Topic 1 - Chapter 1 Auditing
The contribution of the independent auditor to the efficient allocation of economic resources is to provide ________ to information
creditability
The objective of assurance services is to ______. provide more timely information improve the firm's outcomes enhance the degree of confidence in the information compare internal information and policies to those of other firms
enhance the degree of confidence in the information
The CPA examination consists of four parts, which include all of the following except ______.
ethics
The AICPA's Code of Professional Conduct sets forth
ethics rules for CPAs
The highest form of assurance that CPAs can offer is provided by a(n) ___________ engagement, which is referred to as an audit when it involves historical financial statements. (Enter only one word per blank.)
examination
Many of the Treadway Commission's recommendations lead to a group of Statements on Auditing Standards known as the
expectation gap
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. (Enter only one word per blank.)
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
The level of assurance provided in an audit of historical financial statements is ______. low moderate high summary of findings
high
The purpose of the Dodd-Frank Act is to Blank______.
improve accountability and transparency in the financial system
Types of assurance services are designed to ______.
increase the reliability of information put information in a form or context that facilitates decision making
The Sarbanes-Oxley Act of 2002 ______.
increased penalties for corporate fraud created the PCAOB to oversee the accounting profession restricted types of consulting CPAs may perform for public audit clients
When interacting with clients, the CPA must always ensure the appearance of
independence is not impaired
A number of large public accounting firms have organized their firms along ______.
industry lines
The credibility added by auditors reduces ______ risk.
information
Technology related changes ______.
may lead to auditors needing to work with data scientists include artificial intelligence and robotic process automation provide auditors the opportunities to test entire populations
The level of assurance provided in a review is ______.
moderate or limited
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 auditing profession's shift in emphasis to taking a greater responsibility for the detection of fraud resulted from ______.
successful lawsuits for undetected frauds congressional pressure
All of the following are attestation services except ______.
tax services
Forensic accounting services include the investigation of suspected or known
fraud
The level of assurance provided in an audit of historical financial statements is ______.
high
Which attest engagement is designed to provide only a moderate degree of assurance?
Review
Which of the following is NOT an example of a compliance audit?
Audit of the efficiency and effectiveness of a department
Many public accounting firms are organized as either ______ or ______.
sole practitioners; partnerships
The FASB's power has been designated by the ______.
AICPA SEC
True or false: The procedures in an audit will be the same for the audit of a small retail store and a multinational corporation.
False
True or false: The pronouncements of boards established by the IFAC override the national accounting standards of its members.
False
In 2010, the PCAOB's scope of responsibility was expanded to include overseeing of securities brokers and dealers by the
Dodd Frank
In response to the collapse of the U.S. subprime market and reversal of the housing U.S. boom in 2008, Congress passed the ______.
Dodd-Frank Act
True or false: A common reason that financial statements may depart from GAAP is intentional bias.
False
True or false: Technology related change provides auditors the opportunity to do a better job of selecting samples to be tested electronically.
False
True or false: The passage of the Sarbanes-Oxley Act effectively eliminates the AICPA's influence and responsibility on professional standards.
False
Which of the following statements is correct?
The SEC has oversight responsibility for the PCAOB.
Each of the Big 4 Firms is composed of a group of associated firms that qualify as a network.
True
True or false: Industry specialization is common in large public accounting firms.
True
True or false: The Enron case brought the ethical principles of the public accounting profession into question.
True
Which of the following services provides assurance but does not involve attestation?
XBRL services
The accounting profession suffered credibility crises in the early 2000s due to ______.
a record number of restated prior-period financial statements accounting fraud at WorldCom accounting irregularities at Enron
The rules, processes, and laws by which businesses are operated, regulated, and controlled is known as
corporate governance
The contribution of the independent auditor to the efficient allocation of economic resources is to provide
creditability to information
The International Federation of Accountants (IFAC) is a global organization of ______.
accounting professional bodies
All of the following are reasons financial statements may depart from GAAP except ______.
adherence to accounting principles
If an examination or review does not meet the client's needs, the CPAs and specified user or users of the information may mutually decide on specific __________ - ___________ procedures that the CPAs will perform. (Enter only one word per blank.)
agreed-upon
In a financial statement audit, auditors gather sufficient evidence to issue ______.
an audit report
Public accounting firm consulting services ______.
are designed to improve the effectiveness and efficiency of clients' operations have tended to become more operational in nature in recent years include performing executive search services
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. (Enter only one word per blank.)
association
Certified public accountants (CPAs) provide a broad range of information enhancement services known as __________ services
assurance
CPAs provide a report on subject matter or an assertion about that subject matter in a(n) ____________ engagement.
attestation
The large international public accounting firms are known as the ____
big four
Preparing the federal, state, and local tax returns of clients is the basis of ________ work
compliance
Tax services that are performed by public accounting firms fall into two broad categories:
compliance and tax planning
The work of GAO auditors include _____, ______ and financial audits
compliance operational
The first position of a college graduate entering the public accounting profession is that of
staff accountant
Assurance is provided on both the financial statements and the effectiveness of internal control over financial statements in a(n)
integrated
Governmental Accountability Office (GAO) auditors typically perform all of the following type of audits except
integrated
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 ______ in place of fraud to describe fraudulent financial reporting and misappropriation of assets.
irregularities
The level of risk of material misstatement provided by an audit ______.
is low
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
limited assurance on the credibility of the statements
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 company limited liability partnership
In a financial statement audit, responsibility for the assertion that all assets listed on the balance sheet exist rests with ______.
management
PCAOB Standard No. 5 requires ______ to assess and report on company internal controls.
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
managers in large public accounting firms
Relationships between public accounting firm partners and clients ______.
may impair the appearance of independence may make it easier to resolve differences during an audit
Automation is increasingly replacing routine procedures previously manually performed by
staff accountants
All shareholders and directors of a professional corporation ______.
must be engaged in the practice of public accounting
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
Some services provided by CPAs, like tax and bookkeeping, do not enhance information for users. These are known as ______ services. attestation nonassurance assurance review
nonassurance
Financial statement audits are ______ performed by certified public accounting firms.
normally
Regular membership in the AICPA requires members to ______.
obtain 120 hours of CPE every three years abide by the AICPA Code of Professional Conduct
The study of a specific unit of an organization for the purpose of measuring its performance is a(n)
operational audit
In a public accounting firm, the ______ level is comparable to that of top management in an industrial organization.
partnership
In order to be awarded a CPA certificate, candidates must ______.
pass all four parts of the uniform CPA exam satisfy the educational requirements of the licensing state satisfy the experience requirements of the licensing state
The PCAOB has the responsibility to ______.
perform inspections of the practices of registered firms register public accounting firms that audit public companies conduct investigations and disciplinary proceedings of registered firms
Permits to practice as a CPA are granted by the ______.
states
In a financial statement audit, auditors gather sufficient evidence to provide ____________ _______________ that the financial statements follow GAAP or some other appropriate accounting framework. (Enter only one word per blank.)
reasonable assurance
By opening additional offices in neighboring cities or states and increasing the number of professional staff, many local firms have become
regional firms
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
During an audit, evidence is gathered to show that the ______.
sales on the income statement actually occurred balance sheet contains all the liabilities of the company financial statement amounts are properly classified
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
Audit procedures ______. vary considerably from one engagement to another are very similar for all engagements are similar for all companies that are required to file with the SEC
vary considerably from one engagement to another
