External Audit Chapter 1 MC
Accountants who are employees of corporations: A. can have job descriptions that include audit functions B. cannot perform audit functions because they are not independent C. must follow the AICPA Code of Conduct if they perform independent audits and issue reports D. can perform operational and fraud audit tasks but not financial audit tasks
A.
An Integrated Audit: A. is a systematic process B. is not a systematic process because that definition only applies to a financial statement audit C. uses only GAAP as the established criteria for assessing management's assertions D. uses only the COSO Internal Control Framework as the established criteria for assessing management's assertions
A.
Audits are performed: A. because they are required and contribute value B. only because they are required C. only when they can improve the operating effectiveness of a company D. because management always wants to have them
A.
Evidence: A. is composed of various items underlying records of accounts and documents B. must be in written form C. includes records created by the auditor to document the audit activities D. includes only corroborating information obtained from outside the audit client
A.
The COSO Internal Control Framework: A. is a set of criteria that the auditor can use to assess whether ICFR are effective B. is a set of criteria used by management, so the auditor does not use it to assess whether ICFR are effective C. is a set of criteria that governs the auditor's procedures in performing the ICFR audit of a public company D. is the source of the requirement that management's report on ICFR be audited
A.
The PCAOB: A. is a not-for-profit entity B. shares its responsibility for standard setting with the AICPA C. creates audit standards that CPA firms must use in all audits D. Is independent of SEC oversight
A.
An audit of ICFR: A. addresses the same management assertion as a financial statement audit B. is integrated with financial statement audit C. does not result in a audit opinion, the financial statement audit produces the opinion D. is required by all companies
B.
Auditors of public companies: A. must follow AICPA attest standards when performing integrated audits B. must follow PCAOB Auditing Standards when performing integrated audits C. must follow IIASB standards when performing integrated audits if the company is a multinational corporation D. must adhere to the state laws governing public companies in all states where the company is located
B.
Audits are of value because: A. when financial statements are audited, they are accurate B. when financial statements are audited, investors have more confidence in their fairness and reliability C. the IRS accepts them and the company will not have to pay additional taxes D. the PCAOB requires them
B.
The PCAOB: A. uses all the AICPA SAS as the basis for its AS standards for integrated audits B. adopted the AICPA SAS on an interim basis and has replaced some of them with its AS C. adopted the AICPA SAS on an interim basis and has now replaced them all by issuing its own AS D. has adopted the AICPA Code of Conduct and requires auditors to adhere it
B.
An Integrated Audit is: A. required for all companies B. required by the IAASB C. composed of a financial audit and an audit of Internal control over financial reporting D. conducted according to audit standards of the AICPA
C.
Auditing and Accounting: A. are highly related, so if you know one you do not need to know the other as well B. are highly related, because to be a good accountant you have to be a geed auditor C. are highly related, because to be a good auditor you have to be a good accountant D. overlap because accountants and auditors perform similar job functions
C.
Economic event and actions: A. are only important when studying the FASB conceptual framework B. affect accounting but not auditing C. are represented in fairly presented financial statements D. do not impact either accounting or auditing
C.
Shareholders of large multinational companies need audits: A. to be comfortable that management makes good decisions B. because state laws require them C. to have assurance regarding the fairness of financial statements D. because all multinational companies are required by international law to be audited
C.
The SEC and the PCAOB: A. have equal authority B. both have the authority to issue accounting standards C. both have authority over the standards that affect integrated audits D. both have authority over the US stock markets
C.
The audit committee: A. elects the BOD B. consist of members of the audit team and management C. is a subset of the BOD D. is the body that governs the company and provides oversight on behalf of shareholders
C.
Misstated financial statements: A. result from error B. do not result from fraud because when they do they are called fraudulent financial statements C. are always the result of theft D. should be detected by audits whether they result from error or fraud
D.
The Auditor: A. can require management to change the financial statements B. can require management to change the report on ICFR C. can change the accounting information included in the SEC filing D. can respond to the financial statements and management's reports by changing the audit report
D.
When performing an audit, the auditor is objective, meaning: A. the auditor is highly skeptical of all documents examined B. the auditor tries to remain suspicious because of the possibility that documents are forged C. the auditor evaluates underlying documents to be sure that management has used a conservative accounting approach D. the auditor is not biased when evaluating evidence supporting management's assertions
D.
Which of the following statements is true: A. Enron was a large company that went bankrupt B. Enron participated in complex off-balance sheet transactions C. shareholders did not have appropriate understanding of Enron's transactions D. All of the above are true
D.
