Auditing Chapter 2
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Quiz based on Auditing and Assurance Services 14e by Arens
- 1.Which of the following is the least likely form of business for a CPA firm?
- A.
General partnership
- B.
General corporation
- C.
Limited liability company
- D.
Limited liability partnership
- 2.Which one of the following is not one of the three General Standards?
- A.
Proper planning and supervision.
- B.
Independence of mental attitude.
- C.
Adequate training and proficiency.
- D.
Due professional care.
- 3.Which one of the following is not a Field Work Standard?
- A.
Adequate planning and supervision.
- B.
Due professional care.
- C.
Understand the entity and its environment including internal control.
- D.
Sufficient appropriate audit evidence.
- 4.The General Standards stress the importance of:
- A.
Evidence accumulation.
- B.
Personal qualities the auditor should possess.
- C.
Communicating the auditor’s findings to the reader.
- D.
General supervision of the audit.
- 5.The generally accepted auditing standard that requires “Adequate technical training and proficiency” is normally interpreted as requiring the auditor to have:
- A.
Formal education in auditing and accounting.
- B.
Worked for an entity similar to the entity being audited.
- C.
Independence in mental attitude
- D.
A graduate degree in a business field.
- 6.Members of the Public Company Accounting Oversight Board are appointed and overseen by:
- A.
The U.S. Congress.
- B.
The American Institute of Certified Public Accountants.
- C.
The Auditing Standards Board.
- D.
The Securities and Exchange Commission.
- 7.Statements on Auditing Standards provide auditors of privately held companies with ______ guidance regarding the conduct of financial statement audits.
- A.
Fairly extensive
- B.
Some limited
- C.
Practically no
- D.
Specific and detailed
- 8.Which of the following statements most accurately captures the intent of the standards of field work?
- A.
Field work standards are primarily concerned with personal attributes necessary during the conduct of the audit
- B.
Field work standards provide extensive guidance regarding the conduct of an audit.
- C.
Field work standards are primarily directed at the auditor’s planning, understanding of internal control, and evidence accumulation.
- D.
Field work standards are primarily concerned with the conduct of substantive testing as opposed to testing of internal controls.
- 9.Prior to the passage of the Sarbanes-Oxley Act, which of the following was responsible for establishing auditing standards?
- A.
Securities and Exchange Commission
- B.
Public Company Accounting Oversight Board
- C.
Auditing Standards Board
- D.
National Association of Accounting
- 10.Standards issued by the Public Company Accounting Oversight Board must be followed by CPAs who audit:
- A.
Both private and public companies.
- B.
Public companies only.
- C.
Private companies, public companies, and nonprofit entities.
- D.
Private companies only.
- 11.The Statements on Auditing Standards issued by the Auditing Standards Board:
- A.
Are interpretations of generally accepted auditing standards.
- B.
Are the equivalent of laws for audit practitioners.
- C.
Must be followed in all situations.
- D.
Are optional guidelines which an auditor may choose to follow or not follow when conducting an audit.
- 12.
- A.
The issue in question is immaterial in amount.
- B.
More expertise is needed to fulfill the requirement.
- C.
The requirement of the standard has not been addressed by the PCAOB.
- D.
Any of the above three are correct.
- 13.
- A.
Perform inspections of the quality controls at audit firms that audit public companies.
- B.
Establish auditing standards that must be followed by CPAs on all audits.
- C.
Oversee auditors of public companies.
- D.
Perform any of the above functions.
- 14.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:
- A.
Form S-1.
- B.
Form 8-K.
- C.
Form 10-K.
- D.
Form 10-Q.
- 15.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:
- A.
Form S-1.
- B.
Form 8-K.
- C.
Form 10-K
- D.
Form 10-Q.
- 16.The third general standard states that due care is to be exercised in the performance of an audit. This standard is generally interpreted to require:
- A.
Objective review of the adequacy of the technical training of firm personnel.
- B.
Thorough review of the existing internal control structure.
- C.
Critical review of work done at every level of supervision.
- D.
Periodic review of a CPA firm’s quality control procedures.
- 17.Assume the Public Company Accounting Oversight Board (PCAOB) identifies a violation during its inspection of a registered accounting firm.
- A.
The PCAOB may not enforce some disciplinary action against the accounting firm.
- B.
The PCAOB may not report the matter to the Securities and Exchange Commission
- C.
The PCAOB may not report the matter to the appropriate state accountancy board
- D.
The PCAOB may not suspend the license to practice of the CPA guilty of the violation.
- 18.The auditor’s judgment concerning the overall fairness of presentation of financial position, results of operations, and changes in cash flow is applied within the framework of:
- A.
Quality control.
- B.
Generally accepted auditing standards which include the concept of materiality.
- C.
The auditor’s evaluation of the audited company’s internal control.
- D.
Generally accepted accounting principles.
- 19.Hansen Corporation’s stock is listed on a national stock exchange and registered with the Securities and Exchange Commission. Hansen’s management hires a CPA to perform an independent audit of Hansen’s financial statements. The primary objective of this audit is to provide assurance to the:
- A.
Investors in Hansen Corporation’s stock.
- B.
Stock exchange.
- C.
Securities and Exchange Commission.
- D.
Management of Hansen Corporation.
- 20.Which of the following statements is true as it relates to limited liability partnerships?
- A.
Only senior partners are liable for the partnership’s debts.
- B.
Partners have no liability in a limited liability partnership arrangement.
- C.
Partners are personally liable for the acts of those under their supervision.
- D.
All partners must be AICPA members.
- 21.If an auditor of a public company cannot find guidance issued by the PCAOB on a particular audit matter, the auditor should generally seek guidance from which of the following sources?
- A.
Statements on Auditing Standards.
- B.
Statements on Standards for Accounting and Review Services.
- C.
Regulations issued by the Securities and Exchange Commission.
- D.
The AICPA Code of Professional Conduct.
- 22.The SEC requirements of greatest interest to CPAs are set forth in the SEC’s:
- A.
Regulation S-X and Accounting Series Releases.
- B.
S-1 through S-16 forms.
- C.
Director’s newsletter.
- D.
Forms 8-K, 10-K, and 10-Q.
- 23.Generally Accepted Auditing Standards (GAAS) and Statements on Auditing Standards (SAS) should be looked upon by practitioners as:
- A.
Ideals to work towards, but which are not achievable.
- B.
Maximum standards that denote excellent work.
- C.
Minimum standards of performance that must be achieved on each audit engagement.
- D.
Benchmarks to be used on all audits, reviews, and compilations.
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