Question 1

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 client's 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 client's whose management may lack integrity. D

Question 2

The Statements on Auditing Standards issued by the Auditing Standards Board:

Accepted Answer

A)  are regarded as authoritative literature. 
B)  are the equivalent of laws for audit practitioners. 
C)  must be followed in all situations. 
D)  are optional guidelines which an auditor may choose to follow or not follow when conducting an audit. 
A)  are regarded as authoritative literature. 
B)  are the equivalent of laws for audit practitioners. 
C)  must be followed in all situations. 
D)  are optional guidelines which an auditor may choose to follow or not follow when conducting an audit. A

Question 3

All CPA firms registered with the PCAOB are required to undergo a peer review annually.

Accepted Answer

A) True 
 B)False  False

Question 4

The form that must be filed with the Securities and Exchange Commission whenever a company plans to issue new securities to the public is the:

Accepted Answer

A)  Form S-1. 
B)  Form 8-K. 
C)  Form 10-K. 
D)  Form 10-Q. 
A)  Form S-1. 
B)  Form 8-K. 
C)  Form 10-K. 
D)  Form 10-Q.

Question 5

The difference between the Securities Act of 1933 and the Securities Act of 1934 is that only the 1934 act requires audited financial statements.

Accepted Answer

A) True 
 B)False

Question 6

Statements on Auditing Standards issued by the AICPA's Auditing Standards Board are:

Accepted Answer

A)  part of the generally accepted auditing standards under the AICPA Code of Professional Conduct. 
B)  interpretations of generally accepted auditing standards and departures from such statements must be justified. 
C)  interpretations of generally accepted auditing standards and such standards must be followed in every engagement. 
D)  generally accepted auditing procedures that are not covered by the AICPA Code of Professional Conduct. 
A)  part of the generally accepted auditing standards under the AICPA Code of Professional Conduct. 
B)  interpretations of generally accepted auditing standards and departures from such statements must be justified. 
C)  interpretations of generally accepted auditing standards and such standards must be followed in every engagement. 
D)  generally accepted auditing procedures that are not covered by the AICPA Code of Professional Conduct.

Question 7

Form 10-K must be filed with the SEC whenever a public company experiences a significant event.

Accepted Answer

A) True 
 B)False

Question 8

When assessing the risk of material misstatements in the financial statements,

Accepted Answer

A)  inadequate internal control procedures will mitigate client business risk. 
B)  GAAS specifies in detail how much and what type of evidence the auditor needs to obtain. 
C)  company management is responsible for determining materiality levels. 
D)  the auditor must have an understanding of the client's business and industry. 
A)  inadequate internal control procedures will mitigate client business risk. 
B)  GAAS specifies in detail how much and what type of evidence the auditor needs to obtain. 
C)  company management is responsible for determining materiality levels. 
D)  the auditor must have an understanding of the client's business and industry.

Question 9

Any public accounting firm can be a member of the AICPA if the firm meets the membership requirements.

Accepted Answer

A) True 
 B)False

Question 10

Sarbanes-Oxley and the Securities Exchange Commission restrict auditors from providing many consulting services to their publically traded audit clients.

Accepted Answer

A) True 
 B)False

Question 11

Statements on Auditing Standards (SASs) are issued by the Public Company Accounting Oversight Board.

Accepted Answer

A) True 
 B)False

Question 12

List and describe the six organizational structures available to CPA firms.

Accepted Answer

CPA firms can take one of six organizati

Question 13

The AICPA has authority to establish standards and rules in all but which of the following areas?

Accepted Answer

A)  Auditing standards applicable to financial statements of private companies 
B)  Compilation and review standards 
C)  Professional conduct 
D)  Auditing standards applicable to financial statements of private and public companies 
A)  Auditing standards applicable to financial statements of private companies 
B)  Compilation and review standards 
C)  Professional conduct 
D)  Auditing standards applicable to financial statements of private and public companies

Question 14

The PCAOB considers International Standards on Auditing (ISAs) when developing its standards.

Accepted Answer

A) True 
 B)False

Question 15

List the four principles underlying an audit.

Accepted Answer

• Purpose of an audi

Question 16

Which of the following statements about Generally Accepted Audit Standards are true?
I. They serve as broad guidelines to auditors for conducting an audit engagement.
II. They are sufficiently specific to provide any meaningful guide to practitioners.
III. They represent a framework upon which the AICPA can provide interpretations..

Accepted Answer

A)  I and II 
B)  I and III 
C)  II and III 
D)  I, II and III 
A)  I and II 
B)  I and III 
C)  II and III 
D)  I, II and III

Question 17

To obtain reasonable assurance about whether the financial statement as a whole are free from material misstatement, the auditor must fulfill several performance responsibilities, including:

Accepted Answer

A)  verifying that all audit work is performed by a CPA with a minimum of three years experience. 
B)  obtaining sufficient, appropriate audit evidence. 
C)  exercising professional judgment. 
D)  providing an opinion one the financial statements. 
A)  verifying that all audit work is performed by a CPA with a minimum of three years experience. 
B)  obtaining sufficient, appropriate audit evidence. 
C)  exercising professional judgment. 
D)  providing an opinion one the financial statements.

Question 18

Which of the following statements is true as it relates to limited liability partnerships?

Accepted Answer

A)  Only senior partners are liable for the partnership's debts. 
B)  Partners have no liability in a limited liability partnership arrangement. 
C)  Partners are personally liable for the acts of those under their supervision. 
D)  All partners must be AICPA members. 
A)  Only senior partners are liable for the partnership's debts. 
B)  Partners have no liability in a limited liability partnership arrangement. 
C)  Partners are personally liable for the acts of those under their supervision. 
D)  All partners must be AICPA members.

Question 19

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 20

Which of the following are audit standards used in professional practice by audit firms?

Accepted Answer

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

Exam 2: The CPA Profession

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

The Statements on Auditing Standards issued by the Auditing Standards Board:

All CPA firms registered with the PCAOB are required to undergo a peer review annually.

The form that must be filed with the Securities and Exchange Commission whenever a company plans to issue new securities to the public is the:

The difference between the Securities Act of 1933 and the Securities Act of 1934 is that only the 1934 act requires audited financial statements.

Statements on Auditing Standards issued by the AICPA's Auditing Standards Board are:

Form 10-K must be filed with the SEC whenever a public company experiences a significant event.

When assessing the risk of material misstatements in the financial statements,

Any public accounting firm can be a member of the AICPA if the firm meets the membership requirements.

Sarbanes-Oxley and the Securities Exchange Commission restrict auditors from providing many consulting services to their publically traded audit clients.

Statements on Auditing Standards (SASs) are issued by the Public Company Accounting Oversight Board.

List and describe the six organizational structures available to CPA firms.

The AICPA has authority to establish standards and rules in all but which of the following areas?

The PCAOB considers International Standards on Auditing (ISAs) when developing its standards.

List the four principles underlying an audit.

To obtain reasonable assurance about whether the financial statement as a whole are free from material misstatement, the auditor must fulfill several performance responsibilities, including:

Which of the following statements is true as it relates to limited liability partnerships?

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

Which of the following are audit standards used in professional practice by audit firms?

The Demand for Audit and Other Assurance Services

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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 and Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls and 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 Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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