ACC 403 - Ch 1 and 2

The phrase "generally accepted accounting principles" is an accounting term that a. Encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. b. Is included in the audit report to indicate that the audit has been conducted in accordance with generally accepted auditing standards (GAAS). c. Provides a measure of conventions, rules, and procedures governed by the AICPA. d. Includes broad guidelines of general application but not detailed practices and procedures.

a. Encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.

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: a. Securities and Exchange Commission. b. Auditing Standards Board. c. Government Accounting Standards Board. d. Financial Accounting Standards Board.

a. Securities and Exchange Commission.

Which of the following circumstances most likely would cause an auditor to consider whether material misstatements exist in an entity's financial statements? a. Supporting records that should be readily available are frequently not produced when requested. b. Differences are discovered during the client's annual physical inventory count. c. Significant deficiencies previously communicated have not been corrected. d. Clerical errors are listed on a monthly computer-generated exception report.

a. Supporting records that should be readily available are frequently not produced when requested.

The independent auditor's plan for an examination in accordance with generally accepted auditing standards is influenced by the possibility of material misstatements. The auditor will therefore conduct the examination with an attitude of a. Subjective mistrust. b. Professional skepticism. c. Professional responsiveness. d. Objective indifference.

b. Professional skepticism.

Generally accepted auditing standards are: a. Required procedures to be used to gather evidence to support financial statements. b. Pronouncements issued by the Auditing Standards Board. c. Policies and procedures designed to provide reasonable assurance that the CPA firm and its personnel comply with professional standards. d. Rules acknowledged by the accounting profession because of their universal application.

b. Pronouncements issued by the Auditing Standards Board.

Which of the following is not a primary responsibility of an auditor: a. Provide creditors with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. b. Provide management with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. c. Provide investors with an opinion by the auditor on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. d. Provide regulators with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

b. Provide management with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

With regard to financial statements, the auditor is required to obtain reasonable assurance, which is a level of assurance that is _______. a. objective, and not subjective b. high, but not absolute c. guaranteed, but not absolute d. 100%, but not objective

b. high, but not absolute

An independent auditor must have which of the following? a. A pre-existing and well-informed point of view with respect to the audit. b. Experience in taxation that is sufficient to comply with generally accepted auditing standards. c. Technical training that is adequate to meet the requirements of a professional. d. A background in many different disciplines.

c. Technical training that is adequate to meet the requirements of a professional.

When auditors determine that the financial statements of a private firm are presented fairly in accordance with the applicable financial reporting framework, they issue the standard _______ report, which is often referred to as a "_______" report. a. unqualified, rough b. qualified, clean c. unmodified, clean d. modified, rough

c. unmodified, clean

Under the Sarbanes-Oxley Act of 2002, which of the following is not a stated responsibility of the Public Company Accounting Oversight Board? a. Issuing auditing standards that must be followed by registered public accounting firms in auditing the financial statements of issuers. b. Overseeing the registration of public accounting firms. c. Conducting inspections of registered public accounting firms. d. Issuing accounting standards that must be followed by issuers in financial reporting.

d. Issuing accounting standards that must be followed by issuers in financial reporting.

Section 404 of the Sarbanes-Oxley Act of 2002 requires each annual report of an issuer to include which of the following? a. Representations from the company's external auditors that the company has effective internal control over operations. b. Management representations that the company's external auditors have examined its internal control over compliance with laws and regulations. c. Reasonable assurances that fraud will be identified before the issuance of the company's annual report. d. Management's assessment of the effectiveness of internal control over financial reporting.

d. Management's assessment of the effectiveness of internal control over financial reporting.

A financial statement audit report issued for a public company states that the audit was performed in accordance with which of the following standards? a. Generally accepted auditing standards. b. Sarbanes-Oxley standards. c. Securities and Exchange Commission standards. d. Public Company Accounting Oversight Board standards.

d. Public Company Accounting Oversight Board standards.

Which of the following underlies the application of generally accepted auditing standards, particularly the standards for obtaining sufficient appropriate audit evidence? a. The element of internal control over compliance with laws and regulations. b. The element of "cooperative evidence." c. The element of absolute assurance. d. The elements of materiality and audit risk.

d. The elements of materiality and audit risk.

The Public Company Accounting Oversight Board (PCAOB) has authority to establish which of the following relating to public companies? Attestation standards Independence standards a. Yes; No b. No, No c. No, Yes d. Yes, Yes

d. Yes, Yes