Chapter 1: Questions – Flashcards

1) The Sarbanes-Oxley Act applies to which of the following companies? A) All companies B) Privately held companies C) Public companies D) All public companies and privately held companies with assets greater than $500 million

Oral statements made by management, written communications, and auditor observations are considered ___ ___

3) Evidence is paramount to audit and attestation engagements. List the four basic types of audit evidence. Answer: The four types of audit and attestation evidence include: 1. ___ and documentary data about transactions 2. Written and electronic communications with ___ 3. ___ by the auditor 4. ___ testimony of the auditee (client)

4) The criteria by which an auditor evaluates the information under audit may vary with the information being audited. True or False

5) The criteria used by an external auditor to evaluate published financial statements are known as generally accepted auditing standards. True or False

6) The Sarbanes-Oxley Act establishes standards related to the audits of privately held companies. True or False

7) The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to auditing and financial reporting. True or False

8) An auditor must be competent and have an independent mental attitude. True or False

1) Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called: A) finance. B) auditing. C) accounting. D) economics.

2) An accountant: A) must possess expertise in the accumulation of audit evidence. B) must decide the number and types of items to test. C) must have an understanding of the principles and rules that provide the basis for preparing the accounting information. D) must be a CPA.

3) In "auditing" financial accounting data, the primary concern is with: A) determining whether recorded information properly reflects the economic events that occurred during the accounting period. B) determining if fraud has occurred. C) determining if taxable income has been calculated correctly. D) analyzing the financial information to be sure that it complies with government requirements.

4) The trait that distinguishes auditors from accountants is the: A) auditor's ability to interpret accounting principles generally accepted in the United States. B) auditor's education beyond the Bachelor's degree. C) auditor's ability to interpret FASB Statements. D) auditor's accumulation and interpretation of evidence related to a company's financial statements.

The role of ___ is to determine whether the recorded information prepared by accountants properly reflects the economic events that occurred during the accounting period.

the auditor must possess expertise in the ___ and ___ of audit evidence. It is this expertise that distinguishes auditors from accountants.

Determining the proper audit procedures, deciding the ___ and ___ of items to test, and evaluating the results are unique to the auditor.