Question 1

Membership in the AICPA is restricted to CPAs who are currently practicing as independent auditors.

Accepted Answer

A) True 
 B)False

Question 2

Professional skepticism must be maintained only if the auditor suspects fraud.

Accepted Answer

A) True 
 B)False

Question 3

The Sarbanes-Oxley Act established the Public Company Accounting Oversight Board (PCAOB). What are the PCAOB's primary functions?

Accepted Answer

The PCAOB has responsibility for providi

Question 4

The SAS number identifies the order in which it was issues in relation to all other SASs.

Accepted Answer

A) True 
 B)False

Question 5

All of the Big Four and many of the smaller CPA firms now operate as Limited Liability Partnerships.

Accepted Answer

A) True 
 B)False

Question 6

List and describe the six elements of quality control. Who establishes the standards for quality control?

Accepted Answer

• Leadership responsibilities for qualit

Question 7

If an auditor of a public company cannot find guidance issued by the PCAOB on a particular audit matter, the auditor should generally seek guidance from which of the following sources?

Accepted Answer

A)  Statements on Auditing Standards 
B)  Statements on Standards for Accounting and Review Services 
C)  Regulations issued by the Securities and Exchange Commission 
D)  The AICPA Code of Professional Conduct 
A)  Statements on Auditing Standards 
B)  Statements on Standards for Accounting and Review Services 
C)  Regulations issued by the Securities and Exchange Commission 
D)  The AICPA Code of Professional Conduct

Question 8

Listed below are policies or procedures that the Crystal Cove audit firm has in place. For each identified policy or procedure state if it is a Generally Accepted Audit Standard (GAAS) or a Quality Control Standard.

Accepted Answer

1. a
2. b

Question 9

A basic objective of a CPA firm is to provide professional services to conform to professional standards. Reasonable assurance of achieving this basic objective is provided through:

Accepted Answer

A)  continuing professional education. 
B)  compliance with generally accepted reporting standards. 
C)  a system of quality control. 
D)  a system of peer review. 
A)  continuing professional education. 
B)  compliance with generally accepted reporting standards. 
C)  a system of quality control. 
D)  a system of peer review.

Question 10

Members of the Public Company Accounting Oversight Board are appointed and overseen by:

Accepted Answer

A)  the U.S. Congress. 
B)  the American Institute of Certified Public Accountants. 
C)  the Auditing Standards Board. 
D)  the Securities and Exchange Commission. 
A)  the U.S. Congress. 
B)  the American Institute of Certified Public Accountants. 
C)  the Auditing Standards Board. 
D)  the Securities and Exchange Commission.

Question 11

Standards issued by the Public Company Accounting Oversight Board must be followed by CPAs who audit:

Accepted Answer

A)  both private and public companies. 
B)  public companies only. 
C)  private companies, public companies, and nonprofit entities. 
D)  private companies only. 
A)  both private and public companies. 
B)  public companies only. 
C)  private companies, public companies, and nonprofit entities. 
D)  private companies only.

Question 12

International Standards on Auditing are issued by the International Auditing Practices Committee.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not one of the responsibilities of an auditor under the principles underlying an audit?

Accepted Answer

A)  Possess appropriate competence and capabilities. 
B)  Comply with ethical requirements. 
C)  Plan work and supervise assistants. 
D)  Maintain professional skepticism and exercise professional judgment. 
A)  Possess appropriate competence and capabilities. 
B)  Comply with ethical requirements. 
C)  Plan work and supervise assistants. 
D)  Maintain professional skepticism and exercise professional judgment.

Question 14

The organization that is responsible for providing oversight for auditors of public companies is called the ________.

Accepted Answer

A)  Auditing Standards Board. 
B)  American Institute of Certified Public Accountants. 
C)  Public Oversight Board. 
D)  Public Company Accounting Oversight Board. 
A)  Auditing Standards Board. 
B)  American Institute of Certified Public Accountants. 
C)  Public Oversight Board. 
D)  Public Company Accounting Oversight Board.

Question 15

The "Principles Underlying an Auditing in Accordance with Generally Accepted Auditing Principles" provides 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 16

Assume the Public Company Accounting Oversight Board (PCAOB) identifies a violation during its inspection of a registered accounting firm. The PCAOB:

Accepted Answer

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

Question 17

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 Audit 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 Audit Standards Board.

Question 18

Sarbanes-Oxley and the Securities Exchange Commission restrict auditors from providing many consulting services to their publically traded audit clients. Which of the following is true for auditors of publically traded companies?
I. They are restricted from providing consulting services to privately held companies.
II. There is no restriction on providing consulting services to non-audit clients.

Accepted Answer

A)  I only 
B)  II only 
C)  I and II 
D)  Neither I or II 
A)  I only 
B)  II only 
C)  I and II 
D)  Neither I or II

Question 19

What are the major functions of the AICPA?

Accepted Answer

Major functions of the AICPA include:
•

Question 20

The following are definitions of terms that are listed on the right. Match the definition with its associated term. Each term can be used once, more than once or not at all.

Accepted Answer

1. i
2. o
3. n
4. a

Exam 2: The CPA Profession

Membership in the AICPA is restricted to CPAs who are currently practicing as independent auditors.

Professional skepticism must be maintained only if the auditor suspects fraud.

The Sarbanes-Oxley Act established the Public Company Accounting Oversight Board (PCAOB). What are the PCAOB's primary functions?

The SAS number identifies the order in which it was issues in relation to all other SASs.

All of the Big Four and many of the smaller CPA firms now operate as Limited Liability Partnerships.

List and describe the six elements of quality control. Who establishes the standards for quality control?

If an auditor of a public company cannot find guidance issued by the PCAOB on a particular audit matter, the auditor should generally seek guidance from which of the following sources?

Listed below are policies or procedures that the Crystal Cove audit firm has in place. For each identified policy or procedure state if it is a Generally Accepted Audit Standard (GAAS) or a Quality Control Standard.

A basic objective of a CPA firm is to provide professional services to conform to professional standards. Reasonable assurance of achieving this basic objective is provided through:

Members of the Public Company Accounting Oversight Board are appointed and overseen by:

Standards issued by the Public Company Accounting Oversight Board must be followed by CPAs who audit:

International Standards on Auditing are issued by the International Auditing Practices Committee.

Which of the following is not one of the responsibilities of an auditor under the principles underlying an audit?

The organization that is responsible for providing oversight for auditors of public companies is called the ________.

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

Assume the Public Company Accounting Oversight Board (PCAOB) identifies a violation during its inspection of a registered accounting firm. The PCAOB:

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

What are the major functions of the AICPA?

The following are definitions of terms that are listed on the right. Match the definition with its associated term. Each term can be used once, more than once or not at all.

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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