Question 1

Which of the following is true with regards to the various auditing standards?

Accepted Answer

A)  Statements on Auditing Standards (SASs) are issued by the PCAOB. 
B)  The ASB Clarity Project was intended to make the U.S. auditing standards easier to read, understand, and apply. 
C)  The ASB redrafted existing AICPA auditing standards to align them with respective International Standards on Auditing (ISA's). 
D)  Both B and C are correct. 
A)  Statements on Auditing Standards (SASs) are issued by the PCAOB. 
B)  The ASB Clarity Project was intended to make the U.S. auditing standards easier to read, understand, and apply. 
C)  The ASB redrafted existing AICPA auditing standards to align them with respective International Standards on Auditing (ISA's). 
D)  Both B and C are correct.

Question 2

Has audit quality improved since the passage of Sarbanes-Oxley Act (SOX)? Which of the following statements is true with regards to audit quality since the passage of SOX?

Accepted Answer

A)  The frequency of financial statement restatements has increased since SOX. 
B)  PCAOB audit engagement findings continue to document a high level of audit deficiencies. 
C)  Finally, the auditing professions agrees on the definition of audit quality. 
D)  No progress has been made on the definition of what are called "Audit Quality Indicators" since SOX. 
A)  The frequency of financial statement restatements has increased since SOX. 
B)  PCAOB audit engagement findings continue to document a high level of audit deficiencies. 
C)  Finally, the auditing professions agrees on the definition of audit quality. 
D)  No progress has been made on the definition of what are called "Audit Quality Indicators" since SOX.

Question 3

Which staff level in a CPA firm performs most of the detailed audit work?

Accepted Answer

A)  partner 
B)  staff assistant 
C)  senior auditor 
D)  senior manager 
A)  partner 
B)  staff assistant 
C)  senior auditor 
D)  senior manager

Question 4

Which of the following is not an accurate definition or description of a local CPA firm?

Accepted Answer

A)  Some local CPA firms have several offices. 
B)  Local CPA firms do not compete for clients with the Big Four CPA firms. 
C)  Some local CPA firms are affiliated with other CPA firms to share resources. 
D)  Many local CPA firms provide primarily accounting and tax services to their clients only. 
A)  Some local CPA firms have several offices. 
B)  Local CPA firms do not compete for clients with the Big Four CPA firms. 
C)  Some local CPA firms are affiliated with other CPA firms to share resources. 
D)  Many local CPA firms provide primarily accounting and tax services to their clients only.

Question 5

List the four principles underlying an audit.

Accepted Answer

• Purpose of an audi

Question 6

An auditor need not abide by a particular auditing standard if the auditor believes that

Accepted Answer

A)  the issue in question is immaterial in amount. 
B)  more expertise is needed to fulfill the requirement. 
C)  the requirement of the standard has not been addressed by the PCAOB. 
D)  fraud is involved. 
A)  the issue in question is immaterial in amount. 
B)  more expertise is needed to fulfill the requirement. 
C)  the requirement of the standard has not been addressed by the PCAOB. 
D)  fraud is involved.

Question 7

Similar to the Financial Accounting Standards Board (FASB) Codification, the AICPA has codified the Statement of Auditing Standards.

Accepted Answer

A) True 
 B)False

Question 8

In a CPA firm, the audit partner coordinates the performance of audit procedures.

Accepted Answer

A) True 
 B)False

Question 9

Discuss the relationship between quality control and generally accepted auditing standards.

Accepted Answer

For a CPA firm, quality control comprise

Question 10

Which of the following is not an essential component of quality control?

Accepted Answer

A)  policies and procedures to ensure that firm personnel are actively engaged in marketing strategies 
B)  policies and procedures to ensure that the work performed by firm personnel meet applicable professional standards 
C)  policies to ensure that personnel maintain their independence in fact and in appearance 
D)  policies that ensure that monitoring activities are effectively applied 
A)  policies and procedures to ensure that firm personnel are actively engaged in marketing strategies 
B)  policies and procedures to ensure that the work performed by firm personnel meet applicable professional standards 
C)  policies to ensure that personnel maintain their independence in fact and in appearance 
D)  policies that ensure that monitoring activities are effectively applied

Question 11

Who is responsible for establishing auditing standards for privately held companies?

Accepted Answer

A)  Securities and Exchange Commission 
B)  Public Company Accounting Oversight Board 
C)  Auditing Standards Board 
D)  National Association of Accounting 
A)  Securities and Exchange Commission 
B)  Public Company Accounting Oversight Board 
C)  Auditing Standards Board 
D)  National Association of Accounting

Question 12

The legal right to perform audits is granted to a CPA firm by regulation of

Accepted Answer

A)  each state. 
B)  the Financial Accounting Standards Board (FAS
B) . 
C)  the American Institute of Certified Public Accountants (AICP
A) . 
D)  the Auditing Standards Board. 
A)  each state. 
B)  the Financial Accounting Standards Board (FAS
B) . 
C)  the American Institute of Certified Public Accountants (AICP
A) . 
D)  the Auditing Standards Board.

Question 13

The purpose of establishing quality control policies and procedures to accept or continue a client relationship is to

Accepted Answer

A)  provide reasonable assurance that personnel are adequately trained to fulfill their responsibilities. 
B)  monitor the risk factors concerning misstatements that arise from the misappropriation of assets. 
C)  document objective criteria for the CPA firm's peer review. 
D)  minimize the likelihood of associating with a client whose management may lack integrity. 
A)  provide reasonable assurance that personnel are adequately trained to fulfill their responsibilities. 
B)  monitor the risk factors concerning misstatements that arise from the misappropriation of assets. 
C)  document objective criteria for the CPA firm's peer review. 
D)  minimize the likelihood of associating with a client whose management may lack integrity.

Question 14

The AICPA principles underlying an audit are organized around four principles. Which of the following is not one of those principles?

Accepted Answer

A)  fairness 
B)  responsibilities 
C)  reporting 
D)  performance 
A)  fairness 
B)  responsibilities 
C)  reporting 
D)  performance

Question 15

Which of the following does not describe a size category for a CPA firm?

Accepted Answer

A)  Big Four national firms 
B)  Big Four international firms 
C)  local firms 
D)  national and regional firms 
A)  Big Four national firms 
B)  Big Four international firms 
C)  local firms 
D)  national and regional firms

Question 16

Which of the following is not one of the main sets of auditing standards around the world today?

Accepted Answer

A)  AICPA Auditing Standards 
B)  International Standards on Auditing 
C)  PCAOB Auditing Standards 
D)  Securities and Exchange Commission Auditing Standards 
A)  AICPA Auditing Standards 
B)  International Standards on Auditing 
C)  PCAOB Auditing Standards 
D)  Securities and Exchange Commission Auditing Standards

Question 17

List and describe the three factors that influence the organizational structure of all CPA firms. What are the most common forms of CPA firm organization?

Accepted Answer

The three factors that influence the org

Question 18

The "Principles Underlying an Audit in Accordance with Generally Accepted Auditing Principles" provide a framework to help auditors

Accepted Answer

A)  understand the ten GAAS standards. 
B)  obtain complete assurance that the financial statements are free from any error. 
C)  report on the financial statements. 
D)  prevent fraud. 
A)  understand the ten GAAS standards. 
B)  obtain complete assurance that the financial statements are free from any error. 
C)  report on the financial statements. 
D)  prevent fraud.

Question 19

Which staff level in a CPA firm manages the overall relationship with the client and manages the audit, in general?

Accepted Answer

A)  the audit partner 
B)  the audit staff assistant 
C)  the senior or in-charge auditor with 2-5 years' experience 
D)  the audit manager 
A)  the audit partner 
B)  the audit staff assistant 
C)  the senior or in-charge auditor with 2-5 years' experience 
D)  the audit manager

Question 20

With respect to the SEC,

Accepted Answer

A)  the attitude of the SEC is generally considered in any major change proposed by the FASB. 
B)  the SEC is the sole agency responsible for setting generally accepted accounting principles. 
C)  the SEC requirements of greatest interest to CPAs are set forth in their enforcement regulations. 
D)  the SEC has the power to establish rules for all CPAs. 
A)  the attitude of the SEC is generally considered in any major change proposed by the FASB. 
B)  the SEC is the sole agency responsible for setting generally accepted accounting principles. 
C)  the SEC requirements of greatest interest to CPAs are set forth in their enforcement regulations. 
D)  the SEC has the power to establish rules for all CPAs.

Exam 2: The CPA Profession

Which of the following is true with regards to the various auditing standards?

Has audit quality improved since the passage of Sarbanes-Oxley Act (SOX)? Which of the following statements is true with regards to audit quality since the passage of SOX?

Which staff level in a CPA firm performs most of the detailed audit work?

Which of the following is not an accurate definition or description of a local CPA firm?

List the four principles underlying an audit.

An auditor need not abide by a particular auditing standard if the auditor believes that

Similar to the Financial Accounting Standards Board (FASB) Codification, the AICPA has codified the Statement of Auditing Standards.

In a CPA firm, the audit partner coordinates the performance of audit procedures.

Discuss the relationship between quality control and generally accepted auditing standards.

Which of the following is not an essential component of quality control?

Who is responsible for establishing auditing standards for privately held companies?

The legal right to perform audits is granted to a CPA firm by regulation of

The purpose of establishing quality control policies and procedures to accept or continue a client relationship is to

The AICPA principles underlying an audit are organized around four principles. Which of the following is not one of those principles?

Which of the following does not describe a size category for a CPA firm?

Which of the following is not one of the main sets of auditing standards around the world today?

List and describe the three factors that influence the organizational structure of all CPA firms. What are the most common forms of CPA firm organization?

The "Principles Underlying an Audit in Accordance with Generally Accepted Auditing Principles" provide a framework to help auditors

Which staff level in a CPA firm manages the overall relationship with the client and manages the audit, in general?

With respect to the SEC,

The Demand for Audit and Other Assurance Services

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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