Auditing quiz 1

• The Sarbanes-Oxley Act applies to which of the following companies?


  public companies
• Which of the following is considered audit evidence?

  Oral statements made by management, written communications, and auditor observation
• Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:

  accounting
• Which department provides quantitative information in order for management and others to make decisions?

  accounting
• In "auditing" financial accounting data, the primary concern is with:

  determining whether recorded information properly reflects the economic events that occurred during the accounting period
• the trait that distinguishes auditors from accountants is the:

  auditor's accumulation and interpretation of evidence related to a company's financial statements.
• What risk reflects the possibility that the information upon which the business decision was made was inaccurate?

  information
• The use of the Certified Public Accountant title is regulated by:

  state law through a licensing department or agency of each state.
• Financial statement users often receive unreliable financial information from companies. Which of the following is not a common reason for this?


  (Complex exchange transactions, Voluminous data, Remoteness of information)D) Each of these choices is a common reason for unreliable financial information.
• An audit of historical financial statements is most often performed to determine whether the:

  none of these choices
• In the audit of historical financial statements, what accounting criteria is most common?

  Generally accepted accounting principles.
• Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n):

  attestation service
• Three common types of attestation services are:

  audits, reviews, and attestations regarding internal controls.
• Which of the following services provides the lowest level of assurance on a financial statement?

  a review
• Which of the following is not a SysTrust Services principle as defined by the AICPA?

  Operational integrity.
• The Sarbanes-Oxley Act prohibits a CPA firm that audits a public company from providing which of the following types of services to that company?

  Most consulting services.
• Which of the following are required to have a written report regarding the assertion of another party?

  financial statement audit, operational audit, compliance audit, and attestation engagement
• Attestation services on information technology include WebTrust services and SysTrust services. Which of the following statements most accurately describes SysTrust services?

  SysTrust services provide assurance on system reliability in critical areas such as security and data integrity.
• One objective of an operational audit is to:

  make recommendations for improving performance.
• An examination of part of an organization's procedures and methods for the purpose of evaluating efficiency and effectiveness is what type of audit?

  operational audit
• An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n):

  compliance audit
• Which one of the following is more difficult to evaluate objectively?

  Efficiency and effectiveness of operations.
• Which of the following audits can be regarded as generally being a compliance audit?

  IRS agents' examinations of taxpayer returns.
• The three requirements for becoming a CPA include all but which of the following?

  Character requirements.
• The legal right to perform audits is granted to a CPA firm by regulation of:

  each state
• The four categories for describing the size of audit firms include: the Big Four international firms; national firms; regional and local firms; and small firms. Which of the following is not a characteristic of a small firm?

  They do not audit publically traded companies.
• Sarbanes-Oxley and the Securities Exchange Commission restrict auditors from providing many consulting services to their publically traded audit clients. Which of the following is true for auditors of publically traded companies?

  II only; There is no restriction on providing consulting services to non-audit clients.
• Which of the following statements is true as it relates to limited liability partnerships?

  Partners are personally liable for the acts of those under their supervision.
• The organization that is responsible for providing oversight for auditors of public companies is called the:

  Public Company Accounting Oversight Board.
• Members of the Public Company Accounting Oversight Board are appointed and overseen by:

  the Securities and Exchange Commission.
• The Public Company Accounting Oversight Board:


  perform inspections of the quality controls at audit firms that audit public companies.
• Assume the Public Company Accounting Oversight Board (PCAOB) identifies a violation during its inspection of a registered accounting firm. The PCAOB:

  can enforce disciplinary action against the accounting firm, report the matter to the Securities and Exchange Commission, suspend the license to practice of the CPA guilty of the violation(Yes, Yes, No)
• The form that must be completed and filed with the Securities and Exchange Commission whenever a company experiences a significant event that is of interest to public investors is the:

  Form 8-K
• The form that must be filed with the Securities and Exchange Commission whenever a company plans to issue new securities to the public is the:

  Form S-1
• The AICPA has authority to establish standards and rules in all but which of the following areas?

  Auditing standards applicable to financial statements of private and public companies
• Statements on Standards for Accounting and Review Services are issued by the:

  Accounting and Review Services Committee.
• Which of the following is not an essential component of quality control?

  Policies and procedures to ensure that firm personnel are actively engaged in marketing strategies.
• Which of the following are audit standards used in professional practice by audit firms?

  International Standards on Auditing, U.S. Generally Accepted Auditing Standards, PCAOB Auditing Standards (Yes, Yes, Yes)
• For privately held companies who of the following is responsible for establishing auditing standards?

  Auditing Standards Board
• Standards issued by the Public Company Accounting Oversight Board must be followed by CPAs who audit:


  public companies only