Question 1

The public companies accounting oversight board's (PCAOB) rule making process requires the adopted rules to be submitted to ____________ for approval?

Accepted Answer

A)  IRS 
B)  FASB 
C)  AICPA 
D)  IMA 
E)  SEC 
A)  IRS 
B)  FASB 
C)  AICPA 
D)  IMA 
E)  SEC

Question 2

A disclaimer of opinion really states that:

Accepted Answer

A)  no opinion can be formed. 
B)  no audit was attempted. 
C)  except for some minor errors the statements are fair. 
D)  the financial statements are wrong. 
E)  the audit was aborted. 
A)  no opinion can be formed. 
B)  no audit was attempted. 
C)  except for some minor errors the statements are fair. 
D)  the financial statements are wrong. 
E)  the audit was aborted.

Question 3

In the case of a very material departure from GAAP, the best course of action is usually to disclaim an opinion.

Accepted Answer

A) True 
 B)False

Question 4

SAS refers to the Statements on Auditing Services.

Accepted Answer

A) True 
 B)False

Question 5

GAAS are applicable in each financial statement audit made by an independent auditor regardless of the entity's size, form of business organization, or type of industry.

Accepted Answer

A) True 
 B)False

Question 6

What level of assurance does the reader of a private company financial statement receive on the company's system of internal controls?

Accepted Answer

A)  positive assurance 
B)  reasonable assurance 
C)  negative assurance 
D)  no assurance 
E)  limited assurance 
A)  positive assurance 
B)  reasonable assurance 
C)  negative assurance 
D)  no assurance 
E)  limited assurance

Question 7

The primary objective of auditing is to add credibility to the financial statements prepared by management.

Accepted Answer

A) True 
 B)False

Question 8

The auditor of a public company is responsible for issuing more opinions than the auditor of private company.

Accepted Answer

A) True 
 B)False

Question 9

Statements on auditing standards (SAS's) are interpretations of?

Accepted Answer

A)  generally accepted auditing standards 
B)  generally accepted accounting principles 
C)  generally accepted accounting policies 
D)  generally accepted auditing services 
E)  AICPA code of professional conduct 
A)  generally accepted auditing standards 
B)  generally accepted accounting principles 
C)  generally accepted accounting policies 
D)  generally accepted auditing services 
E)  AICPA code of professional conduct

Question 10

Within the generally accepted auditing standards, the general standards relate primarily to:

Accepted Answer

A)  qualifications of the auditor and the quality of the auditor's work. 
B)  qualifications of the auditor. 
C)  the relationship between GAAS and generally accepted accounting principles. 
D)  the fairness of the financial statements. 
E)  the general distribution of audit reports. 
A)  qualifications of the auditor and the quality of the auditor's work. 
B)  qualifications of the auditor. 
C)  the relationship between GAAS and generally accepted accounting principles. 
D)  the fairness of the financial statements. 
E)  the general distribution of audit reports.

Question 11

Which of the following would not be found in the introductory paragraph of the standard audit report?

Accepted Answer

A)  a reference to generally accepted auditing standards. 
B)  a list of specific financial statements audited. 
C)  a statement that the financial statements are the responsibility of management. 
D)  a statement that the auditor's responsibility is to express an opinion, based on the audit. 
E)  a reference to the entity audited. 
A)  a reference to generally accepted auditing standards. 
B)  a list of specific financial statements audited. 
C)  a statement that the financial statements are the responsibility of management. 
D)  a statement that the auditor's responsibility is to express an opinion, based on the audit. 
E)  a reference to the entity audited.

Question 12

During a financial statement audit, the auditor maintains professional relationships with four important groups. Briefly explain each of these relationships.

Accepted Answer

(a) Management - From an auditing

Question 13

In the opinion paragraph, reference is made to the listed financial statements, but their names are not repeated.

Accepted Answer

A) True 
 B)False

Question 14

An auditor may be required to disclose fraud outside the client entity in each one of the following situations except:

Accepted Answer

A)  in response to a court subpoena. 
B)  to the SEC when the auditor has withdrawn from the engagement. 
C)  to a successor auditor who makes inquiries in accordance with professional standards. 
D)  to the GAO when the auditor has reported illegal acts to the audit committee. 
E)  to a funding agency in accordance with audit requirements for entities that receive governmental financial assistance. 
A)  in response to a court subpoena. 
B)  to the SEC when the auditor has withdrawn from the engagement. 
C)  to a successor auditor who makes inquiries in accordance with professional standards. 
D)  to the GAO when the auditor has reported illegal acts to the audit committee. 
E)  to a funding agency in accordance with audit requirements for entities that receive governmental financial assistance.

Question 15

The auditor's responsibility for illegal acts that have an indirect effect on the financial statements is restricted to information that comes to his or her attention.

Accepted Answer

A) True 
 B)False

Question 16

The second general standard likens the auditor's role in an audit to the role of an attorney in a legal case.

Accepted Answer

A) True 
 B)False

Question 17

The internal auditor is responsible for the preparation of the financial statements.

Accepted Answer

A) True 
 B)False

Question 18

If the client refuses to accept an audit report that is qualified due to the known existence of an illegal act, the auditor should:

Accepted Answer

A)  withdraw from the engagement and indicate the reasons to the audit committee in writing. 
B)  issue an adverse opinion if management agrees to fully disclose the matter. 
C)  withdraw from the engagement and indicate the reasons to the SEC or other regulatory body in writing. 
D)  issue a disclaimer of opinion instead. 
E)  issue an unqualified opinion if management agrees to fully disclose the matter. 
A)  withdraw from the engagement and indicate the reasons to the audit committee in writing. 
B)  issue an adverse opinion if management agrees to fully disclose the matter. 
C)  withdraw from the engagement and indicate the reasons to the SEC or other regulatory body in writing. 
D)  issue a disclaimer of opinion instead. 
E)  issue an unqualified opinion if management agrees to fully disclose the matter.

Question 19

The auditors report on internal control over financial reporting that goes to the public must report material weaknesses in

Accepted Answer

A)  financial statement format 
B)  internal affairs 
C)  internal control 
D)  management 
E)  supervision 
A)  financial statement format 
B)  internal affairs 
C)  internal control 
D)  management 
E)  supervision

Question 20

There are several paragraphs included in the auditor's standard report in internal control over financial reporting. Which paragraph defines internal control over financial reporting?

Accepted Answer

A)  introductory paragraph 
B)  scope paragraph 
C)  inherent limitations paragraph 
D)  definition paragraph 
E)  explanatory paragraph 
A)  introductory paragraph 
B)  scope paragraph 
C)  inherent limitations paragraph 
D)  definition paragraph 
E)  explanatory paragraph

Exam 2: Financial Statement Audits and

The public companies accounting oversight board's (PCAOB) rule making process requires the adopted rules to be submitted to ____________ for approval?

A disclaimer of opinion really states that:

In the case of a very material departure from GAAP, the best course of action is usually to disclaim an opinion.

SAS refers to the Statements on Auditing Services.

GAAS are applicable in each financial statement audit made by an independent auditor regardless of the entity's size, form of business organization, or type of industry.

What level of assurance does the reader of a private company financial statement receive on the company's system of internal controls?

The primary objective of auditing is to add credibility to the financial statements prepared by management.

The auditor of a public company is responsible for issuing more opinions than the auditor of private company.

Statements on auditing standards (SAS's) are interpretations of?

Within the generally accepted auditing standards, the general standards relate primarily to:

Which of the following would not be found in the introductory paragraph of the standard audit report?

During a financial statement audit, the auditor maintains professional relationships with four important groups. Briefly explain each of these relationships.

In the opinion paragraph, reference is made to the listed financial statements, but their names are not repeated.

An auditor may be required to disclose fraud outside the client entity in each one of the following situations except:

The auditor's responsibility for illegal acts that have an indirect effect on the financial statements is restricted to information that comes to his or her attention.

The second general standard likens the auditor's role in an audit to the role of an attorney in a legal case.

The internal auditor is responsible for the preparation of the financial statements.

If the client refuses to accept an audit report that is qualified due to the known existence of an illegal act, the auditor should:

The auditors report on internal control over financial reporting that goes to the public must report material weaknesses in

There are several paragraphs included in the auditor's standard report in internal control over financial reporting. Which paragraph defines internal control over financial reporting?

Auditing and the Public Accounting

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

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