Question 1

Which of the following is not an underlying premise of an audit?

Accepted Answer

A)  Management must provide the auditor with all information relevant to the preparation and fair presentation of the financial statements. 
B)  Management and the auditors have responsibility for the preparation of financial statements in accordance with the applicable financial reporting framework. 
C)  Where appropriate, the auditor may obtain information from those charged with governance. 
D)  The auditors should be provided unrestricted access to those within the entity from whom the auditor determines it necessary to obtain audit evidence. 
A)  Management must provide the auditor with all information relevant to the preparation and fair presentation of the financial statements. 
B)  Management and the auditors have responsibility for the preparation of financial statements in accordance with the applicable financial reporting framework. 
C)  Where appropriate, the auditor may obtain information from those charged with governance. 
D)  The auditors should be provided unrestricted access to those within the entity from whom the auditor determines it necessary to obtain audit evidence. B

Question 2

Partners in CPA firms usually have the responsibility for signing the audit report.

Accepted Answer

A) True 
 B)False  True

Question 3

The pronouncements of the International Auditing and Assurance Standards Board do not override the national auditing standards of its members, even when financial statements are issued by a multinational company.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following is not included in the auditors' standard unmodified audit report?

Accepted Answer

A)  The procedures selected by the auditor depend on the auditor's judgment. 
B)  An audit includes evaluating the appropriateness of accounting policies used. 
C)  An audit includes evaluating the overall presentation of the financial statements. 
D)  Accounting principles have been consistently applied. 
A)  The procedures selected by the auditor depend on the auditor's judgment. 
B)  An audit includes evaluating the appropriateness of accounting policies used. 
C)  An audit includes evaluating the overall presentation of the financial statements. 
D)  Accounting principles have been consistently applied.

Question 5

A requirement that working papers be reviewed by the supervisor, and any deficiencies be discussed with the preparer is an example of a quality control procedure in the area of:

Accepted Answer

A)  Acceptance and continuance of client relationships and specific engagements. 
B)  Engagement performance. 
C)  Human resources. 
D)  Relevant ethical requirements. 
A)  Acceptance and continuance of client relationships and specific engagements. 
B)  Engagement performance. 
C)  Human resources. 
D)  Relevant ethical requirements.

Question 6

The Auditing Standards Board's guidance on matters such as the purpose of an audit, the premise of an audit, and auditor personal responsibilities is included in:

Accepted Answer

A)  The 10 Generally Accepted Auditing Standards. 
B)  The Code of Professional Conduct. 
C)  Accounting Series Releases. 
D)  Principles Underlying an Audit Conducted in Accordance with GAAS. 
A)  The 10 Generally Accepted Auditing Standards. 
B)  The Code of Professional Conduct. 
C)  Accounting Series Releases. 
D)  Principles Underlying an Audit Conducted in Accordance with GAAS.

Question 7

Which of the following is the name used to describe financial reporting frameworks other than GAAP which include: cash basis, tax basis, regulatory basis, or contractual basis.

Accepted Answer

A)  Applicable. 
B)  PCAOB. 
C)  Special reports. 
D)  Special purpose. 
A)  Applicable. 
B)  PCAOB. 
C)  Special reports. 
D)  Special purpose.

Question 8

If the auditors discover illegal acts by a client, they ordinarily must immediately resign from the engagement.

Accepted Answer

A) True 
 B)False

Question 9

Financial statements are prepared following a(an)

Accepted Answer

A)  Applicable financial reporting framework. 
B)  Appropriate subject matter. 
C)  Generally accepted auditing standards. 
D)  Set of quality control standards. 
A)  Applicable financial reporting framework. 
B)  Appropriate subject matter. 
C)  Generally accepted auditing standards. 
D)  Set of quality control standards.

Question 10

If noncompliance with a law is discovered during the audit of a publicly held company, the auditors should first:

Accepted Answer

A)  Notify the regulatory authorities. 
B)  Determine who was responsible for the noncompliance. 
C)  Intensify the examination to identify noncompliance with any laws. 
D)  Report the act to high level personnel within the client's organization and to the audit committee. 
A)  Notify the regulatory authorities. 
B)  Determine who was responsible for the noncompliance. 
C)  Intensify the examination to identify noncompliance with any laws. 
D)  Report the act to high level personnel within the client's organization and to the audit committee.

Question 11

In pursuing a CPA firm's quality control objectives, a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm's clients. Which quality control objective would this be most likely to satisfy?

Accepted Answer

A)  Acceptance and continuance of clients and engagements. 
B)  Engagement performance. 
C)  Personnel management. 
D)  Relevant ethical requirements. 
A)  Acceptance and continuance of clients and engagements. 
B)  Engagement performance. 
C)  Personnel management. 
D)  Relevant ethical requirements.

Question 12

Which of the following is a principle underlying an audit conducted in accordance with generally accepted auditing standards?

Accepted Answer

A)  The audit provides reasonable assurance the client will remain in business for at least one year. 
B)  The audit report expresses an opinion on whether the financial statements are free of material and immaterial misstatement. 
C)  Auditors are responsible for, among other things, maintaining professional objectivism, exercising professional engagement, and obtaining appropriate documentation. 
D)  An auditor's opinion enhances the degree of confidence that intended users can place in the financial statements. 
A)  The audit provides reasonable assurance the client will remain in business for at least one year. 
B)  The audit report expresses an opinion on whether the financial statements are free of material and immaterial misstatement. 
C)  Auditors are responsible for, among other things, maintaining professional objectivism, exercising professional engagement, and obtaining appropriate documentation. 
D)  An auditor's opinion enhances the degree of confidence that intended users can place in the financial statements.

Question 13

A requirement to design recruitment processes and procedures to help the firm select individuals meeting minimum academic requirements established by the firm is an example of a quality control procedure in the area of:

Accepted Answer

A)  Acceptance and continuance of client relationships and specific engagements. 
B)  Engagement performance. 
C)  Human resources. 
D)  Relevant ethical requirements. 
A)  Acceptance and continuance of client relationships and specific engagements. 
B)  Engagement performance. 
C)  Human resources. 
D)  Relevant ethical requirements.

Question 14

The Public Company Accounting Oversight Board has authority to establish which of the following relating to public companies? $$\begin{array} { | l | c | c | } 
\hline & \text { Attestation Standards } & \text { Independence Standards } \
\hline \text { A. } & \text { Yes } & \text { Yes } \
\hline \text { B. } & \text { Yes } & \text { No } \
\hline \text { C. } & \text { No } & \text { Yes } \
\hline \text { D. } & \text { No } & \text { No } \
\hline
\end{array}$$

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 15

A peer review is generally performed by employees of the AICPA.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements best describes the primary purpose of Statements on Auditing Standards?

Accepted Answer

A)  They are guides intended to set forth auditing procedures which are applicable to a variety of situations. 
B)  They are procedural outlines which are intended to narrow the areas of inconsistency and divergence of auditor opinion. 
C)  They are authoritative statements, enforced through the Code of Professional Conduct. 
D)  They are interpretations which may be useful guidance to auditors. 
A)  They are guides intended to set forth auditing procedures which are applicable to a variety of situations. 
B)  They are procedural outlines which are intended to narrow the areas of inconsistency and divergence of auditor opinion. 
C)  They are authoritative statements, enforced through the Code of Professional Conduct. 
D)  They are interpretations which may be useful guidance to auditors.

Question 17

An audit should be designed to obtain reasonable assurance of detecting non-compliance with all laws.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not a type of auditors' opinion?

Accepted Answer

A)  Adverse. 
B)  Ordinary. 
C)  Qualified. 
D)  Unmodified. 
A)  Adverse. 
B)  Ordinary. 
C)  Qualified. 
D)  Unmodified.

Question 19

An attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatements, and a critical assessment of audit evidence is referred to as:

Accepted Answer

A)  Reasonable assurance. 
B)  Professional skepticism. 
C)  Audit neutralism. 
D)  Auditing mindset. 
A)  Reasonable assurance. 
B)  Professional skepticism. 
C)  Audit neutralism. 
D)  Auditing mindset.

Question 20

An investor reading the financial statements of The Sundby Corporation observes that the statements are accompanied by an unmodified auditors' report. From this, the investor may conclude that:

Accepted Answer

A)  Any disputes over significant accounting issues have been settled to the auditors' satisfaction. 
B)  The auditors are satisfied that Sundby is operationally efficient. 
C)  The auditors have ascertained that Sundby's financial statements have been prepared accurately. 
D)  Informative disclosures in the financial statements but not necessarily in the footnotes are to be regarded as reasonably adequate. 
A)  Any disputes over significant accounting issues have been settled to the auditors' satisfaction. 
B)  The auditors are satisfied that Sundby is operationally efficient. 
C)  The auditors have ascertained that Sundby's financial statements have been prepared accurately. 
D)  Informative disclosures in the financial statements but not necessarily in the footnotes are to be regarded as reasonably adequate.

Exam 2: Professional Standards

Which of the following is not an underlying premise of an audit?

Partners in CPA firms usually have the responsibility for signing the audit report.

The pronouncements of the International Auditing and Assurance Standards Board do not override the national auditing standards of its members, even when financial statements are issued by a multinational company.

Which of the following is not included in the auditors' standard unmodified audit report?

A requirement that working papers be reviewed by the supervisor, and any deficiencies be discussed with the preparer is an example of a quality control procedure in the area of:

The Auditing Standards Board's guidance on matters such as the purpose of an audit, the premise of an audit, and auditor personal responsibilities is included in:

Which of the following is the name used to describe financial reporting frameworks other than GAAP which include: cash basis, tax basis, regulatory basis, or contractual basis.

If the auditors discover illegal acts by a client, they ordinarily must immediately resign from the engagement.

Financial statements are prepared following a(an)

If noncompliance with a law is discovered during the audit of a publicly held company, the auditors should first:

In pursuing a CPA firm's quality control objectives, a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm's clients. Which quality control objective would this be most likely to satisfy?

Which of the following is a principle underlying an audit conducted in accordance with generally accepted auditing standards?

A requirement to design recruitment processes and procedures to help the firm select individuals meeting minimum academic requirements established by the firm is an example of a quality control procedure in the area of:

The Public Company Accounting Oversight Board has authority to establish which of the following relating to public companies? Attestation Standards Independence Standards A. Yes Yes B. Yes No C. No Yes D. No No

A peer review is generally performed by employees of the AICPA.

Which of the following statements best describes the primary purpose of Statements on Auditing Standards?

An audit should be designed to obtain reasonable assurance of detecting non-compliance with all laws.

Which of the following is not a type of auditors' opinion?

An attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatements, and a critical assessment of audit evidence is referred to as:

An investor reading the financial statements of The Sundby Corporation observes that the statements are accompanied by an unmodified auditors' report. From this, the investor may conclude that:

The Role of the Public Accountant in the American Economy

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property, Plant, and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

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