Question 1

An attestation engagement:

Accepted Answer

A)  Has as its primary source of standards the assurance standards. 
B)  Includes a report on subject matter, or on an assertion about subject matter. 
C)  Includes search and verification procedures for all major accounts. 
D)  Is ordinarily an examination, review or compilation engagement. 
A)  Has as its primary source of standards the assurance standards. 
B)  Includes a report on subject matter, or on an assertion about subject matter. 
C)  Includes search and verification procedures for all major accounts. 
D)  Is ordinarily an examination, review or compilation engagement.

Question 2

By definition, proper professional skepticism on an audit requires: $$\begin{array} { | c | c | c | } 
\hline & \begin{array} { c } 
\text { Questioning } \
\text { mind }
\end{array} & \begin{array} { c } 
\text { Subjective assessment of audit } \
\text { evidence }
\end{array} \
\hline \text { A. } & \text { No } & \text { No } \
\hline \text { B. } & \text { No } & \text { Yes } \
\hline \text { C. } & \text { Yes } & \text { No } \
\hline \text { D. } & \text { Yes } & \text { Yes } \
\hline
\end{array}$$

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 3

The AICPA Statements on Attestation Standards do not supersede the AICPA Statements on Auditing Standards.

Accepted Answer

A) True 
 B)False

Question 4

As compared with the US public company audit report, the international audit report:

Accepted Answer

A)  Is shorter in length. 
B)  Includes enhanced explanation of the audit process. 
C)  Includes the name of the partner and managers on the audit, while the US report includes only the CPA firm name. 
D)  Is dated as of year-end, whereas the US report is dated as of the last date of significant field work. 
A)  Is shorter in length. 
B)  Includes enhanced explanation of the audit process. 
C)  Includes the name of the partner and managers on the audit, while the US report includes only the CPA firm name. 
D)  Is dated as of year-end, whereas the US report is dated as of the last date of significant field work.

Question 5

An audit should be designed to obtain reasonable assurance of detecting material misstatements due to:

Accepted Answer

A)  Errors. 
B)  Errors and fraud. 
C)  Errors, fraud, and noncompliance with laws with a direct effect on financial statement amounts and others. 
D)  Errors, fraud and noncompliance with all laws. 
A)  Errors. 
B)  Errors and fraud. 
C)  Errors, fraud, and noncompliance with laws with a direct effect on financial statement amounts and others. 
D)  Errors, fraud and noncompliance with all laws.

Question 6

Which of the following is explicitly included as a part of the description of management's responsibility in an unmodified audit report?

Accepted Answer

A)  Management is responsible for making a judgment on which misstatements are material vs. immaterial. 
B)  Management is responsible for providing auditors with all relevant evidence. 
C)  Management is responsible for the maintenance of internal control. 
D)  Management is responsible for listing all illegal acts with a direct effect on financial statement amounts and disclosures. 
A)  Management is responsible for making a judgment on which misstatements are material vs. immaterial. 
B)  Management is responsible for providing auditors with all relevant evidence. 
C)  Management is responsible for the maintenance of internal control. 
D)  Management is responsible for listing all illegal acts with a direct effect on financial statement amounts and disclosures.

Question 7

The body that issues international pronouncements providing auditing procedural and reporting guidance is the:

Accepted Answer

A)  International Federation of Auditors. 
B)  Multinational Reporting Commission. 
C)  International Auditing and Assurance Standards Board. 
D)  AICPA Auditing Standards Board. 
A)  International Federation of Auditors. 
B)  Multinational Reporting Commission. 
C)  International Auditing and Assurance Standards Board. 
D)  AICPA Auditing Standards Board.

Question 8

A peer review in which the peer reviewers study and appraise a CPA firm's system of quality control to perform accounting and auditing work is referred to as a(n):

Accepted Answer

A)  Engagement review. 
B)  Inspection review. 
C)  Supervision review. 
D)  System review. 
A)  Engagement review. 
B)  Inspection review. 
C)  Supervision review. 
D)  System review.

Question 9

To present fairly in conformity with generally accepted accounting principles, the financial statements must:

Accepted Answer

A)  Be consistently applied. 
B)  Inform users of all matters that could materially affect a decision. 
C)  Reflect transactions and events within a range of reasonable limits. 
D)  Be considered preferable to the users of those financial statements. 
A)  Be consistently applied. 
B)  Inform users of all matters that could materially affect a decision. 
C)  Reflect transactions and events within a range of reasonable limits. 
D)  Be considered preferable to the users of those financial statements.

Question 10

Within the context of quality control, the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide personnel within the firm with:

Accepted Answer

A)  Technical training that assures proficiency as an auditor. 
B)  Professional education that is required in order to perform with due professional care. 
C)  Knowledge required to fulfill assigned responsibilities and to progress within the firm. 
D)  Knowledge required in order to perform a peer review. 
A)  Technical training that assures proficiency as an auditor. 
B)  Professional education that is required in order to perform with due professional care. 
C)  Knowledge required to fulfill assigned responsibilities and to progress within the firm. 
D)  Knowledge required in order to perform a peer review.

Question 11

An audit provides reasonable assurance of detecting which of the following types of material illegal acts? $$\begin{array} { | l | c | c | } 
\hline & \text { Direct Effect } & \text { Without a Direct Effect } \
\hline \text { A. } & \text { Yes } & \text { Yes } \
\hline \text { B. } & \text { Yes } & \text { No } \
\hline \text { C. } & \text { No } & \text { Yes } \
\hline \text { D. } & \text { No } & \text { No } \
\hline
\end{array}$$

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 12

Authoritative GAAP Sources include: $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { FASB } \
\text { Remediation Statements }
\end{array} & \begin{array} { c } 
\text { FASB } \
\text { Codification }
\end{array} \
\hline \text { A. } & \text { Yes } & \text { Yes } \
\hline \text { B. } & \text { Yes } & \text { No } \
\hline \text { C. } & \text { No } & \text { Yes } \
\hline \text { D. } & \text { No } & \text { No } \
\hline
\end{array}$$

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 13

Which of the following is not an element of quality control?

Accepted Answer

A)  Documentation. 
B)  Engagement performance. 
C)  Monitoring. 
D)  Relevant ethical requirements. 
A)  Documentation. 
B)  Engagement performance. 
C)  Monitoring. 
D)  Relevant ethical requirements.

Question 14

Which of the following is least likely to be directly examined in an inspection performed by the PCAOB?

Accepted Answer

A)  Audit engagements. 
B)  Review engagements. 
C)  Compilation engagements. 
D)  CPA firm quality control system. 
A)  Audit engagements. 
B)  Review engagements. 
C)  Compilation engagements. 
D)  CPA firm quality control system.

Question 15

The auditors' report on a corporation's financial statements usually is addressed to the president of the company.

Accepted Answer

A) True 
 B)False

Question 16

The auditors' report for a nonpublic company should indicate:

Accepted Answer

A)  That the audit was made in accordance with auditing standards generally accepted in the United States of America. 
B)  Any weakness in internal control observed by the auditors. 
C)  That accounting principles have been consistently applied. 
D)  That no illegal acts have been identified. 
A)  That the audit was made in accordance with auditing standards generally accepted in the United States of America. 
B)  Any weakness in internal control observed by the auditors. 
C)  That accounting principles have been consistently applied. 
D)  That no illegal acts have been identified.

Question 17

Which of the following is not included as a part of the description of the auditor's responsibility in a nonpublic company unmodified report?

Accepted Answer

A)  The audit was performed in accordance with generally accepted accounting principles. 
B)  An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. 
C)  The procedures selected depend on the auditor's judgment. 
D)  An audit includes evaluating the appropriateness of accounting policies used. 
A)  The audit was performed in accordance with generally accepted accounting principles. 
B)  An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. 
C)  The procedures selected depend on the auditor's judgment. 
D)  An audit includes evaluating the appropriateness of accounting policies used.

Question 18

A CPA firm establishes quality control policies and procedures for deciding whether to accept a new client or continue to perform services for a current client. The primary purpose for establishing such policies and procedures is:

Accepted Answer

A)  To enable the auditor to attest to the integrity or reliability of a client. 
B)  To comply with the quality control standards established by regulatory bodies. 
C)  To minimize the likelihood of association with clients whose managements lack integrity. 
D)  To lessen the exposure to litigation resulting from failure to detect fraud in client financial statements. 
A)  To enable the auditor to attest to the integrity or reliability of a client. 
B)  To comply with the quality control standards established by regulatory bodies. 
C)  To minimize the likelihood of association with clients whose managements lack integrity. 
D)  To lessen the exposure to litigation resulting from failure to detect fraud in client financial statements.

Question 19

An audit is more likely to detect tax evasion than violations of antitrust laws.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is one of the elements of AICPA quality control?

Accepted Answer

A)  Assurance of proper levels of association. 
B)  Due professional care. 
C)  Engagement performance. 
D)  Supervision. 
A)  Assurance of proper levels of association. 
B)  Due professional care. 
C)  Engagement performance. 
D)  Supervision.

Exam 2: Professional Standards

An attestation engagement:

By definition, proper professional skepticism on an audit requires: Questioning mind Subjective assessment of audit evidence A. No No B. No Yes C. Yes No D. Yes Yes

The AICPA Statements on Attestation Standards do not supersede the AICPA Statements on Auditing Standards.

As compared with the US public company audit report, the international audit report:

An audit should be designed to obtain reasonable assurance of detecting material misstatements due to:

Which of the following is explicitly included as a part of the description of management's responsibility in an unmodified audit report?

The body that issues international pronouncements providing auditing procedural and reporting guidance is the:

A peer review in which the peer reviewers study and appraise a CPA firm's system of quality control to perform accounting and auditing work is referred to as a(n):

To present fairly in conformity with generally accepted accounting principles, the financial statements must:

Within the context of quality control, the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide personnel within the firm with:

An audit provides reasonable assurance of detecting which of the following types of material illegal acts? Direct Effect Without a Direct Effect A. Yes Yes B. Yes No C. No Yes D. No No

Authoritative GAAP Sources include: FASB Remediation Statements FASB Codification A. Yes Yes B. Yes No C. No Yes D. No No

Which of the following is not an element of quality control?

Which of the following is least likely to be directly examined in an inspection performed by the PCAOB?

The auditors' report on a corporation's financial statements usually is addressed to the president of the company.

The auditors' report for a nonpublic company should indicate:

Which of the following is not included as a part of the description of the auditor's responsibility in a nonpublic company unmodified report?

A CPA firm establishes quality control policies and procedures for deciding whether to accept a new client or continue to perform services for a current client. The primary purpose for establishing such policies and procedures is:

An audit is more likely to detect tax evasion than violations of antitrust laws.

Which of the following is one of the elements of AICPA quality control?

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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