Question 1

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.

Question 2

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.

Question 3

An audit provides reasonable assurance of detecting which of the following types of material illegal acts?

$\begin{array} { lcc} 
&\text { Direct Effect } & \text { Without a Direct Effect  }\
\text { A } & \text { Yes } & \text { Yes } \ \text { B. } & \text { Yes } & \text { No } \ \text { C. } & \text { No } & \text { Yes } \ \text { D. } & \text { No } & \text { No } \end{array}$

Accepted Answer

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

Question 4

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.

Question 5

Which of the following is most likely to be included in a public company financial statement audit report?

Accepted Answer

A) Adverse opinion. 
B) The name of the engagement partner. 
C) The audit was performed in accordance with generally accepted auditing standards. 
D) The year the auditor began serving the company.

Question 6

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.

Question 7

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.

Question 8

By definition,proper professional skepticism on an audit requires:

$\begin{array} { l cc } 
&\text { Questioning mind } & \text { Bubjective assessnent of audit evdence }\
\text { A } & \text { No } & \text { No } \ \text { B. } & \text { No } & \text { Yes } \ \text { C. } & \text { Yes } & \text { No } \ \text { D. } & \text { Yes } & \text { Yes } \end{array}$

Accepted Answer

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

Question 9

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.

Question 10

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.

Question 11

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 professional responsibilities section of the 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 12

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.

Question 13

Ordinarily,a public company audit report must be addressed to:

$\begin{array} { l c c } 
&\text { Board of Directors} & \text {Shareholders } \
 \text { A } & \text { Yes } & \text { Yes } \ \text { B. } & \text { Yes } & \text { No } \ \text { C. } & \text { No } & \text { Yes } \ \text { D. } & \text { No } & \text { No } \end{array}$

Accepted Answer

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

Question 14

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.

Question 15

The primary responsibility for the adequacy of disclosure in the financial statements of a publicly held company rests with the:

Accepted Answer

A) Partner assigned to the audit engagement. 
B) Management of the company. 
C) Auditor in charge of the fieldwork. 
D) Securities and Exchange Commission.

Question 16

Indicate whether you agree or disagree with the following statements concerning a financial statement audit conducted in accordance with generally accepted auditing standards.

Accepted Answer

The answer of Indicate whether you agree or disagree with...

Question 17

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.

Question 18

Which of the following is explicitly included as a part of the description of management's responsibility in a nonpublic company 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.

Question 19

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.

Question 20

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.

Exam 2: Professional Standards

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

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:

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

Which of the following is most likely to be included in a public company financial statement 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:

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?

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

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

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:

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

The primary responsibility for the adequacy of disclosure in the financial statements of a publicly held company rests with the:

Indicate whether you agree or disagree with the following statements concerning a financial statement audit conducted in accordance with generally accepted auditing standards.

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:

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

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

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: