Question 1

Financial statement users do not confuse auditing with accounting any longer.

Accepted Answer

A) True 
 B)False

Question 2

One objective of an operational audit is to

Accepted Answer

A)  determine whether the financial statements fairly present the entity's operations. 
B)  determine if the auditee is in compliance with GAAP. 
C)  make recommendations for improving performance. 
D)  report on the entity's relative success in attaining profit maximization. 
A)  determine whether the financial statements fairly present the entity's operations. 
B)  determine if the auditee is in compliance with GAAP. 
C)  make recommendations for improving performance. 
D)  report on the entity's relative success in attaining profit maximization.

Question 3

Explain what is meant by information risk, and list the four causes of this risk.

Accepted Answer

Information risk reflects the possibilit

Question 4

The use of the Certified Public Accountant title is regulated by

Accepted Answer

A)  the federal government. 
B)  state law through the licensing departments of each state. 
C)  the American Institute of Certified Public Accountants through the licensing departments of the tax and auditing committees. 
D)  the Securities and Exchange Commission. 
A)  the federal government. 
B)  state law through the licensing departments of each state. 
C)  the American Institute of Certified Public Accountants through the licensing departments of the tax and auditing committees. 
D)  the Securities and Exchange Commission.

Question 5

In an audit of internal controls over financial reporting, the auditor may rely upon Internal Control - Integrated Framework issued by COSO.

Accepted Answer

A) True 
 B)False

Question 6

Audits

Accepted Answer

A)  are an assurance service, but not an attestation service. 
B)  are designed to provide absolute assurance that the financial statements are free of material misstatement. 
C)  are required for publicly traded companies in the United States. 
D)  do not require the auditor to express their opinion in a written report. 
A)  are an assurance service, but not an attestation service. 
B)  are designed to provide absolute assurance that the financial statements are free of material misstatement. 
C)  are required for publicly traded companies in the United States. 
D)  do not require the auditor to express their opinion in a written report.

Question 7

One criterion used by an external auditor to evaluate published financial statements is known as generally accepted auditing standards.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following are required to have a written report regarding the assertion of another party?

Accepted Answer

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

Question 9

Section 404 of the Sarbanes-Oxley Act requires public companies to have an external auditor attest to their internal control over financial reporting.

Accepted Answer

A) True 
 B)False

Question 10

The primary purpose of a management consulting engagement is to generate a recommendation to management.

Accepted Answer

A) True 
 B)False

Question 11

Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called

Accepted Answer

A)  finance. 
B)  auditing. 
C)  accounting. 
D)  economics. 
A)  finance. 
B)  auditing. 
C)  accounting. 
D)  economics.

Question 12

Results of compliance audits are typically reported to the company's management rather than to a broad spectrum of outside users.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following audits can be regarded as generally being a compliance audit?

Accepted Answer

A)  IRS agents' examinations of taxpayer returns 
B)  GAO auditor's evaluation of the computer operations of governmental units 
C)  an internal auditor's review of a company's payroll authorization procedures 
D)  a CPA firm's audit of a public company 
A)  IRS agents' examinations of taxpayer returns 
B)  GAO auditor's evaluation of the computer operations of governmental units 
C)  an internal auditor's review of a company's payroll authorization procedures 
D)  a CPA firm's audit of a public company

Question 14

The AICPA completed a significant revision of the CPA examination effective April 1, 2017. In total, the CPA Examination has four sections, and the total number of hours these four sections involve when taking the Examination is

Accepted Answer

A)  16 hours, 4 hours for each section. 
B)  20 hours, 5 hours for each section. 
C)  16 hours, 5 hours each for two of the sections, 3 hours for the other two sections. 
D)  20 hours, 6 hours for two of the sections, 4 hours for the other two sections. 
A)  16 hours, 4 hours for each section. 
B)  20 hours, 5 hours for each section. 
C)  16 hours, 5 hours each for two of the sections, 3 hours for the other two sections. 
D)  20 hours, 6 hours for two of the sections, 4 hours for the other two sections.

Question 15

Most public companies' audited financial statements are available on the SEC's EDGAR database.

Accepted Answer

A) True 
 B)False

Question 16

In circumstances where the auditor is being asked to audit subjective types of information, typically, the auditor and the entities being audited should agree in writing about the criteria being audited after the audit starts.

Accepted Answer

A) True 
 B)False

Question 17

Internal auditors

Accepted Answer

A)  must be independent of the entity that employs them. 
B)  report to the accounting department. 
C)  are employed by all types of organizations. 
D)  must be CPAs. 
A)  must be independent of the entity that employs them. 
B)  report to the accounting department. 
C)  are employed by all types of organizations. 
D)  must be CPAs.

Question 18

Large businesses, especially, have the ability to reduce information risk. Which of the following is not a way for a large business to reduce information risk?

Accepted Answer

A)  Paying higher interest rates on loans. 
B)  The user verifies the information they need by any possible means. 
C)  The user of information shares information risk with management. 
D)  Having an independent audit performed of the financial statements. 
A)  Paying higher interest rates on loans. 
B)  The user verifies the information they need by any possible means. 
C)  The user of information shares information risk with management. 
D)  Having an independent audit performed of the financial statements.

Question 19

Which of the following can be used as a criterion for evaluating information being audited?

Accepted Answer

A)  International Financial Reporting Standards (IFRS) 
B)  Generally Accepted Accounting Principles (GAAP) 
C)  Internal Revenue Code (IR
C)  
D)  all of the above 
A)  International Financial Reporting Standards (IFRS) 
B)  Generally Accepted Accounting Principles (GAAP) 
C)  Internal Revenue Code (IR
C)  
D)  all of the above

Question 20

CPA firms are never allowed to provide bookkeeping services for clients.

Accepted Answer

A) True 
 B)False

Exam 1: The Demand for Audit and Other Assurance Services

Financial statement users do not confuse auditing with accounting any longer.

One objective of an operational audit is to

Explain what is meant by information risk, and list the four causes of this risk.

The use of the Certified Public Accountant title is regulated by

In an audit of internal controls over financial reporting, the auditor may rely upon Internal Control - Integrated Framework issued by COSO.

Audits

One criterion used by an external auditor to evaluate published financial statements is known as generally accepted auditing standards.

Which of the following are required to have a written report regarding the assertion of another party?

Section 404 of the Sarbanes-Oxley Act requires public companies to have an external auditor attest to their internal control over financial reporting.

The primary purpose of a management consulting engagement is to generate a recommendation to management.

Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called

Results of compliance audits are typically reported to the company's management rather than to a broad spectrum of outside users.

Which of the following audits can be regarded as generally being a compliance audit?

The AICPA completed a significant revision of the CPA examination effective April 1, 2017. In total, the CPA Examination has four sections, and the total number of hours these four sections involve when taking the Examination is

Most public companies' audited financial statements are available on the SEC's EDGAR database.

In circumstances where the auditor is being asked to audit subjective types of information, typically, the auditor and the entities being audited should agree in writing about the criteria being audited after the audit starts.

Internal auditors

Large businesses, especially, have the ability to reduce information risk. Which of the following is not a way for a large business to reduce information risk?

Which of the following can be used as a criterion for evaluating information being audited?

CPA firms are never allowed to provide bookkeeping services for clients.

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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