Question 1

Why is auditing important in a free market society?

Accepted Answer

A)  The public requires auditors to function as divisions of regulatory bodies. 
B)  Auditors detect all errors and fraud perpetrated by company employees. 
C)  It provides reliable information upon which to judge economic performance. 
D)  The auditor is an amiable insurance policy for investors. 
E)  All of the above are true. 
A)  The public requires auditors to function as divisions of regulatory bodies. 
B)  Auditors detect all errors and fraud perpetrated by company employees. 
C)  It provides reliable information upon which to judge economic performance. 
D)  The auditor is an amiable insurance policy for investors. 
E)  All of the above are true.

Question 2

The Public Company Accounting Oversight Board provides the criteria against which the auditor measures the fairness of financial statement presentation.

Accepted Answer

A) True 
 B)False

Question 3

What is the audit committee of the board of directors of a company responsible for?

Accepted Answer

A)  Hiring the auditor. 
B)  Preparing the financial statements. 
C)  The audit workpapers. 
D)  Obtaining evidence. 
A)  Hiring the auditor. 
B)  Preparing the financial statements. 
C)  The audit workpapers. 
D)  Obtaining evidence.

Question 4

The American Institute of CPAs sets auditing standards for non-publicly traded companies.

Accepted Answer

A) True 
 B)False

Question 5

CPA certificates for auditors are issued by state boards of accountancy.

Accepted Answer

A) True 
 B)False

Question 6

The FASB is responsible for creating International Financial Reporting Standards.

Accepted Answer

A) True 
 B)False

Question 7

An Integrated Audit Report provides opinion(s) on which of the following?

Accepted Answer

A)  The financial statements. 
B)  Internal controls. 
C)  Both financial statements and internal controls. 
D)  Neither financial statements or internal controls. 
A)  The financial statements. 
B)  Internal controls. 
C)  Both financial statements and internal controls. 
D)  Neither financial statements or internal controls.

Question 8

Which of the following procedures do third-party users of the audit report not expect the auditor to perform?

Accepted Answer

A)  Evaluate measurements and disclosures made by management. 
B)  Provide a biased evaluation of the financial statements. 
C)  Determine whether financial statements are presented in accordance with GAAP. 
D)  Gather sufficient appropriate evidence to support their opinion. 
A)  Evaluate measurements and disclosures made by management. 
B)  Provide a biased evaluation of the financial statements. 
C)  Determine whether financial statements are presented in accordance with GAAP. 
D)  Gather sufficient appropriate evidence to support their opinion.

Question 9

A free market can only exist if there is sharing of perfectly reliable information.

Accepted Answer

A) True 
 B)False

Question 10

If the auditor has no reservations about management's financial statements then the auditor will issue a qualified opinion.

Accepted Answer

A) True 
 B)False

Question 11

A bank using Milton Company's financial statements to determine the creditworthiness of a potential loan to Milton is a good example of the need for unbiased reporting.

Accepted Answer

A) True 
 B)False

Question 12

In the United States,what is the most common criteria against which the auditor measures the fairness of financial statement presentation?

Accepted Answer

A)  Auditing standards. 
B)  Generally accepted accounting principles. 
C)  Generally accepted accounting standards. 
D)  Governmental accounting principles. 
A)  Auditing standards. 
B)  Generally accepted accounting principles. 
C)  Generally accepted accounting standards. 
D)  Governmental accounting principles.

Question 13

Only the Big 4 audit firms can conduct audits of private companies in the United States.

Accepted Answer

A) True 
 B)False

Question 14

The Center for Audit Quality has the primary authority to set auditing standards.

Accepted Answer

A) True 
 B)False

Question 15

External auditors frequently serve on the audit committees of their clients.

Accepted Answer

A) True 
 B)False

Question 16

In all states, a CPA must have completed at least 150 hours of college semester hours to receive their license.

Accepted Answer

A) True 
 B)False

Question 17

Overview of Financial Statement Audit.
Define auditing and discuss how its components fit into an overview of a financial statement audit.

Accepted Answer

Financial statement auditing has been de

Question 18

According to the Financial Reporting Council (FRC), when is the culture of an audit firm likely to provide a positive contribution to audit quality?

Accepted Answer

A)  When the leadership of the audit firm ensures partners and other staff have sufficient time and resources to deal with difficult issues as they arise. 
B)  When the leadership of the audit firm ensures robust systems for client acceptance and continuation based on the likelihood of increased audit fees. 
C)  When the leadership of the audit firm creates an environment where achieving efficiency is valued, invested in and rewarded. 
D)  When the leadership of the audit firm ensures financial considerations drive actions. 
A)  When the leadership of the audit firm ensures partners and other staff have sufficient time and resources to deal with difficult issues as they arise. 
B)  When the leadership of the audit firm ensures robust systems for client acceptance and continuation based on the likelihood of increased audit fees. 
C)  When the leadership of the audit firm creates an environment where achieving efficiency is valued, invested in and rewarded. 
D)  When the leadership of the audit firm ensures financial considerations drive actions.

Question 19

What is the primary objective of the independent auditor's report on financial statements?

Accepted Answer

A)  To report on all instances of fraud. 
B)  To assist the board in evaluating management's effectiveness. 
C)  To attest to the credit-worthiness of the client. 
D)  To give credibility to management's prepared financial statements. 
A)  To report on all instances of fraud. 
B)  To assist the board in evaluating management's effectiveness. 
C)  To attest to the credit-worthiness of the client. 
D)  To give credibility to management's prepared financial statements.

Question 20

A quality audit is one performed "in accordance with generally accepted auditing standards (GAAS) to provide reasonable assurance that the audited financial statements and related disclosures are presented in accordance with generally accepted accounting principles (GAAP) and (2) are not materially misstated whether due to errors or fraud."

Accepted Answer

A) True 
 B)False

Why is auditing important in a free market society?

The Public Company Accounting Oversight Board provides the criteria against which the auditor measures the fairness of financial statement presentation.

What is the audit committee of the board of directors of a company responsible for?

The American Institute of CPAs sets auditing standards for non-publicly traded companies.

CPA certificates for auditors are issued by state boards of accountancy.

The FASB is responsible for creating International Financial Reporting Standards.

An Integrated Audit Report provides opinion(s) on which of the following?

Which of the following procedures do third-party users of the audit report not expect the auditor to perform?

A free market can only exist if there is sharing of perfectly reliable information.

If the auditor has no reservations about management's financial statements then the auditor will issue a qualified opinion.

A bank using Milton Company's financial statements to determine the creditworthiness of a potential loan to Milton is a good example of the need for unbiased reporting.

In the United States,what is the most common criteria against which the auditor measures the fairness of financial statement presentation?

Only the Big 4 audit firms can conduct audits of private companies in the United States.

The Center for Audit Quality has the primary authority to set auditing standards.

External auditors frequently serve on the audit committees of their clients.

In all states, a CPA must have completed at least 150 hours of college semester hours to receive their license.

Overview of Financial Statement Audit. Define auditing and discuss how its components fit into an overview of a financial statement audit.

According to the Financial Reporting Council (FRC), when is the culture of an audit firm likely to provide a positive contribution to audit quality?

What is the primary objective of the independent auditor's report on financial statements?

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters

Exam 1: Auditing: Integral to the Economy

Why is auditing important in a free market society?

The Public Company Accounting Oversight Board provides the criteria against which the auditor measures the fairness of financial statement presentation.

What is the audit committee of the board of directors of a company responsible for?

The American Institute of CPAs sets auditing standards for non-publicly traded companies.

CPA certificates for auditors are issued by state boards of accountancy.

The FASB is responsible for creating International Financial Reporting Standards.

An Integrated Audit Report provides opinion(s) on which of the following?

Which of the following procedures do third-party users of the audit report not expect the auditor to perform?

A free market can only exist if there is sharing of perfectly reliable information.

If the auditor has no reservations about management's financial statements then the auditor will issue a qualified opinion.

A bank using Milton Company's financial statements to determine the creditworthiness of a potential loan to Milton is a good example of the need for unbiased reporting.

In the United States,what is the most common criteria against which the auditor measures the fairness of financial statement presentation?

Only the Big 4 audit firms can conduct audits of private companies in the United States.

The Center for Audit Quality has the primary authority to set auditing standards.

External auditors frequently serve on the audit committees of their clients.

In all states, a CPA must have completed at least 150 hours of college semester hours to receive their license.

Overview of Financial Statement Audit. Define auditing and discuss how its components fit into an overview of a financial statement audit.

According to the Financial Reporting Council (FRC), when is the culture of an audit firm likely to provide a positive contribution to audit quality?

What is the primary objective of the independent auditor's report on financial statements?

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters