Auditing Chapter 2
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
Correct Answer
A. General 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.
Correct Answer
A. Proper planning and supervision. -
- 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.
Correct Answer
B. Due professional care. -
- 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.
Correct Answer
B. Personal qualities the auditor should possess. -
- 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.
Correct Answer
A. Formal education in auditing and accounting. -
- 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.
Correct Answer
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
Correct Answer
B. Some limited -
- 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.
Correct Answer
C. Field work standards are primarily directed at the auditor’s planning, understanding of internal control, and evidence accumulation. -
- 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
Correct Answer
C. Auditing Standards Board -
- 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.
Correct Answer
B. Public 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.
Correct Answer
A. Are interpretations of generally accepted auditing standards. -
- 12.
An auditor need not abide by a particular auditing standard if the auditor believes that:
- 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.
Correct Answer
A. The issue in question is immaterial in amount. -
- 13.
The Public Company Accounting Oversight Board does not:
- 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.
Correct Answer
B. Establish auditing standards that must be followed by CPAs on all audits. -
- 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.
Correct Answer
B. Form 8-K. -
- 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.
Correct Answer
A. Form S-1. -
- 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.
Correct Answer
C. Critical review of work done at every level of supervision. -
- 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.
Correct Answer
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.
Correct Answer
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.
Correct Answer
A. Investors in Hansen Corporation’s stock. -
- 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.
Correct Answer
C. Partners are personally liable for the acts of those under their supervision. -
- 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.
Correct Answer
A. Statements on Auditing Standards. -
- 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.
Correct Answer
A. Regulation S-X and Accounting Series Releases. -
- 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.
Correct Answer
C. Minimum standards of performance that must be achieved on each audit engagement. -
Quiz Review Timeline +
Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.
-
Current Version
-
Mar 19, 2022Quiz Edited by
ProProfs Editorial Team -
Dec 09, 2011Quiz Created by
Kosdaisy
Back to top