?

Accepted Answer

A) Auditors would be required to rely on external (rather than internal)forms of evidence. 
B) Auditors would be required to perform procedures at interim periods, rather than at year end. 
C) Auditors would be required to confirm a larger number of customer accounts receivable balances. 
D) Auditors would be required to obtain more evidence through direct personal observation. 
A) Auditors would be required to rely on external (rather than internal)forms of evidence. 
B) Auditors would be required to perform procedures at interim periods, rather than at year end. 
C) Auditors would be required to confirm a larger number of customer accounts receivable balances. 
D) Auditors would be required to obtain more evidence through direct personal observation.

Question 7

The state of mind that characterizes the auditors' appropriate questioning and critical assessment of audit evidence is referred to as:

Accepted Answer

A) due care. 
B) independence in appearance. 
C) professional judgment. 
D) professional skepticism. 
A) due care. 
B) independence in appearance. 
C) professional judgment. 
D) professional skepticism.

Question 8

Which of the following is an example of the appropriate implementation of a system of quality control?

Accepted Answer

A) The firm requires all documents obtained during the audit to be destroyed immediately following the engagement to ensure the client's information remains confidential. 
B) The firm's quality control policies have evolved through the performance of audit procedures but are not formally developed or communicated to staff members. 
C) All firm employees must verbally confirm their compliance with the appropriate independence requirements before being assigned to an engagement. 
D) The firm uses manuals and standardized forms for audit documentation to help ensure engagement performance objectives and quality standards are met. 
A) The firm requires all documents obtained during the audit to be destroyed immediately following the engagement to ensure the client's information remains confidential. 
B) The firm's quality control policies have evolved through the performance of audit procedures but are not formally developed or communicated to staff members. 
C) All firm employees must verbally confirm their compliance with the appropriate independence requirements before being assigned to an engagement. 
D) The firm uses manuals and standardized forms for audit documentation to help ensure engagement performance objectives and quality standards are met.

Question 9

Which of the following is an important consideration during the planning of the audit?

Accepted Answer

A) Considering the independence of members of the audit team 
B) Performing some of the audit procedures prior to the end of the year under audit 
C) Considering the ability and expertise of the audit team with respect to accounting and auditing issues in the client's industry 
D) Considering the impact of tests of controls on the overall assessment of control risk 
A) Considering the independence of members of the audit team 
B) Performing some of the audit procedures prior to the end of the year under audit 
C) Considering the ability and expertise of the audit team with respect to accounting and auditing issues in the client's industry 
D) Considering the impact of tests of controls on the overall assessment of control risk

Question 10

All of the following statements are true regarding generally accepted auditing standards (GAAS) except:

Accepted Answer

A) departures from auditing standards that impose presumptively mandatory requirements on auditors are not permitted under any circumstances. 
B) Auditing Standards issued by the PCAOB serve as an appropriate source of GAAS for the audits of issuers. 
C) separate auditing standards have been developed for the audits of U.S. governmental entities and foreign entities. 
D) Interpretive Publications, which are officially considered less authoritative and less binding than auditing standards, are included as part of GAAS. 
A) departures from auditing standards that impose presumptively mandatory requirements on auditors are not permitted under any circumstances. 
B) Auditing Standards issued by the PCAOB serve as an appropriate source of GAAS for the audits of issuers. 
C) separate auditing standards have been developed for the audits of U.S. governmental entities and foreign entities. 
D) Interpretive Publications, which are officially considered less authoritative and less binding than auditing standards, are included as part of GAAS.

Question 11

During which stages of an audit examination are auditors required to exhibit the appropriate use of professional judgment? $\begin{array}{cc} & \text { Gathering Evidence}& \text { Drawing Conclusions}\end{array}$
A.$\begin{array}{cc}&&&& \text { Yes } &&&&&&& \text { No } \\end{array}$
B.$\begin{array}{cc} &&&& \text { Yes } &&&&&&& \text { Yes } \\end{array}$
C.$\begin{array}{cc} &&&& \text { No } &&&&&&& \text { Yes } \\end{array}$
D.$\begin{array}{cc} &&&&\text { No } &&&&&&& \text { No }
\end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 12

Under generally accepted auditing standards, which of the following relates to the responsibilities principle?

Accepted Answer

A) The initial planning of the audit engagement. 
B) The confirmation of accounts receivable. 
C) The completion of an internal control questionnaire. 
D) Maintaining professional skepticism and exercising professional judgment. 
A) The initial planning of the audit engagement. 
B) The confirmation of accounts receivable. 
C) The completion of an internal control questionnaire. 
D) Maintaining professional skepticism and exercising professional judgment.

Question 13

The primary purpose of the auditors' study of internal control for a non-issuer is:

Accepted Answer

A) to provide constructive suggestions to the client for improving its internal control. 
B) to report on internal control as required by Auditing Standard No. 5. 
C) to identify and detect fraud and irregularities perpetrated by client personnel. 
D) to determine the nature, timing, and extent of further audit procedures. 
A) to provide constructive suggestions to the client for improving its internal control. 
B) to report on internal control as required by Auditing Standard No. 5. 
C) to identify and detect fraud and irregularities perpetrated by client personnel. 
D) to determine the nature, timing, and extent of further audit procedures.

Question 14

Which of the following types of audit evidence provides the least assurance of reliability?

Accepted Answer

A) Receivable confirmations received from the client's customers. 
B) Prenumbered receiving reports completed by the client's employees. 
C) Prior months' bank statements obtained from the client. 
D) Municipal property tax bills prepared in the client's name. 
A) Receivable confirmations received from the client's customers. 
B) Prenumbered receiving reports completed by the client's employees. 
C) Prior months' bank statements obtained from the client. 
D) Municipal property tax bills prepared in the client's name.

Question 15

Which of the following could serve as a source of professional guidance in the audit of an issuer? $\begin{array}{cc} & \text { Auditing standards}& \text { Statements on Auditing}\
& \text { Issued by the PCAOB}& \text { Issued by the ASB}\end{array}$ 
A.$\begin{array}{cc} &&&& \text { Yes } &&&&&&&& \text { No } \\end{array}$
B.$\begin{array}{cc} &&&& \text { Yes } &&&&&&&& \text { Yes } \\end{array}$
C.$\begin{array}{cc} &&&& \text { No } &&&&&&&& \text { Yes } \\end{array}$
D.$\begin{array}{cc}&&&& \text { No } &&&&&&&& \text { No }
\end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 16

The standard auditors' report refers to standards of the PCAOB and GAAP in which section(s)?

Accepted Answer

A) Standards of the PCAOB: Basis for Opinion; GAAP: Opinion on the Financial Statements. 
B) Standards of the PCAOB: Opinion on the Financial Statements; GAAP: Opinion on the Financial Statements and Basis for Opinion. 
C) Standards of the PCAOB: Opinion on the Financial Statements and Basis for Opinion; GAAP: Opinion on the Financial Statements. 
D) Standards of the PCAOB: Opinion on the Financial Statements; GAAP: Opinion on the Financial Statements. 
A) Standards of the PCAOB: Basis for Opinion; GAAP: Opinion on the Financial Statements. 
B) Standards of the PCAOB: Opinion on the Financial Statements; GAAP: Opinion on the Financial Statements and Basis for Opinion. 
C) Standards of the PCAOB: Opinion on the Financial Statements and Basis for Opinion; GAAP: Opinion on the Financial Statements. 
D) Standards of the PCAOB: Opinion on the Financial Statements; GAAP: Opinion on the Financial Statements.

Question 17

Which of the following is true with respect to the PCAOB inspection process?

Accepted Answer

A) All firms performing audits of issuers are inspected every year. 
B) PCAOB inspections are conducted by partners of other CPA firms. 
C) PCAOB inspection teams review a sample of audit engagements conducted by the firm as well as the firm's system of quality control. 
D) Deficiencies from sample audit engagements reviewed by the inspection team and deficiencies in the firm's system of quality control are publicly disclosed on the PCAOB's website. 
A) All firms performing audits of issuers are inspected every year. 
B) PCAOB inspections are conducted by partners of other CPA firms. 
C) PCAOB inspection teams review a sample of audit engagements conducted by the firm as well as the firm's system of quality control. 
D) Deficiencies from sample audit engagements reviewed by the inspection team and deficiencies in the firm's system of quality control are publicly disclosed on the PCAOB's website.

Question 18

Which of the following courses of action is most appropriate if an auditor concludes that there is a high risk of material misstatement?

Accepted Answer

A) Use smaller, rather than larger, sample sizes. 
B) Perform substantive tests as of an interim date. 
C) Select more effective substantive tests. 
D) Increase tests of controls. 
A) Use smaller, rather than larger, sample sizes. 
B) Perform substantive tests as of an interim date. 
C) Select more effective substantive tests. 
D) Increase tests of controls.

Question 19

Which of the following actions should a CPA firm take to comply with the AICPA's quality control standards?

Accepted Answer

A) Establish procedures that comply with the standards of the Sarbanes-Oxley Act. 
B) Use attributes sampling techniques in testing internal controls. 
C) Consider inherent risk and control risk before determining detection risk. 
D) Establish policies to ensure that the audit work meets applicable professional standards. 
A) Establish procedures that comply with the standards of the Sarbanes-Oxley Act. 
B) Use attributes sampling techniques in testing internal controls. 
C) Consider inherent risk and control risk before determining detection risk. 
D) Establish policies to ensure that the audit work meets applicable professional standards.

Question 20

Auditors try to achieve independence in appearance in order to:

Accepted Answer

A) maintain public confidence in the profession. 
B) become independent in fact. 
C) comply with the responsibilities principle. 
D) maintain an unbiased mental attitude. 
A) maintain public confidence in the profession. 
B) become independent in fact. 
C) comply with the responsibilities principle. 
D) maintain an unbiased mental attitude.

The fundamental principles developed by the Auditing Standards Board are best described as:

The audit failures of both Enron and WorldCom were examples in which the leadership responsibilities for quality work within the accounting firm were overshadowed by fears that losing a key client would

A CPA firm would provide itself reasonable assurance of meeting its responsibility to offer professional services that conform with professional standards by

Which of the following is an element of a system of quality control that should be considered by a public accounting firm in establishing its quality control policies and procedures?

A vendor's invoice received and held by the client would be considered what type of evidence?

Which of the following statements is not true with respect to the evidence that would be gathered when assessments of control risk are high?

The state of mind that characterizes the auditors' appropriate questioning and critical assessment of audit evidence is referred to as:

Which of the following is an example of the appropriate implementation of a system of quality control?

Which of the following is an important consideration during the planning of the audit?

All of the following statements are true regarding generally accepted auditing standards (GAAS) except:

During which stages of an audit examination are auditors required to exhibit the appropriate use of professional judgment? Gathering Evidence Drawing Conclusions A. Yes No B. Yes Yes C. No Yes D. No No

Under generally accepted auditing standards, which of the following relates to the responsibilities principle?

The primary purpose of the auditors' study of internal control for a non-issuer is:

Which of the following types of audit evidence provides the least assurance of reliability?

Which of the following could serve as a source of professional guidance in the audit of an issuer? Auditing standards Statements on Auditing Issued by the PCAOB Issued by the ASB A. Yes No B. Yes Yes C. No Yes D. No No

The standard auditors' report refers to standards of the PCAOB and GAAP in which section(s)?

Which of the following is true with respect to the PCAOB inspection process?

Which of the following courses of action is most appropriate if an auditor concludes that there is a high risk of material misstatement?

Which of the following actions should a CPA firm take to comply with the AICPA's quality control standards?

Auditors try to achieve independence in appearance in order to:

Auditing and Assurance Services

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Revenue and Collection Cycle 279

Acquisition and Expenditure Cycle 336

Production Cycle 394

Finance and Investment Cycle 443

Completing the Audit 500

Reports on Audited Financial Statements

Filters

Exam 2: Professional Standards

The fundamental principles developed by the Auditing Standards Board are best described as:

The audit failures of both Enron and WorldCom were examples in which the leadership responsibilities for quality work within the accounting firm were overshadowed by fears that losing a key client would

A CPA firm would provide itself reasonable assurance of meeting its responsibility to offer professional services that conform with professional standards by

Which of the following is an element of a system of quality control that should be considered by a public accounting firm in establishing its quality control policies and procedures?

A vendor's invoice received and held by the client would be considered what type of evidence?

Which of the following statements is not true with respect to the evidence that would be gathered when assessments of control risk are high?

The state of mind that characterizes the auditors' appropriate questioning and critical assessment of audit evidence is referred to as:

Which of the following is an example of the appropriate implementation of a system of quality control?

Which of the following is an important consideration during the planning of the audit?

All of the following statements are true regarding generally accepted auditing standards (GAAS) except:

During which stages of an audit examination are auditors required to exhibit the appropriate use of professional judgment? Gathering Evidence Drawing Conclusions A. Yes No B. Yes Yes C. No Yes D. No No

Under generally accepted auditing standards, which of the following relates to the responsibilities principle?

The primary purpose of the auditors' study of internal control for a non-issuer is:

Which of the following types of audit evidence provides the least assurance of reliability?

Which of the following could serve as a source of professional guidance in the audit of an issuer? Auditing standards Statements on Auditing Issued by the PCAOB Issued by the ASB A. Yes No B. Yes Yes C. No Yes D. No No

The standard auditors' report refers to standards of the PCAOB and GAAP in which section(s)?

Which of the following is true with respect to the PCAOB inspection process?

Which of the following courses of action is most appropriate if an auditor concludes that there is a high risk of material misstatement?

Which of the following actions should a CPA firm take to comply with the AICPA's quality control standards?

Auditors try to achieve independence in appearance in order to:

Auditing and Assurance Services

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Revenue and Collection Cycle 279

Acquisition and Expenditure Cycle 336

Production Cycle 394

Finance and Investment Cycle 443

Completing the Audit 500

Reports on Audited Financial Statements

Filters