Ch.1 Role of Accountant

25) Which of the following are issued by the Securities and Exchange Commission?

A) Accounting and Auditing Enforcement Releases.

11) A summary of findings rather than assurance is most likely to be included in a(n):

A) Agreed-upon procedures report.

12) The Statements on Auditing Standards have been issued by the:

A) Auditing Standards Board.

45) An audit of the financial statements of a company is referred to as a(n)

A) Financial audit.

39) Operational auditing is primarily oriented toward:

A) Future improvements to accomplish the goals of management.

47) The financial statements of a United States public company are most likely to follow:

A) Generally accepted accounting principles.

24) When compared to an audit performed prior to 1900, an audit today:

A) Is more likely to use sampling.

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

A) Is substantially less in scope of procedures than an audit.

41) An integrated audit performed under the Sarbanes-Oxley Act requires that auditors report on:

A) Option A

16) An engagement in which a CPA firm arranges for a critical review of its practices by another CPA firm is referred to as a(n):

A) Peer Review Engagement.

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

A) Professional standards for CPAs.

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

A) State Boards of Accountancy.

53) Prepares the CPA exam.

Answer: American Institute of Certified Public Accountants.

7) Despite the high cost, most small companies have their financial statements audited by a CPA firm, so they can obtain a loan.

Answer: FALSE

49) Develop accounting standards for the U.S. Government.

Answer: Federal Accounting Standards Advisory Board.

48) Develop accounting standards for public and nonpublic companies.

Answer: Financial Accounting Standards Board.

50) Formed to improve standards of financial accounting for state and local government entities.

Answer: Government Accounting Standards Board.

51) Issue auditing standards for public companies.

Answer: Public Company Accounting Oversight Board.

52) Issue CPA certificates.

Answer: State Boards of Accountancy.

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

B) An audit provides credibility to the financial statements.

46) An act passed by Congress aimed at promoting financial stability improving accountability and transparency in the financial system:

B) Dodd-Frank Act.

23) Attestation risk is limited to a low level in which of the following engagement(s)?

B) Examinations, but not reviews.

30) The FDIC Improvement Act requires that management of large financial institutions engage auditors to attest to assertions by management about the effectiveness of the institution's internal controls over:

B) Financial reporting.

33) Which of the following types of services is generally provided only by CPA firms?

B) Financial statement audits.

22) The attest function:

B) Includes the preparation of a report of the CPA's findings.

13) The risk that a company's financial statements will materially depart from generally accepted accounting principles is referred to as:

B) Information Risk.

43) International Standards on Auditing are issued by

B) International Auditing and Assurance Standards Board.

27) An operational audit differs in many ways from an audit of financial statements. Which of the following is the best example of one of these differences?

B) Operational audits are more subjective and often involve evaluating efficiency and effectiveness of operations.

31) Passage of the Sarbanes-Oxley Act led to the establishment of the:

B) Public Company Accounting Oversight Board.

42) In United States v. Arthur Young, the Supreme Court of the United States described the auditor's role as requiring independence, complete fidelity to the public trust and to serve as a(n):

B) Public watchdog.

18) The Government Accountability Office (GAO):

B) Responsibilities include conducting operational audits to ensure spending meets Congress's requirements.

44) In cases of a publicly traded company audit in the United States, when International Standards on Auditing (ISAs) conflict with the PCAOB, standards, which of the following is correct?

B) The PCAOB standard is applicable.

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

C) Compliance audit.

38) Financial accounting standards for cities are developed primarily by the

C) GASB.

21) Which of the following attributes is more essential for an auditor than of management?

C) Independence.

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

C) It applies to both public and nonpublic audit clients.

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

C) Make recommendations for improving performance.

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

C) Members, regardless of whether they are in public practice, are required to meet such requirements.

17) The sequentially-numbered pronouncements issued by the Auditing Standards Board over a period of years are known as:

C) Statements on Auditing Standards (SASs).

19) The risk associated with survivability and profitability is referred to as

D) Business risk.

20) The risk that a company will not be able to meet its obligations when they become due is an aspect of:

D) Business risk.

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

D) Review.

15) 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:

D) Securities and Exchange Commission.

32) Which of the following professionals has primary responsibility for the performance of an audit?

D) The partner in charge of the engagement.

3) The GAO is limited by statute to performing only compliance audits.

FALSE

5) The American Institute of Certified Public Accountants has the primary authority to establish accounting standards.

FALSE

6) When a CPA firm enrolls in the AICPA Peer Review Program, it agrees to comply with the AICPA's Quality Control Standards and to have a peer review of its accounting and auditing practice every seven years.

FALSE

9) The Sarbanes-Oxley Act requires that auditors of certain publicly traded companies in the United States perform an integrated audit that includes providing assurance on both the financial statements and on compliance with laws and regulations.

FALSE

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

TRUE

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

TRUE

2) The American Institute of Certified Public Accountants creates the CPA Exam, while individual states issue CPA certificates and permits CPAs to practice.

TRUE

4) The SEC does not pass on the merits of the securities that are registered with the agency.

TRUE

8) Senior auditors in CPA firms may be responsible for planning and coordinating audits on smaller engagements.

TRUE