Question 1

Discuss the purpose of the Securities and Exchange Commission and its influence on setting generally accepted accounting principles.

Accepted Answer

The overall purpose of the SEC is to ass

Question 2

The four categories for describing the size of audit firms include: the Big Four international firms; national firms; regional and local firms; and small firms. Which of the following is not a characteristic of a small firm?

Accepted Answer

A)  Most have fewer than 25 professionals. 
B)  They perform audits on small and not-for-profit businesses. 
C)  Tax services are more important to their practice than auditing. 
D)  They do not audit publically traded companies. 
A)  Most have fewer than 25 professionals. 
B)  They perform audits on small and not-for-profit businesses. 
C)  Tax services are more important to their practice than auditing. 
D)  They do not audit publically traded companies.

Question 3

Membership in the AICPA is mandatory for all licensed practicing CPAs.

Accepted Answer

A) True 
 B)False

Question 4

The International Standards on Auditing (ISAs):

Accepted Answer

A)  are issued by the AICPA. 
B)  override a country's regulations governing the audit of a company. 
C)  has many of the same standards as the Auditing Standards Board (AS
B) . 
D)  must be followed by companies whose stock is traded in the U.S. 
A)  are issued by the AICPA. 
B)  override a country's regulations governing the audit of a company. 
C)  has many of the same standards as the Auditing Standards Board (AS
B) . 
D)  must be followed by companies whose stock is traded in the U.S.

Question 5

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)  any of the above three are correct. 
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)  any of the above three are correct.

Question 6

Many small/local accounting firms do not perform audits as their primary services to their clients include accounting and tax.

Accepted Answer

A) True 
 B)False

Question 7

The overall purpose of the Securities and Exchange Commission is to assist in providing investors with reliable information upon which to make investment decisions.

Accepted Answer

A) True 
 B)False

Question 8

Generally Accepted Auditing Standards (GAAS) and Statements on Auditing Standards (SAS) should be looked upon by practitioners as:

Accepted Answer

A)  ideals to work towards, but which are not achievable. 
B)  maximum standards that denote excellent work. 
C)  minimum standards of performance that must be achieved on each audit engagement. 
D)  benchmarks to be used on all audits, reviews, and compilations. 
A)  ideals to work towards, but which are not achievable. 
B)  maximum standards that denote excellent work. 
C)  minimum standards of performance that must be achieved on each audit engagement. 
D)  benchmarks to be used on all audits, reviews, and compilations.

Question 9

Historically auditing standards have been organized into three categories, including:

Accepted Answer

A)  Standards of field work. 
B)  Purpose of an audit. 
C)  Responsibilities of the auditor. 
D)  Proper planning and supervision. 
A)  Standards of field work. 
B)  Purpose of an audit. 
C)  Responsibilities of the auditor. 
D)  Proper planning and supervision.

Question 10

The Public Company Accounting Oversight Board (PCAOB) provides oversight to auditors of publically traded and private companies.

Accepted Answer

A) True 
 B)False

Question 11

For privately held companies who of the following is responsible for establishing auditing standards?

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

In order to properly plan and perform an audit, an important fact for both the auditor and the client to understand is that:

Accepted Answer

A)  the internal control policies and procedures are developed by the auditors. 
B)  the purpose of an audit is to prevent fraud. 
C)  management is responsible for the preparation of the financial statements. 
D)  management can restrict the auditor's access to important information relevant to the financial statements. 
A)  the internal control policies and procedures are developed by the auditors. 
B)  the purpose of an audit is to prevent fraud. 
C)  management is responsible for the preparation of the financial statements. 
D)  management can restrict the auditor's access to important information relevant to the financial statements.

Question 13

Statements on Standards for Accounting and Review Services are issued by the:

Accepted Answer

A)  Accounting and Review Services Committee. 
B)  Professional Ethics Executive Committee. 
C)  Securities and Exchange Commission. 
D)  Financial Accounting Standards Board. 
A)  Accounting and Review Services Committee. 
B)  Professional Ethics Executive Committee. 
C)  Securities and Exchange Commission. 
D)  Financial Accounting Standards Board.

Question 14

Limited liability companies are structured and taxed like a general partnership, but their owners have limited personal liability similar to that of a general corporation.

Accepted Answer

A) True 
 B)False

Question 15

The form that must be completed and filed with the Securities and Exchange Commission whenever a company experiences a significant event that is of interest to public investors 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 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 that are applicable to a variety of situations. 
B)  They are procedural outlines that 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, and are intended to limit the degree of auditor judgment. 
D)  They are interpretations that are intended to clarify the meaning of "generally accepted auditing standards." 
A)  They are guides intended to set forth auditing procedures that are applicable to a variety of situations. 
B)  They are procedural outlines that 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, and are intended to limit the degree of auditor judgment. 
D)  They are interpretations that are intended to clarify the meaning of "generally accepted auditing standards."

Question 17

Hansen Corporation's stock is listed on a national stock exchange and registered with the Securities and Exchange Commission. Hansen's management hires a CPA to perform an independent audit of Hansen's financial statements. The primary objective of this audit is to provide assurance to the:

Accepted Answer

A)  investors in Hansen Corporation's stock. 
B)  stock exchange. 
C)  Securities and Exchange Commission. 
D)  management of Hansen Corporation. 
A)  investors in Hansen Corporation's stock. 
B)  stock exchange. 
C)  Securities and Exchange Commission. 
D)  management of Hansen Corporation.

Question 18

Which of the following is an element of the CPA's quality control system that should be considered in establishing it's quality control policies and procedures?

Accepted Answer

A)  Considering audit risk and materiality. 
B)  Using statistical sampling techniques. 
C)  Assigning personnel to engagements. 
D)  Complying with laws and regulations. 
A)  Considering audit risk and materiality. 
B)  Using statistical sampling techniques. 
C)  Assigning personnel to engagements. 
D)  Complying with laws and regulations.

Question 19

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

Accepted Answer

A)  technical training that assures proficiency as a valuation expert. 
B)  professional education that is required in order to perform with due professional care. 
C)  knowledge required to fulfill assigned responsibilities. 
D)  knowledge required to perform a peer review. 
A)  technical training that assures proficiency as a valuation expert. 
B)  professional education that is required in order to perform with due professional care. 
C)  knowledge required to fulfill assigned responsibilities. 
D)  knowledge required to perform a peer review.

Question 20

Which one of the following is not true regarding the American Institute of Certified Public Accountants peer review requirement?

Accepted Answer

A)  A CPA firm must develop and adhere to quality control standards. 
B)  Peer reviews are mandatory. 
C)  A CPA firm will lose AICPA eligibility if a peer review is not performed. 
D)  Firms required to be registered with and inspected by the PCAOB are exempt. 
A)  A CPA firm must develop and adhere to quality control standards. 
B)  Peer reviews are mandatory. 
C)  A CPA firm will lose AICPA eligibility if a peer review is not performed. 
D)  Firms required to be registered with and inspected by the PCAOB are exempt.

Exam 2: The CPA Profession

Discuss the purpose of the Securities and Exchange Commission and its influence on setting generally accepted accounting principles.

The four categories for describing the size of audit firms include: the Big Four international firms; national firms; regional and local firms; and small firms. Which of the following is not a characteristic of a small firm?

Membership in the AICPA is mandatory for all licensed practicing CPAs.

The International Standards on Auditing (ISAs):

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

Many small/local accounting firms do not perform audits as their primary services to their clients include accounting and tax.

The overall purpose of the Securities and Exchange Commission is to assist in providing investors with reliable information upon which to make investment decisions.

Generally Accepted Auditing Standards (GAAS) and Statements on Auditing Standards (SAS) should be looked upon by practitioners as:

Historically auditing standards have been organized into three categories, including:

The Public Company Accounting Oversight Board (PCAOB) provides oversight to auditors of publically traded and private companies.

For privately held companies who of the following is responsible for establishing auditing standards?

In order to properly plan and perform an audit, an important fact for both the auditor and the client to understand is that:

Statements on Standards for Accounting and Review Services are issued by the:

Limited liability companies are structured and taxed like a general partnership, but their owners have limited personal liability similar to that of a general corporation.

The form that must be completed and filed with the Securities and Exchange Commission whenever a company experiences a significant event that is of interest to public investors is the:

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

Hansen Corporation's stock is listed on a national stock exchange and registered with the Securities and Exchange Commission. Hansen's management hires a CPA to perform an independent audit of Hansen's financial statements. The primary objective of this audit is to provide assurance to the:

Which of the following is an element of the CPA's quality control system that should be considered in establishing it's quality control policies and procedures?

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

Which one of the following is not true regarding the American Institute of Certified Public Accountants peer review requirement?

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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