Audit Ch. 1
Audit committees have been identified as a major factor in promoting independence in both internal and external auditors. Which of the following is the most important limitation on the effectiveness of audit committees?
Audit committees are composed of independent directors. However, those directors may have close personal and professional friendships with management.
Who establishes generally accepted auditing standards?
Auditing Standards Board and the Public Company Accounting Oversight Board.
Which of the following is the authoritative body designated to promulgate attestation standards?
Auditing Standards Board.
Quality control fora CPA firm, as referred to in Statements on Quality Control Standards (SQCS), applies to
Auditing and accounting and review services
Beth babe, CPA, is associated with a client's financial statements but is not independent with respect to that client. If she is requested to perform and audit on the financial statements, she should
Disclaim an opinion.
In connection with the element of monitoring a CPA firm's system of quality control ordinarily should provide for the maintenance of
Documentation to demonstrate compliance with its policies and procedures.
The objective of assurance services is to
Enhance decision making.
An auditor must obtain professional experience primarily to
Exercise professional judgment
An audit of the financial statements of Camden Corporation is being conducted by an external auditor. The external auditor is expected to
Express an opinion as to the fairness of Camden's financial statements.
In performing an attest engagement, a CPA most likely
Expresses an opinion or conclusion about a written assertion.
Several sources of U.S. GAAP consulted by an auditor are in conflict as to the application of an accounting principle. Which of the following should the auditor consider the most authoritative?
FASB Accounting Standards Codification
Assurance services differ from consulting services in that assurance services
Focus on Involve Monitoring of Providing advice One party by another NO YES
A firm of independent auditors must establish and follow quality control policies and procedures because these standards
Give reasonable assurance that the firm as a whole will conform with applicable auditing standards.
A CPA firm is reasonably assured of meeting its responsibility to provide services that conform with professional standards by
Having an appropriate system of quality control
Which of the following are elements of a CPA firm's quality control that should be considered in establishing its quality control policies and procedures?
Human Monitoring Engagement Resources Performance YES YES YES
The guidance least likely to apply to personal financial planning (PFP) Engagements is
Independence Rule
GAAS require the auditor to be independent. An auditor is independent if he is
Independent in fact and in appearance
Assurance and advisory services are best described as
Independent professional services that improve the quality of information, or its context, for decision makers.
The Committee of Sponsoring Organizations (COSO) of the Treadway Commission issued a document in 1992 that has been embraced by numerous organizations, including the AICPA and the GAO. That document is titled
Internal Control - Integrated Framework.
The requirement to promote a culture of quality is most closely associated with which of the following quality control elements?
Leadership responsibilities for quality within the firm
Users of an issuer's financial statements demand independent audits because
Management may not be objective in reporting.
Which of the following is an element of a CPA firm's quality control system that should be considered in establishing its quality control policies and procedures?
Managing human resources
Quality control policies and procedures should be relevant, adequate, effective, and complied with. This statement is most closely associated with the quality control element of
Monitoring
For the purposes of SSARSs, which of the following is a nonissuer?
A closely held corporation.
Independent CPAs perform audits on the financial statement of issuers. This type of auditing can best be described as
A discipline that attests to financial information presented by management.
A CPA in public practice is required to comply with the provisions of the Statements on Standards for Accounting and Review Services when
Advising a client Advocating a Regarding the selection client's position of computer software before the IRS NO NO
CPAs within each state have formed state societies or associations of CPAs. Which of the following statements about these associations is false?
All CPAs in the state must be members of the state association or society.
Which of the following professional services is considered an attest engagement?
An engagement to report on compliance with statutory requirements.
Williams & Co. is a medium-sized CPA firm enrolled in the Private Companies Practice Section (PCPS). The firm is to have a peer review under the AICPA Peer Review program. The review will most likely be performed by
Another CPA firm.
Audit standards require that the engagement partner
Be responsible for the assignment of tasks to, and supervision of, assistants.
Brand-new Company is going public, and its stock will be listed on a stock exchange. Audit financial statements are required to be filed with the Securities and Exchange Commission (SEC). Who is expected to be the primary user of the audit financial statements?
Brand-new Company's Investors.
Notes that are included with financial statements are the responsibility of the
Company's management.
Statements on Standards for Accounting and Review Services establish standards and procedures for which of the following engagements?
Compiling and individual's personal financial statement to be used to obtain a mortgage.
Anyone inquiring about the professional reputation and standing of a CPA firm may contact the AICPA Division for CPA firms and expect to receive
Copies of peer review reports on the CPA firm after the reports have been accepted.
Competence as an independent auditor includes all of the following except
Warranting the infallibility of the work performed
In connection with the element of ham resources, a CPA firm's system of quality control should ordinarily provide that all personnel
Participate in professional development activities that enable them to fulfill responsibilities assigned.
Which of the following services, if any, May an accountant who is not independent provide?
Preparations and compilations but not reviews.
The primary reason for an audit by an independent, external audit firm is to
Provide increased assurance to users as to the fairness of the financial statements.
One purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to
Provide reasonable assurance that the integrity of the client is considered.
In pursuing a CPA firm's quality control objective, a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm were previously employed by the CPA firm's clients. Which quality control element is this procedure most likely to satisfy?
Relevant ethical requirements
AICPA members in the practice of public accounting with a firm that is registered and inspected by the Public Company Accounting Oversight Board (PCAOB) may be associated with the firm only if it is enrolled the AICPA Center for Public Company Audit Firms Peer Review Program (Center PRP). The purpose of the Center PRP is to
Review and evaluate those portions of a firm's practice that are not inspected by the PCAOB.
According to AU-C 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Generally Accepted Auditing Standards, "presumptively mandatory requirements" in the auditing standards use which word?
Should
The AICPA peer review standards define three levels of peer review. The highest level is a
System Review
The nature and extent of a CPA Firms's quality control policies and procedures depend on
The CPA The nature Cost-Benefit Firm's Size of the CPA Considerations Firm's Practice YES YES YES
Within the context of quality control, the primary purpose of continuing professional education (CPE) and training activities is to provide a CPA firm with reasonable assurance that personal within the firm have
The ability to fulfill assigned responsibilities and the qualifications for advancement.
The practitioner's report on the examination of prospective financial statements should include all of the following except
The practitioner's opinion that the prospective results will be attained.
Through legal precedent, generally accepted auditing standards established by the AICPA apply
To all CPAs.