Question 1

Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n)

Accepted Answer

A)  accounting and bookkeeping service. 
B)  attestation service. 
C)  assurance service. 
D)  tax service. 
A)  accounting and bookkeeping service. 
B)  attestation service. 
C)  assurance service. 
D)  tax service. B

Question 2

Discuss the similarities and differences between financial statement audits, operational audits, and compliance audits. Give an example of each type.

Accepted Answer

Financial statement audits, operational audits, and compliance audits are similar in that each type of audit involves accumulating and evaluating evidence about information to ascertain and report on the degree of correspondence between the information and established criteria and/or procedures, rules, or regulations. The differences between each type of audit are the information being examined and the criteria used to evaluate the information.
A financial statement audit is conducted to determine whether financial statements are stated in accordance with specified criteria, normally the U.S. or international standards. Auditors not only focus on accounting transactions, but also focus on an integrated approach in which both the risk of misstatements and the operating controls are considered. The auditor must have a thorough understanding of the entity and its environment.
An operational audit evaluates the efficiency and effectiveness of any part of an organization's operating procedures and methods. At completion of an operational audit, management normally expects recommendations for improving operations. In operational auditing, the reviews are not limited to accounting. It is more difficult to objectively evaluate whether the efficiency and effectiveness of operations meets established criteria than it is for compliance and financial statement audits. Also, establishing criteria for evaluating the information in an operational audit is extremely subjective. Thus, operational auditing is more like management consulting than what is usually considered auditing.
A compliance audit is conducted to determine whether the auditee is following specific procedures, rules, or regulations set by some higher authority. Results of compliance audits are typically reported to management, like in the operational audits, rather than to outside users as is done with financial statement audits.
An example of a financial statement audit would be the annual audit of IBM Corporation, in which the external auditors examine IBM's financial statements to determine the degree of correspondence between those financial statements and generally accepted accounting principles. An example of an operational audit would be an internal auditor's evaluation of whether the company's computerized payroll-processing system is operating efficiently and effectively. An example of a compliance audit would be an IRS auditor's examination of an entity's federal tax return to determine the degree of compliance with the Internal Revenue Code.

Question 3

________ risk reflects the possibility that the information upon which the business decision was made was inaccurate.

Accepted Answer

A)  Client acceptance 
B)  Information 
C)  Business 
D)  Control 
A)  Client acceptance 
B)  Information 
C)  Business 
D)  Control B

Question 4

List and discuss the three primary requirements to become a CPA.

Accepted Answer

The three primary requirements for becom

Question 5

An auditor must be competent and have an independent mental attitude.

Accepted Answer

A) True 
 B)False

Question 6

External users of the financial statements

Accepted Answer

A)  value the auditor's report because of the auditor's independence from the client. 
B)  look to the auditor's report as an indication of the statements' reliability. 
C)  use the audited information on the assumption that it is reasonably complete, accurate, and unbiased. 
D)  all of the above. 
A)  value the auditor's report because of the auditor's independence from the client. 
B)  look to the auditor's report as an indication of the statements' reliability. 
C)  use the audited information on the assumption that it is reasonably complete, accurate, and unbiased. 
D)  all of the above.

Question 7

The most common way for users to obtain reliable information is to

Accepted Answer

A)  have an internal audit. 
B)  have an independent audit. 
C)  verify all information individually. 
D)  verify the information with management. 
A)  have an internal audit. 
B)  have an independent audit. 
C)  verify all information individually. 
D)  verify the information with management.

Question 8

Which of the following services provides the lowest level of assurance on a financial statement?

Accepted Answer

A)  review 
B)  audit 
C)  Neither service provides assurance on financial statements. 
D)  Each service provides the same level of assurance on financial statements. 
A)  review 
B)  audit 
C)  Neither service provides assurance on financial statements. 
D)  Each service provides the same level of assurance on financial statements.

Question 9

CPA firms perform numerous services that generally fall outside the scope of assurance services. Give three examples of such services.

Accepted Answer

Three specific examples of services perf

Question 10

When auditing accounting data, auditors focus on

Accepted Answer

A)  determining whether recorded information properly reflects the economic events that occurred during the accounting period. 
B)  determining if fraud has occurred. 
C)  determining if taxable income has been calculated correctly. 
D)  analyzing the financial information to be sure that it complies with government requirements. 
A)  determining whether recorded information properly reflects the economic events that occurred during the accounting period. 
B)  determining if fraud has occurred. 
C)  determining if taxable income has been calculated correctly. 
D)  analyzing the financial information to be sure that it complies with government requirements.

Question 11

What are the four categories of attestation services?

Accepted Answer

The four categories of attestation servi

Question 12

The accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and some established criteria is defined as

Accepted Answer

A)  accounting. 
B)  financial reporting. 
C)  tax reporting. 
D)  auditing. 
A)  accounting. 
B)  financial reporting. 
C)  tax reporting. 
D)  auditing.

Question 13

Which type of auditor audits the financial information prepared by various federal government agencies before it is submitted to Congress?

Accepted Answer

A)  internal auditor 
B)  revenue agent 
C)  independent auditor 
D)  GAO auditor 
A)  internal auditor 
B)  revenue agent 
C)  independent auditor 
D)  GAO auditor

Question 14

Two types of attestation services provided by CPA firms are audits and reviews. Discuss the similarities and differences between these two types of attestation services. Which type provides the least assurance?

Accepted Answer

In both the review and audit of the hist

Question 15

Auditors focus on determining whether recorded information properly reflects the economic events that occurred during the accounting period.

Accepted Answer

A) True 
 B)False

Question 16

Auditors do not provide which of the following?

Accepted Answer

A)  assurance on financial statements 
B)  assurance on the effectiveness of internal controls over financial reporting 
C)  assurance on corporate sustainability reports 
D)  absolute assurance on the financial statements including assuming responsibility for them 
A)  assurance on financial statements 
B)  assurance on the effectiveness of internal controls over financial reporting 
C)  assurance on corporate sustainability reports 
D)  absolute assurance on the financial statements including assuming responsibility for them

Question 17

Which of the following is considered audit evidence?

Accepted Answer

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

Question 18

Three common types of attestation services are

Accepted Answer

A)  audits of historical financial statements, reviews of historical financial statements, and audits of internal control over financial reporting. 
B)  audits of historical financial information, verifications of historical financial information, and attestations regarding internal controls. 
C)  reviews of historical financial information, verifications of future financial information, and attestations regarding internal controls. 
D)  audits of historical financial information, reviews of controls related to investments, and verifications of historical financial information. 
A)  audits of historical financial statements, reviews of historical financial statements, and audits of internal control over financial reporting. 
B)  audits of historical financial information, verifications of historical financial information, and attestations regarding internal controls. 
C)  reviews of historical financial information, verifications of future financial information, and attestations regarding internal controls. 
D)  audits of historical financial information, reviews of controls related to investments, and verifications of historical financial information.

Question 19

Discuss the similarities and differences between the roles of independent auditors, GAO auditors, internal revenue agents, and internal auditors.

Accepted Answer

The roles of all four types of auditors

Question 20

The primary purpose of a compliance audit is to determine whether the financial statements are prepared in compliance with generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Exam 1: The Demand for Audit and Other Assurance Services

Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n)

Discuss the similarities and differences between financial statement audits, operational audits, and compliance audits. Give an example of each type.

________ risk reflects the possibility that the information upon which the business decision was made was inaccurate.

List and discuss the three primary requirements to become a CPA.

An auditor must be competent and have an independent mental attitude.

External users of the financial statements

The most common way for users to obtain reliable information is to

Which of the following services provides the lowest level of assurance on a financial statement?

CPA firms perform numerous services that generally fall outside the scope of assurance services. Give three examples of such services.

When auditing accounting data, auditors focus on

What are the four categories of attestation services?

The accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and some established criteria is defined as

Which type of auditor audits the financial information prepared by various federal government agencies before it is submitted to Congress?

Two types of attestation services provided by CPA firms are audits and reviews. Discuss the similarities and differences between these two types of attestation services. Which type provides the least assurance?

Auditors focus on determining whether recorded information properly reflects the economic events that occurred during the accounting period.

Auditors do not provide which of the following?

Which of the following is considered audit evidence?

Three common types of attestation services are

Discuss the similarities and differences between the roles of independent auditors, GAO auditors, internal revenue agents, and internal auditors.

The primary purpose of a compliance audit is to determine whether the financial statements are prepared in compliance with generally accepted accounting principles.

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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