ACCT 400 ch 1
When the auditing profession recognized that audits designed to discover fraud would be too costly, which of the following were recognized as better fraud protection techniques than audits?
- Strong internal control - Surety bonds
Examples of compliance audit
- Tax return audit by the IRS - Bank examination by bank examiners - Internal auditor examination of internal controls
To which of the following should internal auditors report?
- audit committee - president or high-level executive
The auditing profession's shift in emphasis to taking a greater responsibility for the detection of fraud resulted from ______.
- congressional pressure - successful lawsuits for undetected frauds
Along with establishing standards and rules to guide CPAs, the AICPA also ______.
- contributes to the profession's self-regulation - carries on a program of research and publication - promotes continuing professional education
The Sarbanes-Oxley Act of 2002 ______.
- created the PCAOB to oversee the accounting profession - restricted types of consulting CPAs may perform for public audit clients - increased penalties for corporate fraud
Public accounting firm consulting services ______.
- have tended to become more operational in nature in recent years - are designed to improve the effectiveness and efficiency of clients' operations - include performing executive search service
A group of CPAs is considering options to organize a group practice. The individual CPAs want to ensure their personal assets are protected from any litigation related to services or engagements that the individual CPAs did not personally work on. That protection will be afforded by a ______.
- limited liability partnership - limited liability company
Public accounting firms with offices in most major cities in the United States are called _____ firms.
- may impair the appearance of independence - may make it easier to resolve differences during an audit
Regular membership in the AICPA requires members to ______.
- obtain 120 hours of CPE every three years - abide by the AICPA Code of Professional Conduct
In order to be awarded a CPA certificate, candidates must ______.
- pass all four parts of the uniform CPA exam - satisfy the experience requirements of the licensing state - satisfy the educational requirements of the licensing state
The PCAOB has the responsibility to ______.
- register public accounting firms that audit public companies - conduct investigations and disciplinary proceedings of registered firms - perform inspections of the practices of registered firms
During an audit, evidence is gathered to show that the ______.
- sales on the income statement actually occurred - financial statement amounts are properly classified - balance sheet contains all the liabilities of the company
In order to be granted a CPA license, all states require ______ CPA exam.
- successful completion of - a certain level of education to sit for
The voluntary national organization that establishes standards and rules to guide CPAs in their conduct of professional services is the ______.
AICPA
The AICPA has assigned responsibility for issuing official pronouncements on auditing matters to the ______.
ASB
Which of the following is NOT an example of a compliance audit?
Audit of the efficiency and effectiveness of a department
In 2010, to promote financial stability following the collapse of the subprime market and reversal of the housing boom, Congress passed the ___ - ____ Act, also known as the Wall Street Reform and Consumer Protection Act.
Dodd Frank
In 2010, the PCAOB's scope of responsibility was expanded to include overseeing audits of securities brokers and dealers by the _____ - _____ Act.
Dodd-Frank
The agency that creates generally accepted accounting principles that form the suitable criteria used in a financial statement audit is the ______.
FASB
The Sarbanes-Oxley Act of 2002 created the ______ to regulate audits and auditors of public companies.
PCAOB
The auditing standards for public companies are issued by the ______.
PCAOB
Which attest engagement is designed to provide only a moderate degree of assurance?
Review
The FASB's power has been designated by the ______.
SEC, AICPA
The Auditing Standards Board (ASB) of the AICPA issues auditing standards for the audits of nonpublic companies called ______.
Statement on Auditing Standards (SASs)
Which of the following statements is correct?
The SEC has oversight responsibility for the PCAOB.
The International Federation of Accountants (IFAC) is a global organization of ______.
accounting professional bodies
In a financial statement audit, auditors gather sufficient evidence to issue ______.
an audit report
A CPA with operations in only one city may use the resource of a separate legal entity known as a(n) _____ to provide services to clients in other areas.
association
To improve their capabilities to provide professional services, may CPA firms join a group of firms, typically structured as a(n) _____, which is a separate legal entity.
association
Certified public accountants (CPAs) provide a broad range of information enhancement services known as ___ services
assurance
The board of directors is elected by shareholders to oversee the corporation's activities. The board establishes the ______ committee to provide oversight of financial reporting, regulatory compliance, and risk management.
audit
The large international public accounting firms are known as the _____ _____.
big four
The risk associated with a company's survivability and profitability is ______ risk.
business
Nonprofit organizations that receive financial assistance from the federal government must arrange for a(n) ______ audit to determine whether the financial assistance is spent in accordance with applicable laws and regulations.
compliance
Preparing the federal, state, and local tax returns of clients is the basis of _____ work.
compliance
Audits are often viewed as falling into three major categories: ______ audits, _____ audits and operational audits
compliance, financial
Tax services that are performed by public accounting firms fall into two broad categories: _____ work and tax _____.
compliance, planning
The rules, processes, and laws by which businesses are operated, regulated, and controlled is known as ____ ___.
corporate governance
The AICPA's Code of Professional Conduct sets forth _____ rules for CPA's.
ethical
The CPA examination consists of four parts, which include all of the following except ______.
ethics
The highest form of assurance that CPAs can offer is provided by a(n) ______ engagement.
examination
Many of the Treadway Commission's recommendations lead to a group of Statements on Auditing Standards known as the _ ___.
expectation gap
The audit committee is responsible for appointment, compensation, and oversight of ______.
external auditors
T or F: The passage of the Sarbanes-Oxley Act effectively eliminates the AICPA's influence and responsibility on professional standards.
false
T or F: The pronouncements of boards established by the IFAC override the national accounting standards of its members.
false
Determining whether the balance sheet and related statements of income, retained earnings, and cash flows have been prepared in accordance with GAAP is the goal of a(n) ____ audit.
financial
Fraud investigation services are also referred to as _____ _____ services, which is somewhat broader and includes litigation support.
forensic accounting
In 1996, the AICPA issued guidance to auditors requiring an explicit assessment of the risk of material misstatement in financial statements due to ___ on all audits.
fraud
In 1996, the AICPA issued guidance to auditors requiring an explicit assessment of the risk of material misstatement in financial statements due to ______ on all audits.
fraud
Increased reliance upon sampling and internal control led professional standards to begin to emphasize limitations on the auditors' ability to detect _____
fraud
Forensic accounting services include the investigation of suspected or known _____.
fraud.
The purpose of the Dodd-Frank Act is to ____.
improve accountability and transparency in the financial system
When interacting with clients, the CPA must always ensure the appearance of _____ is not impaired.
independence
A number of large public accounting firms have organized their firms along ______.
industry lines
The credibility added by auditors reduces ______ risk.
information
The Sarbanes-Oxley Act requires a(n) ______ audit for public companies.
integrated
The work of the Treadway Commission increased the demand for attestation by auditors to the effectiveness of ______.
internal control
Beginning in the 1960s, the detection of large-scale fraud assumed a larger role in the audit process and professional standards used the term Blank______ in place of fraud to describe fraudulent financial reporting and misappropriation of assets.
irregularities
The professional ultimately responsible for assuring the audit is performed in accordance with applicable professional standards is the ______.
lead partner
A review of financial statements is designed to provide _____ _____ on the credibility of the statements.
limited assurance
In a financial statement audit, responsibility for the assertion that all assets listed on the balance sheet exist rests with ______.
management
The professional responsible for determining the audit procedures applicable to specific audits and for maintaining uniform standards of fieldwork is the ______.
manager
Many of the duties assigned to partners in smaller firms are performed by _____ in large public accounting firms.
managers
Information risk includes an inherent possibility that the financial statements of a client may contain ___ departures from generally accepted accounting principles
material
The level of assurance provided in a review is ______.
moderate or limited
All shareholders and directors of a professional corporation ______.
must be engaged in the practice of public accounting
Public accounting firms with offices in most major cities in the United States are called ______ firms.
national
When an association shares a common brand name, it is considered a(n)
network
A compilation report on the financial statements provides ______ assurance that the financial statements are presented fairly in accordance with GAAP.
no
Financial statement audits are ______ performed by certified public accounting firms.
normally
The study of a specific unit of an organization for the purpose of measuring its performance is a(n) _____ audit.
operational
The study of a specific unit of an organization for the purpose of measuring its performance is a(n) ______ audit.
operational
To investigate and appraise the effectiveness with which a company's department carries out their assigned functions, internal auditors typically perform _____ audits.
operational
In a public accounting firm, the ______ level is comparable to that of top management in an industrial organization.
partnership
A critical evaluation of one public accounting firm's practices by another public accounting firm is called a(n) _____ _____.
peer review
The PCAOB establishes auditing standards related to audits of _____ companies, also known as issuers.
public
By opening additional offices in neighboring cities or states and increasing the number of professional staff, many local firms have become _____ firms.
regional
An important term in any discussion regarding the impact of the SEC on accounting practice is _____ statement.
registration
Performing consulting services for public company audit clients is ______.
restricted
On-the-job staff training is one of the major responsibilities of the ______.
senior "in-charge" auditor
Preventing the accumulation of excessive staff hours on inconsequential matters is one of the responsibilities of the ______.
senior "in-charge" auditor
The passage of the Sarbanes-Oxley Act ______ the AICPA's influence and responsibility.
significantly diminished
Many public accounting firms are organized as either ______ or ______.
sole practitioners, partnerships
The first position of a college graduate entering the public accounting profession is that of _____ _____.
staff accountant
Automation is increasingly replacing routine procedures previously manually performed by _____ _____.
staff accountants
Permits to practice as a CPA are granted by the ______.
states
All of the following are attestation services except ______.
tax services
T or F: Each of the Big 4 Firms is composed of a group of associated firms that qualify as a network.
true
T or F: Industry specialization is common in large public accounting firms.
true
