Auditing Chapter 1
The Public Company Accounting Oversight Board (PCAOB) is charged with all of the following responsibilities except: a. Establishing accounting standards for public companies b. Establishing auditing standards c. Registering accounting firms that will audit public companies. d. Inspecting accounting firms that will audit public companies.
a. Establishing accounting standards for public companies (The FASB establishes accounting standards. PCAOB establishes auditing standards)
The Sarbanes-Oxley Act of 2002 imposes a mandatory rotation applicable to both the audit engagement partner and the quality control (also called review) partner. How long in total is the partner allowed to serve as the engagement partner or review partner before someone else must serve in that capacity. a. 3 Years b. 5 Years c. 7 Years d. 10 Years
5 Years (Title II of the Sarbanes-Oxley Act of 2002 establishes 5 years as the upper limit for how long someone can serve as the engagement partner or review partner before mandatory rotation is required)
An attestation engagement is one in which a CPA is engaged to a. Issue a written communication expressing a conclusion about the reliability of a written assertion that is the responsibility of another party. b. Provide tax advice or prepare a tax return based on financial information the CPA has not audited or reviewed c. Testify as an expert witness in accounting, auditing, or tax matters, given certain stipulated facts d. Assemble pro forma financial statements based on the representations of the entity's management without expressing any assurance
a. Issue a written communication expressing a conclusion about the reliability of a written assertion that is the responsibility of another party (An attestation engagement is one in which the practitioner is engaged to issue an examination, a review, or an agreed-upon procedures report on subject matter or an assertion about subject matter that is the responsibility of another party)
An entity engaged a CPA to determine whether the client's web sites meet defined criteria for standard business practices and controls over transaction integrity and information protection. In performing this engagement, the CPA should comply with the provisions of a. Statements on Assurance Standards b. Statements on Standards for Attestation Engagements c. Statements on Standards for Management Consulting Services d. Statements on Auditing Standards
b. Statements on Standards for Attestation Engagements (The type of engagement described is a WebTrust assurance engagement. It is performed in accordance with the Statements on Standards for Attestation Engagements)
At least how often should the PCAOB inspect a registered public accounting firm that regularly issues audit reports to 50 issuers? a. Annually b. Every Two Years c. Every Three Years d. As requested by the firm
c. Every Three Years (Registered public accounting firms that audit more than 100 issuers must be inspected annually; those that audit 100 or fewer issuers must be inspected every three years. In this case, a registered public accounting firm that issues audit report to 50 issuers would be inspected every three years)
Under the Sarbanes-Oxley Act of 2002, which of the following is not a stated responsibility of the Public Company Accounting Oversight Board a. Conducting inspections of registered public accounting firms b. Overseeing the registration of public accounting firms. c. Issuing accounting standards that must be followed by issuers in financial reporting. d. Issuing auditing standards that must be followed by registered public accounting firms in auditing the financial statements of issuers.
c. Issuing accounting standards that must be followed by issuers in financial reporting (The PCAOB is a standard-setting body for certain matters related to registered public accounting firms (including auditing and quality control, among other matters). However, the PCAOB is not an accounting standard-setting body and does not promulgate GAAP affecting the financial statements of issuers.)
