chapter 11 accy 190

In the United States, the audit reports of SEC registered U.S companies such as Boing, Coca-Cola are prepared in accordance with: 1. The PCAOB standards 2. The international accounting standards 3. The auditors' own standards 4. The companies' own standards Multiple choice question. 3 1 2 4

1. The PCAOB standards

Select the best answer to complete the following statement: "In some Blank______ countries, a two-tiered board of directors is required for a public company, in that in addition to the management board, a company is also required to have a supervisory board." Multiple choice question. Asian European African American

European

What would be the reason for restricted or prohibited activities with client companies? Multiple choice question. It will make the auditing process longer There is no framework for auditing and non-auditing fees Such activities may influence the auditor independence Such activities may improve the auditor independence

Such activities may influence the auditor independence

Is it true that UK auditors often include disclaimers of liability in their audit opinions to protect themselves from unintended liability? Multiple choice question. False True

True

Select the best answer to complete the following statement: "There is ______ demand for assurance on the effectiveness and quality of management arrangements and corporate governance." Multiple choice question. a fixed Reason: an increasing no Reason: an increasing a decreasing Reason: an increasing an increasing

an increasing

Select the best answer to complete the following statement: "There is a growing use of the Japanese ______ model, in which the outgoing chief executive is promoted to chairperson to oversee his or her replacement." Multiple choice question. keretsu and 5S 5S kaisen apprenticeship

apprenticeship

Select the best answer to complete the following statement: "The term Blank______ can be defined as the difference between what the public and financial statements users believe auditors are responsible for and what auditors themselves believe to be their responsibilities." Multiple choice question. public auditing public and private auditors international auditing gap audit expectation gap

audit expectation gap

Select the best answer to complete the following statement: "______ when auditors break contractual or civil obligations or both." Multiple choice question. professional sanctions criminal and civil liability criminal liability civil liability

civil liability

What would be a reason for large audit firms to argue that consulting work helps improve audit quality? Multiple choice question. consulting work helps them to get more new clients consulting work helps them to build up relation with their clients and thus increase the auditing fees consulting work enables them to measure important items that are not available on the financial statements consulting work helps them to charge lower auditing fees

consulting work enables them to measure important items that are not available on the financial statements

Select the best answer to complete the following statement: "Given the increased attention to ______ and the resulting changes to corporate structure in recent years, no longer is auditing only the domain of the external auditor." Multiple choice question. corporate governance after-sale services operating activities inventory cost

corporate governance

Select the best answer to complete the following statement: "Although German law specifies the disciplinary procedures against auditors, they are not always strictly implemented due to an overall tendency to focus on Blank______ to the reputation of the profession rather than on the extent of the individual culpability of the auditor." Multiple choice question. addition construction contribution damage

damage

Select the best answer to complete the following statement: "Harmonization of auditing standards would enable audit firms to increase the Blank______ globally." Multiple choice question. efficiency and effectiveness of the audit process auditing time and fees auditing time auditing fees and the efficiency of the auditing process

efficiency and effectiveness of the audit process

Select the best answer to complete the following statement: "The IACPA/CICA Web Trust Program identifies a set of principles and criteria to provide assurance services in the area of ______ business." Multiple choice question. global international electronic local

electronic

Is it true that U.S auditors often include disclaimers of liability in their audit opinions to protect themselves from unintended liability? Multiple choice question. true false

false

true or false: The FCPA makes it illegal for U.S companies to pay bribes to foreign government officials or political parties to secure or maintain business transactions or secure another type of improper advantage. True false question. True False

false

Select the best answer to complete the following statement: "In the international capital markets, Blank______ of auditing standards would ensure that the audit process has been consistent across companies, and in particular that one set of high-quality standards has been applied in auditing both the parent and its subsidiary companies." Multiple choice question. harmonization elimination convergence combination

harmonization

Select the best answer to complete the following statement: "Auditor ______ in the traditional sense is becoming increasingly ______ as both the audit firms and their clients grow in size and complexity." Multiple choice question. independence; simple independence; problematic dependence; simple dependence; problematic

independence; problematic

Select the best answer to complete the following statement: "There is a trend for independent registered public accounting firms to either include comments on Blank______ of the company audited in their audit report or to provide a separate report on Blank______." Multiple choice question. corporate governance; internal control internal control; corporate governance internal control; internal control corporate governance; corporate governance

internal control; internal control

In New Zealand, what is the liability of auditors described as? Multiple choice question. joint and several liability partial liability whole liability proportionate liability

joint and several liability

Select the best answer to complete the following statement: "In the United Kingdom, the auditors are legally prevented from Blank______ to their client company arising from negligence, default, breach of duty, and breach of trust." Multiple choice question. limiting their liability paying for damages caused paying their liability increasing their liability

limiting their liability

Select the best answer to complete the following statement: "Professional ethical issues in international auditing can be Blank______ and Blank______." Multiple choice question. local; contextual understandable; easy to deal with global; easy to deal with complicated; impossible to deal with

local; contextual :Professional ethical issues in international auditing can be local and contextual.

Select the best answer to complete the following statement: "Auditing plays an important role in ensuring the quality of financial information and helps Blank______ the cost of debt offerings." Multiple choice question. increase lower eliminate fix

lower

Select the best answer to complete the following statement: "From the auditor's point of view, there is a risk involved when the financial report issued by the entity may be materially ______ due to unauthorized tampering. This could put auditors at risk of legal action." Multiple choice question. correct reported restated misstated

misstated

Select the best answer to complete the following statement: "Because they have a virtual Blank______ of the large-firm audit market, the Big Four firms have been able to use this market to build their brands." Multiple choice question. shrinkage monopoly expansion free competition

monopoly

Select the best answer to complete the following statement: "The fact that there is Blank______ on how to deal with any of international auditing issues is of interest to MNCs because they have to operate under different regulatory regimes in different countries." Multiple choice question. an international agreement a common set of standards a common set of legal rules no international agreement

no international agreement

Select the best answer to complete the following statement: "Audit firms, particularly in the U.K. tradition, are often organized as Blank______ in which the principle of joint and several liability applies." Multiple choice question. public ownership partnerships sole ownership limited liability

partnerships

In an auditor independence standard, the Canadian Institute of Chartered Accountants made a shift to a more rigorous approach. What is that approach? Multiple choice question. rules-based approach case-study approach market approach principles-based approach

principles-based approach

Select the best answer to complete the following statement: "Audit quality can be defined as the Blank______ that an error or irregularity will be detected and reported." Multiple choice question. mechanism probability time cost

probability

Select the best answer to complete the following statement: "The audit firms need to recognize that the nature of business has changed. It is Blank______, Blank______, and very different from the nature of business in the last century." Multiple choice question. slowing down; disconnected quicker; more connected and more global slowing down; more connected and more local quicker; disconnected and more local

quicker; more connected and more global

Select the best answer to complete the following statement: "As MNCs face an increasing array of risks due to the fact that their control landscape is more extensive and complicated compared to purely domestic enterprises, there is a growing demand for Blank______." Multiple choice question. risk management skills human resource management skills capital investment skills

risk management skills

Select the best answer to complete the following statement: "The OECD principles deal with the rights and fair treatment of various groups of Blank______, the role of various stakeholders, the importance of disclosure and transparency of information and the responsibility of the Blank______."

shareholders, board

Select the best answer to complete the following statement: "To reduce SEC concerns about lack of independence, many large accounting firms have taken more drastic action by Blank______ in order to deal with a specific operational area." Multiple choice question. acquiring another nonaudit company splitting into separate entities merging into a larger company acquiring another audit company

splitting into separate entities

Select the best answer to complete the following statement: "Having stockholders involved in the auditor appointment process is expected to Blank______ the independence of auditors from management and to Blank______ audit quality." Multiple choice question. weaken; destroy strengthen; improve weaken; improve strengthen; destroy

strengthen; improve

Select the best answer to complete the following statement: "Mandatory rotation of audit firms often has been advocated as a means of Blank______ auditor independence." Multiple choice question. replacing strengthening destroying weakening

strengthening

In Germany, the examinations for prospective auditors are set by: Multiple choice question. the Ministry for Economic Cooperation and Development. the Ministry of Economics. the Ministry of Finance. the Ministry of Education and Research.

the Ministry of Economics.

Select the best answer to complete the following statement: "The audit function is increasing becoming a process that involves a partnership between ______." Multiple choice question. the tax committee, internal auditors and management team the audit committee, internal auditors, and external auditors the compensation committee, the audit committee, and suppliers the audit committee, tax committee, and compensation committee

the audit committee, internal auditors, and external auditors

Select the best answer to complet the following statement: "Under the join and several liability principle, each audit partner of an auditing firm may be held liability for ______." Multiple choice question. less than 5% of the amount of the claim 50% of the amount of the claim between 5% and 10% of the amount of the claim the whole amount of the claim

the whole amount of the claim

True or false: Even though the audit market is not extremely profitable, it will be in the interest of the Big Four to protect this market from the encroachment of competitors. True false question. True False

true

True or false: In recent years, an increasing number of companies have revealed financial accounting irregularities in their past financial statements and many of these companies had received clean audit reports from large international accounting firms. True false question. True False

true

True or false: The FCPA makes it illegal for U.S companies to pay bribes to foreign government officials or political parties to secure or maintain business transactions or secure another type of improper advantage. True false question. True False

true

True or false: The advent of litigation and the need for efficiency and effectiveness have driven the audit in some cases to be led more by process than by judgment. True false question. True False

true

True or false: The notion of a universal or global set of ethical norms that is embedded in IFRS can be challenged, as the notion of an international community reflects the aspirations of Anglo-American culture. True false question .True False

true

True or false: Unlike in the United States, there is no uniform system of examination for those who want to become auditors in the United Kingdom. True false question. True False

true Unlike in the United States, there is no uniform system of examination for those who want to become auditors in the United Kingdom.

Select the best answer to complete the following statement: "Big Four firms pointed out that the risks involved in auditing are Blank______, Blank______, unmanageable, and could at any time destroy the firm or any of its competitors." Multiple choice question. uninsurable; quantifiable uninsurable; unquantifiable insurable; quantifiable insurable; unquantifiable

uninsurable; unquantifiable

The external auditor's primary concern is: Multiple choice question. whether the financial reports are filed on time whether the financial statements are free of material misstatement whether auditing fees are paid to maintain a close relation with their clients to reduce auditing time

whether the financial statements are free of material misstatement

Auditors of SEC-registered companies are required to be members of: 1. The PCAOB 2. The American Accounting Association 3. The Institute of Management Accountants 4. The CFA Institute Multiple choice question. 4 1 2 3

1

Globalization of corporations and the accounting profession has raised some fundamental questions related to ethics. One of them is: 1. What does the new global professional stand for? 2. Which framework is used to charge audit fees? 3. How long should a set of financial statements be audited? 4. Who should be in charge of the relation between auditors and their clients? Multiple choice question. 2 3 4 1

1

What does a two-tiered board of directors refer to? 1. In addition to the management board, a company is also required to have a supervisory board 2. The management board is divided into two groups: junior and senior directors 3. The board of directors is composed solely of outsiders. Multiple choice question. 1, 2 and 3 2 3 1

1

What is an audit committee? 1. A committee of the board of directors that oversees the financial reporting process including auditing. 2. A committee of employees that oversees salary and wages payment and salary and wages auditing 3. A committee between auditor firms and client companies 4. A committee of government agencies and audit firms Multiple choice question. 1 2 3 4

1

Which of the following organization has the authority to establish or adopt auditing standards, quality control standards, and ethical rules in relation to the conduct of audits of public companies and inspect audit firms? 1. The PCAOB 2. The American Accounting Association 3. The Institute of Management Accountants 4. The CFA Institute Multiple choice question. 3 4 1 2

1

Why would large audit firms split their operations? 1. Splitting operations allow their auditing and consulting arms to deal with the same customer. 2. Splitting operations prevent them from dealing with the same customers. 3. Splitting operations eliminate the interdependence of different branches. Multiple choice question. 3 only 1 and 3 1 2

1

What does international auditing refer to? 1. The rules to be applied internationally for the auditing of financial statements 2. The processes associated with auditing financial statements prepared by multinational corporations (MNCs) 3. The fees paid to auditors auditing a foreign financial statement Multiple choice question. 2 and 3 1 and 2 only 3 1 and 3

1 and 2

Auditors can be subject to which of the following kind(s) of liability? 1. civil liability 2. criminal liability 3. professional sanctions Multiple choice question. Only 1 and 3 Only 3 1, 2 and 3 Only 1 and 2

1, 2 and 3

In June 2017, the PCAOB adopted a new standard to enhance the relevance and usefulness of the auditor's report with additional information for investors. The new standard requires auditors to include in the audit report a discussion of the critical audit matters. What are the critical audit matters? 1. Matters that have been communicated to the audit committee 2. Matters that are related to accounts or disclosures that are material to the financial statements 3. Matters that have involved especially challenging, subjective, or complex auditor judgment Multiple choice question. 1, 2 and 3 Only 1 and 3 Only 3 Only 2

1, 2 and 3

In a report published in early 2008, the International Federation of Accountants (IFAC) identified several concerns. What are they? 1. governance in name but not in spirit 2. cost-benefit concerns 3. personal risk and liability for directors and senior management Multiple choice question. Only 2 and 3 Only 1 and 2 Only 1 1, 2 and 3

1, 2 and 3

In a report published in early 2008, the International Federation of Accountants (IFAC) identified several concerns. What are they? 1. governance in name but not in spirit 2. overregulation 3. the development of a checklist mentality Multiple choice question. Only 1 Only 1 and 2 1, 2 and 3 Only 2 and 3

1, 2 and 3

What does the report of IASC published in November 1999 conclude? 1. There is a need for a generic code of conduct for internet-based business reporting. 2. A code of conduct should include conditions clearly setting out the information that is consistent with the printed annual report. 3. The users of internet-based reports are likely to be confused as to which part of the website relates to the audit report signed off on by an auditor. Multiple choice question. Only 1 and 3 1, 2 and 3 Only 2 and 3 Only 3

1, 2 and 3

Which of the following factors are found to have influenced on corporate governance? 1. Political factors 2. Economic development 3. Culture Multiple choice question. Only 2 and 3 1, 2 and 3 Only 1 Only 2

1, 2 and 3

n Europe, auditor independence is described as a conceptual approach. What are the reasons to support this approach? 1. This approach requires auditors to consider actively and to be ready to demonstrate the efficiency of arrangements for safeguarding independence 2. This approach can cope with the rapid changes of the modern business environment 3. This approach prevents the use of legalistic devices to avoid compliance Multiple choice question. Only 2 and 3 1, 2 and 3 Only 1 Only 2

1, 2 and 3

What does audit expectation gap? 1. The difference between what the public and financial statement users believe auditors are responsible for, and what auditors themselves believe to be their responsibilities 2. The difference between public expectations about the responsibilities and duties of the auditing profession and what the auditing profession actually provides 3. The gap between the expectations of society about auditors and the performance of auditors. Multiple choice question. Only 1 Only 1 and 2 1, 2 or 3 Only 3

1, 2 or 3

What does audit expectation gap? 1. The difference between what the public and financial statement users believe auditors are responsible for, and what auditors themselves believe to be their responsibilities 2. The difference between public expectations about the responsibilities and duties of the auditing profession and what the auditing profession actually provides 3. The gap between the expectations of society about auditors and the performance of auditors. Multiple choice question. Only 1 and 2 1, 2 or 3 Only 1 1, 2 or 3

1, 2 or 3

Which aspect(s) does external auditing include? 1. the purpose of external auditing 2. the audit environment 3. the regulation of auditing 4. audit reports Multiple choice question. Only 3 and 4 1, 2, 3 and 4 Only 1 and 2 Only 1 and 4

1, 2, 3 and 4

In its Statement of Principles of Corporate Governance and Financial Reporting, IOSCO recommends which of the following: 1. Auditors should be independent. 2. Auditors should make a statement to the board concerning their independence at the time the audit report is issued. 3. The audit committee should monitor the auditor's appointment, remuneration, and scope of services and any retention of the auditor to provide nonaudit services. Multiple choice question. only 1 and 3 2 1, 2, and 3 1

1, 2, and 3

What factors are found to influence international auditing? 1. Culture 2. Legal systems 3. Environments Multiple choice question. only 1 only 2 only 1 and 3 1, 2, and 3

1, 2, and 3

How does the Institute of Internal Auditors define internal auditing? 1. As an independent, objective assurance and consulting activity designed to add value and improve an organization's operations 2. As a dependent, subjective assurance and consulting activity designed to give appropriate advice to managers 3. As a dependent, subjective assurance and consulting activity designed to give advice for potential investors 4. As an independent, objective assurance and consulting activity designed to give support to external auditors and potential investors Multiple choice question. 2 4 3 1

1. As an independent, objective assurance and consulting activity designed to add value and improve an organization's operations

The auditor independence standard in Canada requires auditors to ensure that their independence has not been impaired in any way. What kinds of nonaudit services does this standard prohibit? 1. Bookkeeping 2. Valuations 3. Actuarial 4. Internal audit outsourcing Multiple choice question. only 4 1, 2, 3, and 4 only 1 and 3 only 2 and 4

1. Bookkeeping 2. Valuations 3. Actuarial 4. Internal audit outsourcing Multiple choice question.

In general, what are the responsibilities of an auditing committee? 1. Monitor the financial reporting process 2. Oversee the internal control systems 3. Oversee the internal audit and independent public accounting functions Multiple choice question. Only 1 and 2 1, 2 and 3 Only 3 Only 1

1. Monitor the financial reporting process 2. Oversee the internal control systems 3. Oversee the internal audit and independent public accounting functions

The UK Companies ACt of 1989 (Section 384) requires that the registered auditor be appointed by: 1. the shareholders in an annual general meeting. 2. customers and suppliers of the client company 3. Board of directors 4. Employees and customers of the client company Multiple choice question. 4 1 3 2

1. the shareholders in an annual general meeting.

In Japan, the audit reports of Japanese companies such as Sumitomo Metal Industries and Toshiba Corporation are prepared in accordance with: 1. The international standards on auditing 2. Auditing standards generally accepted in Japan 3. The auditors' own standards 4. The companies' own standards Multiple choice question. 2 3 4 1

2

In Finland, the audit reports of Finnish companies such as Nokia are prepared in accordance with: 1. The PCAOB standards 2. Good auditing practices in Finland 3. The auditors' own standards 4. The companies' own standards

2. Good auditing practices in Finland

In Finland, the audit reports of Finnish companies such as Nokia are prepared in accordance with: 1. The PCAOB standards 2. Good auditing practices in Finland 3. The auditors' own standards 4. The companies' own standards Multiple choice question. 4 1 3 2

2. Good auditing practices in Finland

What is the market share of the Big Four in the world's largest business clients? Multiple choice question. between 5% and 10% 90% 10%

90%

In June 2017, the PCAOB adopted a new standard to enhance the relevance and usefulness of the auditor's report with additional information for investors. Which of the following must be included in the audit report as per the new standard? Multiple choice question. Signatures of all top managers The components of auditing fees A discussion of the critical audit matters

A discussion of the critical audit matters

Select the best answer to complete the following statement: "Blank______ is a segment of accounting that uses the basic techniques and methods of auditing and functions as an appraisal activity established within an entity." Multiple choice question. External auditing Independent accounting Internal auditing Independent auditing

Internal auditing

Currently, the UK model of splitting the roles of chairperson and chief executive is taking hold globally, except: Multiple choice question. Asia and Europe South America and Asia North America and Europe Africa and Asia

North America and Europe

Which Act requires companies to establish and maintain appropriate internal control systems so that corporate funds are not improperly used for illegal purposes? Multiple choice question. The Foreign Corrupt Practices Act The Financial Control Act The Funding Control Practices Act The Financial Restriction Act

The Foreign Corrupt Practices Act

Which reason did the UK's largest audit firms use to argue that mandatory rotation is not necessary? Multiple choice question. They argue that mandatory rotation will bring down the audit quality They argue that mandatory rotation will improve auditor independence They argue that mandatory rotation will create more jobs for their competitors They argue that mandatory rotation will reduce their revenue

They argue that mandatory rotation will bring down the audit quality

What is the purpose of a statutory cap? Multiple choice question. To double the amount of money that an audit firm would have to receive if found liable for negligence To reduce the amount of money that an audit firm would have to pay if found liable for negligence To double the amount of money that an audit firm would have to pay if found liable for negligence To avoid the amount of payment that an audit firm would have to pay if found liable for negligence

To reduce the amount of money that an audit firm would have to pay if found liable for negligence

Multiple Choice Question Select the best answer to complete the following statement: "The AICPA and the CICA issued AICPA/CICA ______ for Certification Authorities Version 1.0 in August 2000." Multiple choice question. Web Trust Program Accounting Program Auditing Program Error Detection System

Web Trust Program

Select the best answer to complete the following statement: "In the United Kingdom, the Companies Act of 1989 restricted qualifications for appointment as a statutory auditor to those who held Blank______ and were subject to the requirements of a Blank______." Multiple choice question. a unrecognized professional qualification; unrecognized supervisory body a recognized professional qualification; client a recognized professional qualification; recognized supervisory body a recognized client; recognized professional association

a recognized professional qualification; recognized supervisory body

The IFAC Code of Ethics for Professional Accountants identifies two different categories of independence. What are they? Multiple choice question. independence in mind and independence in appearance independence financially and independence in human resources independence in human resources and independence in mind independence financially and independence in appearance

independence in mind and independence in appearance

The IFAC Code of Ethics for Professional Accountants identifies two different categories of independence. What are they? Multiple choice question. independence in mind and independence in appearance independence in human resources and independence in mind independence financially and independence in human resources independence financially and independence in appearance

independence in mind and independence in appearance

Select the best answer to complete the following statement: "Independence in mind requires auditors to be in a state of mind that allows them to express opinions about the auditee without feeling that they are under pressure due to Blank______ and feel that they are allowed to act with Blank______, conducting their audits objectively and with professional skepticism." Multiple choice question. dependence issues; financial obligations independence issues; integrity independence issues; financial obligations auditing fees; financial obligations

independence issues; integrity