auditing chapter 2 homework

Fraudulent financial reporting 1. Yes 2. yes 3. no 4. No

misappropriation of assets yes no yes no

g) The general group of the 10 PACOB auditing standards requires that: 1. The auditors maintain an independent mental attitude 2. The audit be conducted in conformity with generally accepted accounting principles 3. Assistants, if any, be properly supervised 4. The auditors obtain an understanding of internal control

1. Mental attitude is required while the other options are wrong

j) Which of the following is not included in an integrated audit report on the financial statements of a public company? 1. The report states that the audit was performed in accordance with AICPA standards 2. The report indicated that the financial statements are the responsibility of management 3. The report indicated that the auditors have also audited the effectiveness of the company's internal control 4. The report is signed in the name of the CPA firm

1. A report states if it was in accordance with Public company accouting oversight boards not AICPA standards

i) An audit provides reasonable assurance of detecting material:

1. yes yes An audit will provide evidence of both of these

d) Financial statements audits performed under PCAOB requirements are designed too provide which type(s) of assurance with respect to the detection of material misstatements due to errors or fraud? Reasonable Absolute 1. Yes yes 2. Yes no 3. No yes 4. No no

2.

c) Which of the following does the FASB considered a source of nonauthoritative guidance for use when there is no authoritive guidance available? 1. The FASB codification 2. FASB concepts statements 3. SEC rules 4. SEC interpretive releases

2. All other options are all interpretive publications

e) A basic objective of a CPA firm is to provide professional services that conform with professional standards. Reasonable assurance of achieving this basic objective is providing through: 1. Compliance with generally accepted reporting standards 2. A system of quality control 3. A system of peer review 4. Continuing professional education

2. Quality control provides reasonable assurance of professional services that conform with professional standards

b) The AICPA over time has played an important role in standards setting. Which of the following standards are currently established by the AICPA? 1. Accounting standards applicable to nonpublic companies 2. Auditing standards applicable to audits of nonpublic companies 3. Quality control standards applicable to audits of public companies 4. Standards for reviews of the interim financial information issued by public companies

2. They set the standards

k) Audit firms that are subject to inspections by the PCAOB staff include: 1. All audit firms 2. Audit firms that are registered with the SEC 3. Audit firms that are registered with the PCAOB 4. Audit firms that are registered with a state board of accountancy

3, Only firms subject to inspection are the ones registered with the PCAOB

f) Which of the following is not explicitly included in a standard report for a nonpublic company? 1. The CPA's opinion that the financial statements comply with generally accepted accounting principles 2. That generally accepted auditing standards were followed during the audit 3. That internal control of the client was satisfactory 4. An identification of the financial statements audited

3. Internal control is not explicitly listed like the others

h) Which AICPA quality control standards would most likely be satisfied when a CPA firm maintains records indicating which partners or employees of the firm were previously employed by the CPA firm's clients? 1. Professional relationship 2. Engagement performance 3. Relevant ethical requirements 4. Monitoring

3. It's a quality control policy

l) Which of the following is not a difference noted when comparing the AICPA audit report to the international audit report? 1.The international audit report may use the phrase "true and fair view" 2. The international audit report may be signed using the personal name of the audit partner, the audit the audit firm, or both 3. The international audit report requires inclusion of the city of the CPA firm office that performed the audit 4. The international audit report includes an opinion on internal control

4.

a) Which of the following organizations can revoke the right of an individual to practice as a CPA: 1. The Public Company Accounting Oversight Board 2. The American Institute of Certified Public Accountants 3. The Securities and Exchange Commissions 4. The applicable state board of accountancy

4. This is because the state is the one who issues the licence

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Peer review is required for CPA firms

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Peer review is the review of the quality control within a firm.

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Quality control is firm requirements

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Reed is responsible to find these errors and possible fraud. He is also responsible to find all the noncompliance and make sure that they become compliant.

2. What is the difference between generally accepted accounting principles (GAAP) and AICPA generally accepted auditing standards (GAAS)?

The difference between GAAP and GAAS is that GAAP tries to have some standards while GAAS is more of the framework.

7. Evaluate the following quote "If a CPA firm completes a nonpublic company audit of Adam Company's financial statements following the AICPA generally accepted auditing standards and is satisfied with the results of the audit, an unmodified audit report may be issued. On the other hand, if no audit is performed of the current year's financial statements, but the CPA firm has performed satisfactory audits in the prior years, has confidence in the management of the company, and makes a quick review of the current year's financial statements, a qualified report may be issued? Do you agree? Give reasons to support your answer

The first part is true while the second part is not true. It is not true because the auditor must complete the audit to have any idea of what is going on in the firm since it changes each year