question

The audit objective that footnotes in the financial statements should be clear and expressed such that the information is easily conveyed to the readers of the financial statements is related most closely with which of the ASB presentation and disclosure assertions?

answer

Understandability

question

The accounting, auditing, and investigating agency of the U.S. Congress, headed by the U.S. Comptroller General is known as

answer

the U.S. General Accountability Office (GAO).

question

The audit objective that all transactions and accounts that should be presented in the financial statements are in fact included is related to which of the PCAOB assertions?

answer

Completeness

question

To be proficient as an auditor, a person must first be able to accomplish which of these tasks in a decision-making process?

answer

Recognize the financial assertions made in management's financial statements and footnotes.

question

Which of the following best describes the main reason independent auditors report on management's financial statements?

answer

The management that prepares the statements and the persons who use the statements may have conflicting interests.

question

In auditing the long term debt account, an auditor's procedures most likely would focus primarily on management's assertion of

answer

completeness

question

An auditor has substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time because of negative cash flows and working capital deficiencies. Under these circumstances, the auditor would be most concerned about the

answer

possible effects on the entity's financial statements

question

Inquiries of warehouse personnel concerning possible obsolete or slow moving inventory items provide assurance about the ASB balance assertion of

answer

valuation

question

What is the term used to identify the risk that the client's financial statements may be materially false and misleading?

answer

Information risk

question

The underlying conditions that create demand by users for reliable information include all of the following, except

answer

users lack professional skepticism.

question

The confirmation of an account payable balance selected from the general ledger provides primary evidence regarding which management assertion?

answer

Existence

question

Which of the following is not an ASB assertion about inventory related to presentation and disclosure?

answer

All of these are ASB presentation and disclosure assertions about inventory.

question

Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

answer

professional skepticism.

question

Which of the following is a management assertion regarding account balances at the period end?

answer

The entity holds or controls the rights to assets, and liabilities are obligations of the entity.

question

According to PCAOB Auditing Standard No. 5 (AS 5), the auditor should identify significant accounts and disclosures and their relevant assertions. Which of the following financial statement assertions is not explicitly identified in AS 5?

answer

Accuracy

question

The probability that the information circulated by a company will be false or misleading is referred to as

answer

information risk.

question

If an auditor is performing procedures related to the information that is contained in the client's pension footnote, he/she is most likely obtain evidence concerning management's assertion about

answer

presentation and disclosure.

question

The engineering department at Omni Company built a piece of equipment in the company's own shop for use in the company's operations. When looking at the ending balance for the fixed asset account the auditor examined all work orders, purchased materials, labor cost reports, and applied overhead that were capitalized as part of the equipment costs. Which of the following is the ASB balance assertion most closely related to the auditor's testing?

answer

Valuation

question

The audit objective that all transactions are recorded in the proper period is related most closely to which of the Audit Standards Board (ASB) transaction assertions?

answer

Cutoff

question

The audit objective that all the transactions and accounts presented in the financial statements represent real assets, liabilities, revenues, and expenses is related most closely to which of the PCAOB assertions?

answer

Existence or occurrence

question

Which of the following best describes assurance services?

answer

Independent professional services that improve the quality of information for decision makers

question

Assurance services involve all of the following, except

answer

providing absolute rather than reasonable assurance.

question

In order to be considered as external auditors with respect to government agencies, GAO auditors must be

answer

organizationally independent.

question

An auditor selected items for test counts from the client's warehouse during the physical inventory observation. The auditor then traced these test counts into the detailed inventory listing that ultimately agreed to the financial statements. This procedure most likely provided evidence concerning management's assertion of

answer

completeness.

question

The auditor's judgment concerning the overall fairness of the presentation of financial position, results of operations, and cash flows is applied within the framework of

answer

the applicable financial reporting framework (i.e., GAAP in the United States).

question

What type of evidence would provide the highest level of assurance in an attestation engagement

answer

Evidence obtained from independent sources.

question

Which of the following is an underlying condition that in part creates the demand by users for reliable information?

answer

All of these: Economic transactions that are numerous and complex, Decisions are time-sensitive, Users separated from accounting records by distance and time, Financial decisions that are important to investors and users

question

The audit objective that all balances include all items that should be recorded in that account is related most closely to which one of the ASB balance assertions?

answer

Completeness

question

In performing an attestation engagement, a CPA typically

answer

expresses a conclusion on an assertion about some type of subject matter.

question

An attestation engagement is one in which a CPA is engaged to...

answer

issue, or does issue, a report on subject matter or an assertion about the subject matter that is the responsibility of another party.

question

Which of the following is the essential purpose of the audit function?

answer

Determination of whether the client's financial statement assertions are fairly state

question

The process of a CPA obtaining a certificate and license in a state other than the state in which the CPA's certificate was originally obtained is referred to as

answer

substantial equivalency.

question

Which of the following best describes the primary role and responsibility of independent external auditor?

answer

Express an opinion on the fairness of a company's annual financial statements and footnotes.

question

Which of the following is not included in The American Accounting Association (AAA) definition of auditing?

answer

Potential conflict of interest

question

A practitioner is engaged to express an opinion on management's assertion that the square footage of a warehouse offered for sale is 150,000 square feet. The practitioner should refer to which of the following sources for professional guidance?

answer

Statements on Standards for Attestation Engagements.

question

Inquiries of warehouse personnel concerning possible obsolete or slow moving inventory items provide assurance about the PCAOB assertion of

answer

valuation

question

The four basic requirements for becoming a CPA in most states are

answer

education, the CPA Examination, experience, and a state certificate.

question

The study of business operations for the purpose of making recommendations about the efficient use of resources, effective achievement of business objectives, and compliance with company policies is referred to as

answer

operational auditing.

question

The audit objective that all balances include items owned by the client is related most closely to which one of the ASB balance assertions?

answer

Rights and obligations

question

Cutoff tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent year provide assurance about the PCAOB assertion of

answer

completeness

question

The audit objective that all transactions are recorded in the proper account is related most closely to which one of the ASB transaction assertions?

answer

Classification

question

When testing the completeness assertion for a liability account, an auditor ordinarily works from the

answer

potentially unrecorded items to the financial statements

question

Which of the following is not a recommendation usually made following the completion of an operational audit?

answer

Attesting to the fairness of the financial statements

question

Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?

answer

Inventory is complete.

question

The risk an entity will fail to meet its objectives is referred to as

answer

business risk.

question

During an audit of an entity's stockholders' equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements or state law. This audit procedure most likely is intended to verify management's assertion of

answer

presentation and disclosure.

question

The engineering department at Omni Company built a piece of equipment in the company's own shop for use in the company's operations. The auditor reviewed all work orders that were capitalized as part of the equipment costs. Which of the following is the ASB transaction assertion most closely related to the auditor's testing?

answer

Classification

question

The Sarbanes-Oxley Act of 2002 requires that the key company officials certify the financial statements. Certification means that the company CEO and CFO must sign a statement indicating

answer

All of these: they have read the financial statements, they are not aware of any false or misleading statements (or any key omitted disclosures), they believe that the financial statements present an accurate picture of the company's financial condition.

question

An auditor traces the serial numbers on equipment to a nonissuer's sub-ledger. Which of the following management assertions is supported by this test?

answer

Completeness

question

Cutoff tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year provide assurance about management's assertion of

answer

completeness

question

An auditor selected items from the client's detailed inventory listing (that agreed to the financial statements). During the physical inventory observation, the auditor then found each item selected and counted the number of units on hand. Assuming that the amount on hand was the same as the amount in the client's detailed inventory listing, this procedure most likely would provide evidence concerning management's assertion of

answer

existence

question

Which of the following questions would be inappropriate for an auditor to ask a client when exhibiting an appropriate level of professional skepticism while completing an audit procedure related to the internal control system?

answer

Which of your employees is a fraudster?

question

Which of the following is not a PCAOB assertion about inventory related to presentation and disclosure?

answer

Inventory is properly stated at its cost on the balance sheet.

question

Which of the following types of audit evidence provides the least assurance of reliability?

answer

Pre-numbered receiving reports completed by the client's employees.

question

An independent auditor must have which of the following?

answer

Technical training that is adequate to meet the requirements of a professional

question

A level of performance that would be exercised by reasonable auditors in similar circumstances is referred to as

answer

due care.

question

Which of the following statements is not true with respect to the responsibility for establishing generally accepted auditing standards?

answer

Standards issued by the Auditing Standards Board after 2003 apply to the audits of both public and private entities

question

Which of the following information would not be included in the auditors' standard report?

answer

An indication that all necessary disclosures have been presented

question

Which of the following concepts is least related to the risk of material misstatement?

answer

Detection risk

question

Which of the following does not directly relate to an auditor's responsibility for having appropriate competence and capabilities to perform the audit?

answer

Obtaining reliable documentary evidence

question

Which of the following is an example of the appropriate implementation of a system of quality control?

answer

The firm uses manuals and standardized forms for audit documentation to help ensure engagement performance objectives and quality standards are met.

question

Which of the following types of audit evidence provides the least assurance of reliability?

answer

Prenumbered receiving reports completed by the client's employees

question

The Public Company Accounting Oversight Board was established by which of the following?

answer

The Sarbanes-Oxley Act of 2002

question

Which of the following would most likely be a violation of the independence requirement found in the responsibilities principle under generally accepted auditing standards?

answer

An auditor on the engagement owns a financial interest in the stock of the client.

question

Which of the following statements describes an appropriate relationship with respect to the reliability of audit evidence?

answer

A bank confirmation received directly by the auditor is more reliable than a bank confirmation initially received by the client and forwarded to the auditor.

question

Which of the following situations would most likely be in conflict with the responsibilities principle?

answer

Auditors are directly involved with a client manager in a strategic decision-making capacity.

question

Which of the following is not a concept from the performance principle under generally accepted auditing standards?

answer

The auditor must express an opinion in accordance with the auditor's findings.

question

The responsibilities principle under generally accepted auditing standards does not include which of the following?

answer

Planning and supervision

question

Prior to, or in conjunction with, the information-gathering procedures for an audit, audit team members should discuss the potential for material misstatement due to fraud. Which of the following best characterizes the mindset that the audit team should maintain during this discussion?

answer

Questioning

question

The standard auditors' report refers to standards of the PCAOB and GAAP in which paragraph?

answer

Standards of the PCAOB: Scope only; GAAP: Opinion only

question

Which of the following types of auditors' reports does not require an additional paragraph to support the opinion?

answer

Unmodified opinion

question

What type of evidence would provide the highest level of assurance in an attestation engagement?

answer

Evidence obtained from independent sources

question

The audit failures of both Enron and WorldCom were examples in which the leadership responsibilities for quality work within the accounting firm were overshadowed by fears that losing a key client would

answer

negatively impact individual auditors' performance evaluations.

question

Internal evidence

answer

consists of documents that are produced, used, and stored within the client's information system.

question

Which of the following is not true with respect to the concept of reasonable assurance?

answer

Audit teams should evaluate all transactions and components of an account balance or class of transactions.

question

Which of the following paragraphs references the conduct of the audit in accordance with PCAOB standards?

answer

Scope paragraph

question

Which of the following courses of action is most appropriate if an auditor concludes that there is a high risk of material misstatement?

answer

Select more effective substantive tests.

question

The relevant ethical requirements relating to due care, professional skepticism, and professional judgment are responsibilities of the auditor at which stage(s) of the audit?

answer

Risk Assessment: Yes Audit Evidence: Yes

question

Which of the following is not true with respect to the responsibilities for establishing generally accepted auditing standards?

answer

Auditing standards for both public and private entities must be formally approved by the Securities and Exchange Commission.

question

Which of the following is least related to the concept of independence in appearance?

answer

The auditors' objectivity and ability to act impartially toward the client

question

A vendor's invoice received and held by the client would be considered what type of evidence?

answer

External-internal

question

Which of the following procedures would provide the most reliable audit evidence?

answer

Inspection of bank statements obtained directly from the client's financial institution

question

Which of the following is a definition of control risk?

answer

The risk that a material misstatement will not be prevented or detected on a timely basis by the client's internal controls

question

The role of the Public Company Accounting Oversight Board in the standard-setting process is to develop

answer

Auditing Standards for the audits of public entities.

question

The performance principle would include all of the following except

answer

the auditors' evaluation of independence with respect to their clients.

question

Which of the following situations would result in the issuance of a disclaimer of opinion?

answer

The auditor is discovered to own a financial interest in the entity.

question

The concept of _________ recognizes that a GAAS audit may fail to detect all material misstatements.

answer

reasonable assurance

question

Which of the following factors influences the risk of material misstatement?

answer

Susceptibility of the account balance to misstatement: Yes Nature, timing, and extent of further audit procedures: No

question

Which of the following is not related to the responsibilities principle?

answer

Specific auditing procedures designed to determine the effectiveness of the entity's internal control over financial reporting

question

Which of the following is most closely associated with the responsibilities principle?

answer

Due care

question

Which element of a system of quality control strives to provide the firm with reasonable assurance that its policies and procedures are operating effectively?

answer

Monitoring

question

Which of the following is true with respect to the PCAOB inspection process?

answer

PCAOB inspection teams review a sample of audit engagements conducted by the firm as well as the firm's system of quality control.

question

The particular and specialized actions that auditors undertake to obtain evidence in a specific audit engagement are known as

answer

audit procedures.

question

As it relates to audit evidence, appropriateness refers to the

answer

quality of evidence gathered.

question

The initial development of auditing standards was in response to

answer

a scandal involving embezzlement that was not detected during an audit engagement.

question

When a firm decides to withdraw from an engagement, it should document all of the following except

answer

significant effects the decision to withdraw from the engagement could have on the firm.

question

An important role of the Public Company Accounting Oversight Board is to oversee the

answer

regulation of firms that audit public entities.

question

The three fundamental principles underlying GAAS include all of the following, except

answer

general principle.

question

An audit of the financial statements of Camden Corporation is being conducted by external auditors. The external auditors are expected to

answer

give an opinion on the fair presentation of Camden's financial statements in conformity with the applicable financial reporting framework (e.g., GAAP, IFRS).

question

Generally accepted auditing standards are

answer

standards that guide the conduct of an audit examination.

question

Which of the following is an element of a system of quality control that should be considered by a public accounting firm in establishing its quality control policies and procedures?

answer

Acceptance and continuance of client relationships and specific engagements

question

A CPA firm would provide itself reasonable assurance of meeting its responsibility to offer professional services that conform with professional standards by

answer

maintaining a comprehensive system of quality control that is suitably designed in relation to its organizational structure.

question

Pronouncements issued by the Public Company Accounting Oversight Board are subject to formal approval by the

answer

Securities and Exchange Commission.

question

Which of the following statements is true with respect to the quality of audit evidence?

answer

Evidence obtained under environments of stronger internal control is of higher quality than evidence obtained under environments of weaker internal control.

question

Control risk is

answer

the probability that a material misstatement could not be prevented or detected by the entity's internal control policies and procedures.

question

In a system of quality control, leadership responsibilities for quality within the firm are best characterized by

answer

management's clear and consistent demonstration of its own commitment to quality control and high-quality work.

question

The state of mind that characterizes the auditors' appropriate questioning and critical assessment of audit evidence is referred to as

answer

professional skepticism.

question

An internal evaluation of the significant judgments made by the audit team and the conclusions reached in formulating its report for engagements meeting specified criteria is known as a(n)

answer

engagement quality control review.

question

Audit evidence is usually considered sufficient when

answer

there is enough quantity to afford a reasonable basis for an opinion on financial statements.

question

PCAOB inspections are conducted by

answer

individuals selected by the PCAOB who are not current employees of public accounting firms.

question

Which of the following represent audit quality guides that remain stable over time and are applicable for all audits?

answer

Auditing standards

question

The preparation of an audit plan prior to the beginning of fieldwork is appropriately considered documentation of

answer

planning.

question

Which of the following would normally be considered earliest in the audit examination?

answer

Determination of materiality levels for use during the audit

question

The primary purpose of the auditors' study of internal control for a nonpublic entity is

answer

to determine the nature, timing, and extent of further audit procedures.

question

Which of the following is not included in the auditors' standard report representing an unmodified opinion?

answer

An indication that all appropriate disclosures have been made and included in the financial statements

question

Which of the following statements is generally correct about the appropriateness of audit evidence?

answer

Auditors' direct personal knowledge, obtained through observation and inspection, is of higher quality than information obtained indirectly from independent outside sources.

question

Which of the following statements is not true with respect to the evidence that would be gathered when assessments of control risk are high?

answer

Auditors would be required to perform procedures at interim periods, rather than at year end.

question

Which reporting options do auditors have if the client's financial statements are not presented according to the applicable financial framework (e.g., GAAP, IFRS)?

answer

Qualified opinion or adverse opinion

question

All of the following are examples of procedures a firm can use to monitor its system of quality control except

answer

devoting sufficient resources to developing a system of quality control.

question

Which of the following presumptions is correct about the reliability of audit evidence?

answer

An effective system of internal control provides more assurance about the reliability of audit evidence.

question

Which of the following is an important consideration during the planning of the audit?

answer

Performing some of the audit procedures prior to the end of the year under audit

question

Firm A performs audits of 60 public entities, while firm B performs audits of 120 public entities. How often must each firm undergo a PCAOB inspection?

answer

Firm A will be inspected every three years and firm B will be inspected annually.

question

Under generally accepted auditing standards, which of the following relates to the responsibilities principle?

answer

Maintaining professional skepticism and exercising professional judgment

question

Which of the following could serve as a source of professional guidance in the audit of a public entity?

answer

Auditing Standards issued by the PCAOB: Yes Statements on Auditing Standards issued by ASB: Yes

question

The auditors' responsibility to express an opinion on the financial statements is

answer

explicitly represented in the introductory paragraph of the auditors' standard report.

question

All of the following statements are true regarding generally accepted auditing standards (GAAS) except

answer

departures from auditing standards that impose presumptively mandatory requirements on auditors are not permitted under any circumstances.

question

Which of the following is not considered a type of audit evidence?

answer

The entity's trial balance

question

Which of the following actions should a CPA firm take to comply with the AICPA's quality control standards?

answer

Establish policies to ensure that the audit work meets applicable professional standards.

question

A periodic review of an audit firm's system of quality control by the PCAOB is referred to as a(n)

answer

inspection.

question

Which of the following would be evaluated during the PCAOB inspection process?

answer

Firm's system of quality control: Yes Financial viability of the firm: Yes

question

Which of the following is not true with respect to the auditors' report for a public entity?

answer

The report provides a detailed listing of major auditing procedures performed during the examination.

question

Auditors try to achieve independence in appearance in order to

answer

maintain public confidence in the profession.

question

Which of the following presumptions does not relate to the reliability of audit evidence?

answer

The auditors' opinion, to be economically useful, is formed within reasonable time and based on evidence obtained at a reasonable cost.

question

The fundamental principles developed by the Auditing Standards Board are best described as

answer

guidelines for the general conduct of audit engagements.

question

During which stages of an audit examination are auditors required to exhibit the appropriate use of professional judgment?

answer

Gathering evidence: Yes Drawing conclusions: Yes

question

Dara & Co. Audit Hill Corporation. Ellie is the engagement partner on the audit with an office in Buffalo Grove. Which of the following would NOT be considered a covered member?

answer

Julie, a partner in Dara & Company, with an office in Elmhurst

question

Rule 301 has been interpreted by the AICPA to explicitly allow a CPA to divulge confidential client information to

answer

the AICPA Professional Ethics Division.

question

Which of the following is NOT a restriction placed on audit partners by Sarbanes-Oxley?

answer

Engagement partners must review non-audit work to insure that independence has not been compromised.

question

Which of the following statements include in the advertising of a CPA firm is permissible according to Rule 502, Advertising and Other Forms of Solicitation.

answer

"We audit the five largest manufacturing companies in the state."

question

According to the ethical standards of the profession, which of the following acts is generally prohibited?

answer

Accepting a commission for recommending a product to an audit client

question

The interpretation of Rule 501, Acts Discreditable to the Profession, would not include

answer

membership in an activist political party.

question

According to the profession's ethical standards, an auditor would be considered independent in which of the following instances?

answer

The auditor's checking account that is fully insured by a federal agency is held at a client financial institution.

question

Which of the following is NOT one of the AICPA Principles of Professional Conduct?

answer

Reliability

question

According to Rule 203, Accounting Principles, requires the auditor to adhere to official pronouncements except when

answer

adherence to a pronouncement would be misleading.

question

Which of the following is NOT included in Rule of Conduct 102, Integrity and Objectivity?

answer

Prudent assessment of facts

question

The interpretation of Independence Rule 101 allows members to

answer

have loans from a client that are collateralized by cash deposits held by the client.

question

A client has omitted a significant disclosure from the financial statements. The auditor has asked the client to include the information, but the client refuses and claims the information is confidential. The position of the CPA should be that the information

answer

cannot be considered confidential if it is necessary to the completeness of the financial statements.

question

What agency has the ultimate authority in defining independence for public companies?

answer

SEC

question

The SEC requires companies to disclose fees paid to independent public accounting firms for audit and consulting services in the belief that

answer

client directors and financial statement users should consider all aspects related to auditors' independence, and information about fees is important.

question

An audit client hires a member of the audit engagement team to be its new controller. Sarbanes-Oxley rules require that

answer

the client find a new audit firm.

question

Which of the following is allowed under the Government Independence Standards?

answer

Personnel who provide nonaudit services are prohibited from planning, conducting or reviewing audit work related to the nonaudit service.

question

The AICPA Council has designated the following bodies to pronounce accounting principles under Rule 203, except the

answer

Auditing Procedures Board.

question

Julie and Lisa are sisters. Julie is a CPA auditing the company where Lisa works. Julie's independence is impaired if

answer

Lisa is the Controller.

question

In which of the following circumstances would a CPA who audits XZ Corporation lack independence?

answer

The CPA and XZ's president each own 25% of FOB Corporation, a closely held company.

question

According to Sarbanes-Oxley, the audit committee must pre-approve all audit and non-audit services. This can be done

answer

Case-by-case basis: Yes; Through established policies: Yes; Delegating the responsibility: No

question

Which of the following sections is no longer included in the AICPA Rules of Conduct?

answer

Responsibilities to Colleagues

question

Red and Green, CPAs are the external auditors for Blue Corporation, a publicly-held company. Blue Corporation has outsourced its internal audit function to Red and Green. Which of the following statements is true?

answer

Public accounting firms cannot be both the internal and external auditors for publicly-held companies and maintain independence.

question

Which of the following philosophical theories places emphasis on following rules, rather than on the consequences of the decision?

answer

Imperative principle

question

Which of the following is true according to Government Independence Standards?

answer

Nonaudit services are allowed providing the audit organization does not perform management functions, make management decisions, or audit its own work.

question

To which group can a CPA provide audit documentation without being subpoenaed and without the client's consent?

answer

Another CPA firm performing a peer review

question

Based on Sarbanes-Oxley, who is ultimately responsible for the independence of the external auditor?

answer

The audit committee

question

CPA Krogstad is the executive in charge of the Omaha office of the audit firm. He is responsible for the practice in all areas of audit, tax, and consulting, but he does not serve as a field audit partner or a reviewer. CPA Ward is the partner in charge of the Dodger, Inc. audit (an SEC filing). The audit firm's independence is impaired if

answer

Krogstad owns Dodger common stock.

question

Rule 201, General Standards, requires a member to comply with standards and interpretations. Which of the following is NOT a standard covered by Rule 201?

answer

Independence

question

Violet, CPA, audits Big Bank, a local financial institution. Which of the following would most likely impair Violet's independence with regard to Big Bank?

answer

A home loan with the value of the house exceeding the mortgage balance

question

Which of the following defines the imperative principle of ethics?

answer

Ethics are a function of moral rules and principles.

question

Which of the following is NOT a key element of the definition of ethics?

answer

Definitive conclusions

question

Which of the following is the responsibility of the Professional Ethics Executive Committee?

answer

Make and enforce all the rules of conduct for CPAs who are AICPA members.

question

Maralee has been approached by J. Fox Entertainment to perform an audit of her theatre company. Maralee has never audited a theatre company before. Maralee can

answer

accept the engagement if she can obtain the required knowledge before the end of the engagement.

question

According to the ethical standards of the profession, which of the following acts is generally prohibited?

answer

Retaining client records after an engagement is terminated prior to completion and the client has demanded their return

question

Which of the following philosophical theories places emphasis on the consideration of projecting the consequences of a choice in terms of this question: "What may be the consequences of similar persons making this choice in similar circumstances?"

answer

Generalization principle

question

Which of the following is required for a CPA firm to designate itself as "Members of the American Institute of Certified Public Accountants" on its letterhead?

answer

All owners must be members.

question

Which of the following forms of organization would NOT be allowed under Rule 505 of the Professional Code of Conduct?

answer

Partnership; 40% of partners are CPAs

question

Which of the following philosophical principles in ethics places emphasis on the consequences of action, rather than on following the rules?

answer

Utilitarianism principle

question

Auditing is...

answer

-systematic process of obtaining and evaluating evidence regarding assertions made by management

question

Attestation is...

answer

-a practitioner is engaged -to issue a report on subject matter or an assertion -that is the responsibility of another party

question

Assurance is...

answer

-improving the quality of information -for decision makers

question

Conflict of interest gives rise for

answer

assurance

question

When assuring for specific assertions made by management, we call this...

answer

attestation

question

When the assertions made are embodies in financial statements, we call this...

answer

auditing

question

Responsibilities Principle

answer

-Have appropriate competence and capabilities -Comply with relevant ethical requirements -Maintain professional skepticism and exercise professional judgment

question

Performance Principle

answer

-Obtain 'reasonable assurance' -Plan and supervise -Apply materiality level -Identify and assess risks -Obtain sufficient appropriate audit evidence -- sufficient = quantity -- appropriate = quality

question

Reporting Principle

answer

-Express an opinion based upon audit findings -Public companies --Audit opinion and opinion on management's assertion related to internal control over financial reporting (integrated audit) -Private companies --Internal control is tested to determine the level of other testing required for gathering evidence

question

Audit Quality Control

answer

-SQCS 8 - specifies six elements --Leadership 'tone' at the top --Compliance to relevant ethical requirements --Acceptance and continuance of engagements --Human resources --Engagement performance --Monitoring

question

Peer Reviews

answer

-Public Companies --PCAOB Independent Inspection -Private companies --peer reviews only

question

Rule 101

answer

independence

question

Rule 102

answer

integrity and objectivity

question

Rule 201

answer

General Standards

question

Rule 202

answer

Compliance with standards

question

Rule 203

answer

Accounting principles

question

Rule 301

answer

Confidential client information

question

Rule 302

answer

contingent fees

question

Rule 501

answer

Acts discreditable

question

Rule 502

answer

Advertising and solicitation

question

Rule 503

answer

Commission and Referral fees

question

Rule 505

answer

Form of practice and name

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