Question 1

Match between columns
                        Premises: Formed to improve standards of financial accounting for state and local government entities.
Develop accounting standards for public and nonpublic companies.
Issue CPA certificates.
Develop accounting standards for the U.S. Government.
Issue auditing standards for public companies.
Prepares the CPA exam.

Accepted Answer

The Answer of Government Accounting Standards Board. and Auditing Standards is...

Question 2

Historically, which of the following has the AICPA been most concerned with providing?

Accepted Answer

A)   Professional standards for CPAs.
B)   Professional guidance for regulating financial markets.
C)   Standards guiding the conduct of internal auditors.
D)   Staff support to Congress. A

Question 3

A company is either audited by the GAO or internal auditors, but not both.

Accepted Answer

A) True 
 B)False  False

Question 4

The review of a company's financial statements by a CPA firm:

Accepted Answer

A)   Is substantially less in scope of procedures than an audit.
B)   Requires detailed analysis of the major accounts.
C)   Is of similar scope as an audit and adds similar credibility to the statements.
D)   Culminates in issuance of a report expressing the CPA's opinion as to the fairness of the statements.

Question 5

A typical objective of an operational audit is for the auditor to:

Accepted Answer

A)   Determine whether the financial statements fairly present the entity's operations.
B)   Evaluate the feasibility of attaining the entity's operational objectives.
C)   Make recommendations for improving performance.
D)   Report on the entity's relative success in attaining profit maximization.

Question 6

An annual peer review is a requirement of the AICPA.

Accepted Answer

A) True 
 B)False

Question 7

The American Institute of Certified Public Accountants issues CPA certificates and permits CPAs to practice.

Accepted Answer

A) True 
 B)False

Question 8

Auditing is frequently only a small part of the practice of local CPA firms.

Accepted Answer

A) True 
 B)False

Question 9

The attest function:

Accepted Answer

A)   Is an essential part of every engagement by the CPA, whether performing auditing, tax work, or other services.
B)   Includes the preparation of a report of the CPA's findings.
C)   Requires a consideration of internal control.
D)   Requires a complete review of all transactions during the period under examination.

Question 10

Many small companies elect to have their financial statements reviewed by a CPA firm, rather than incur the cost of an audit.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following terms best describes the audit of a taxpayer's tax return by an IRS auditor?

Accepted Answer

A)   Operational audit.
B)   Internal audit.
C)   Compliance audit.
D)   Government audit.

Question 12

The Sarbanes-Oxley Act of 2002 made significant reforms for public companies and their auditors.
a. Describe the events that led up to the passage of the Act.
b. Describe the major changes made by the Act.

Accepted Answer

The answer of The Sarbanes-Oxley Act of 2002 made significant...

Question 13

Inquiries and analytical procedures ordinarily form the basis for which type of engagement?

Accepted Answer

A)   Agreed-upon procedures.
B)   Audit.
C)   Examination.
D)   Review.

Question 14

Which of the following best describes the reason why independent auditors report on financial statements?

Accepted Answer

A)   A management fraud may exist and it is more likely to be detected by independent auditors.
B)   Different interests may exist between the company preparing the statements and the persons using the statements.
C)   A misstatement of account balances may exist and is generally corrected as the result of the independent auditors' work.
D)   Poorly designed internal control may be in existence.

Question 15

The right to practice as a CPA is given by which of the following organizations?

Accepted Answer

A)   State Boards of Accountancy.
B)   The AICPA.
C)   The SEC.
D)   The General Accounting Office.

Question 16

The organization charged with protecting investors and the public by requiring full disclosure of financial information by companies offering securities to the public is the:

Accepted Answer

A)   Auditing Standards Board.
B)   Financial Accounting Standards Board.
C)   Government Accounting Standards Boards.
D)   Securities and Exchange Commission.

Question 17

The risk associated with a company's survival and profitability is referred to as:

Accepted Answer

A)   Business Risk.
B)   Information Risk.
C)   Detection Risk.
D)   Control Risk.

Question 18

Independent audits of today place more emphasis on sampling than did the audits of the 19th century.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not correct relating to the Sarbanes-Oxley Act?

Accepted Answer

A)   It toughens penalties for corporate fraud.
B)   It restricts the types of consulting CPAs may perform for audit clients.
C)   It created the Public Company Accounting Oversight Board (PCAO
B)   as a replacement for the Financial Accounting Standards Board.
D)   It eliminates a significant portion of the accounting profession's system of self-regulation.

Question 20

Which statement is correct with respect to continuing professional education (CPE) requirements of members of the AICPA?

Accepted Answer

A)   Only members employed by the AICPA are required to take such courses.
B)   Only members in public practice are required to take such courses.
C)   Members, regardless of whether they are in public practice, are required to meet such requirements.
D)   There is no requirement for members to participate in CPE.

Exam 1: The Role of the Public Accountant in the American Economy

Accountants are regulated by a variety of organizations. Match the following statements with the most directly related organizations. Organizations may be used once or not at all.

Historically, which of the following has the AICPA been most concerned with providing?

A company is either audited by the GAO or internal auditors, but not both.

The review of a company's financial statements by a CPA firm:

A typical objective of an operational audit is for the auditor to:

An annual peer review is a requirement of the AICPA.

The American Institute of Certified Public Accountants issues CPA certificates and permits CPAs to practice.

Auditing is frequently only a small part of the practice of local CPA firms.

The attest function:

Many small companies elect to have their financial statements reviewed by a CPA firm, rather than incur the cost of an audit.

Which of the following terms best describes the audit of a taxpayer's tax return by an IRS auditor?

The Sarbanes-Oxley Act of 2002 made significant reforms for public companies and their auditors. a. Describe the events that led up to the passage of the Act. b. Describe the major changes made by the Act.

Inquiries and analytical procedures ordinarily form the basis for which type of engagement?

Which of the following best describes the reason why independent auditors report on financial statements?

The right to practice as a CPA is given by which of the following organizations?

The organization charged with protecting investors and the public by requiring full disclosure of financial information by companies offering securities to the public is the:

The risk associated with a company's survival and profitability is referred to as:

Independent audits of today place more emphasis on sampling than did the audits of the 19^th century.

Which of the following is not correct relating to the Sarbanes-Oxley Act?

Which statement is correct with respect to continuing professional education (CPE) requirements of members of the AICPA?