Question 1

A correct relationship among the auditor, the client, and the external users is:

Accepted Answer

A) management of a public company hires the independent auditor. 
B) the audit committee of a private company hires the independent auditor. 
C) the client provides capital to the external users. 
D) the external users can rely upon the auditor's report to reduce information risk. 
A) management of a public company hires the independent auditor. 
B) the audit committee of a private company hires the independent auditor. 
C) the client provides capital to the external users. 
D) the external users can rely upon the auditor's report to reduce information risk. D

Question 2

To perform an audit, it is necessary for the information to be in a verifiable form and there must be some criteria by which the auditor can evaluate the information.Detail the information and criteria that would be used when:
(A)an independent CPA firm audits a company's historical financial statements.
(B)an Internal Revenue Service auditor audits that same company's tax return.
(C)an internal auditor performs an operational audit to evaluate whether the company's computerized payroll processing system is operating efficiently and effectively.

Accepted Answer

(A)The information used by a CPA firm in a financial statement audit is the financial information in the company's financial statements.The most commonly used criteria are applicable U.S.generally accepted accounting standards or International Financial Reporting Standards (IFRS).
(B)The information used by an IRS auditor is the financial information in the company's federal tax return.The criteria used are the internal revenue code and interpretations.
(C)The information used by an internal auditor when performing an operational audit of the payroll system could include various items such as the number of errors made, costs incurred by the payroll department, and number of payroll records processed each month.The criteria would consist of company standards for departmental efficiency and effectiveness.

Question 3

Evidence is paramount to audit and attestation engagements.List the four basic types of audit evidence.

Accepted Answer

The four types of audit and attestation evidence include:
1.Electronic and documentary data about transactions
2.Written and electronic communications with outsiders
3.Observations by the auditor
4.Oral testimony of the auditee (client)

Question 4

In the audit of historical financial statements, what accounting criteria is most common?

Accepted Answer

A) Regulatory accounting principles 
B) Applicable international accounting standards 
C) Applicable U.S.accounting standards 
D) B and C 
E) All of the above 
A) Regulatory accounting principles 
B) Applicable international accounting standards 
C) Applicable U.S.accounting standards 
D) B and C 
E) All of the above

Question 5

The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to auditing and financial reporting.

Accepted Answer

A) True 
 B)False

Question 6

An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n):

Accepted Answer

A) audit of financial statements. 
B) compliance audit. 
C) operational audit. 
D) production audit. 
A) audit of financial statements. 
B) compliance audit. 
C) operational audit. 
D) production audit.

Question 7

Most public companies' audited financial statements are available on the SEC's EDGAR database.

Accepted Answer

A) True 
 B)False

Question 8

Section 404 of the Sarbanes-Oxley Act requires public companies to have an external auditor attest to their internal control over financial reporting.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following are required to have a written report regarding the assertion of another party?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 10

Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:

Accepted Answer

A) finance. 
B) auditing. 
C) accounting. 
D) economics. 
A) finance. 
B) auditing. 
C) accounting. 
D) economics.

Question 11

What is an engagement to attest on internal control over financial reporting?

Accepted Answer

For an audit of internal control over fi

Question 12

An auditor must be competent and have an independent mental attitude.

Accepted Answer

A) True 
 B)False

Question 13

The primary role of the United States General Accounting Office is the enforcement of the federal tax laws as defined by Congress and interpreted by the courts.

Accepted Answer

A) True 
 B)False

Question 14

An accountant:

Accepted Answer

A) must possess expertise in the accumulation of audit evidence. 
B) must decide the number and types of items to test. 
C) must have an understanding of the principles and rules that provide the basis for preparing the accounting information. 
D) must be a CPA. 
A) must possess expertise in the accumulation of audit evidence. 
B) must decide the number and types of items to test. 
C) must have an understanding of the principles and rules that provide the basis for preparing the accounting information. 
D) must be a CPA.

Question 15

Three common types of attestation services are:

Accepted Answer

A) audits of historical financial statements, reviews of historical financial statements, and audits of internal control over financial reporting. 
B) audits of historical financial information, verifications of historical financial information, and attestations regarding internal controls. 
C) reviews of historical financial information, verifications of future financial information, and attestations regarding internal controls. 
D) audits of historical financial information, reviews of controls related to investments, and verifications of historical financial information. 
A) audits of historical financial statements, reviews of historical financial statements, and audits of internal control over financial reporting. 
B) audits of historical financial information, verifications of historical financial information, and attestations regarding internal controls. 
C) reviews of historical financial information, verifications of future financial information, and attestations regarding internal controls. 
D) audits of historical financial information, reviews of controls related to investments, and verifications of historical financial information.

Question 16

Which of the following is not a SysTrust Services principle as defined by the AICPA?

Accepted Answer

A) Online privacy 
B) Availability 
C) Processing integrity 
D) Operational integrity 
A) Online privacy 
B) Availability 
C) Processing integrity 
D) Operational integrity

Question 17

Two types of attestation services provided by CPA firms are audits and reviews.Discuss the similarities and differences between these two types of attestation services.Which type provides the least assurance?

Accepted Answer

In both the review and audit of the hist

Question 18

Match between columns
                        Premises: Evaluate financial statements that are to be submitted to a bank.
List A - Type of Audit:
Determine if Medicare reimbursements are in accordance with the Healthcare Financing Administration (HCFA).
List A - Type of Audit:
Evaluate the promptness of materials inspection in a manufacturer's receiving department.
List A - Type of Audit:
Determine the effectiveness of a Department of Defense project.
List A - Type of Audit:
Evaluate/determine if bank covenants are being met.
List A - Type of Audit:
Determine if the tax return of a multinational corporation is in accordance with the tax code.
List A - Type of Audit:
Determine if a public school is properly applying their reimbursement for the payment-in-kind program.
List A - Type of Audit:
Evaluate a company's payroll processing for economy.
List A - Type of Audit:

Accepted Answer

The Answer of Compliance and External and Operational
List B - is...

Question 19

The primary purpose of a compliance audit is to determine whether the financial statements are prepared in compliance with generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 20

________ risk reflects the possibility that the information upon which the business decision was made was inaccurate.

Accepted Answer

A) Client acceptance 
B) Information 
C) Business 
D) Control 
A) Client acceptance 
B) Information 
C) Business 
D) Control

Exam 1: The Demand for Audit and Other Assurance Services

A correct relationship among the auditor, the client, and the external users is:

Evidence is paramount to audit and attestation engagements.List the four basic types of audit evidence.

In the audit of historical financial statements, what accounting criteria is most common?

The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to auditing and financial reporting.

An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n):

Most public companies' audited financial statements are available on the SEC's EDGAR database.

Section 404 of the Sarbanes-Oxley Act requires public companies to have an external auditor attest to their internal control over financial reporting.

Which of the following are required to have a written report regarding the assertion of another party?

Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:

What is an engagement to attest on internal control over financial reporting?

An auditor must be competent and have an independent mental attitude.

The primary role of the United States General Accounting Office is the enforcement of the federal tax laws as defined by Congress and interpreted by the courts.

An accountant:

Three common types of attestation services are:

Which of the following is not a SysTrust Services principle as defined by the AICPA?

Two types of attestation services provided by CPA firms are audits and reviews.Discuss the similarities and differences between these two types of attestation services.Which type provides the least assurance?

The primary purpose of a compliance audit is to determine whether the financial statements are prepared in compliance with generally accepted accounting principles.

________ risk reflects the possibility that the information upon which the business decision was made was inaccurate.

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Internal Control, Control Risk, and Section 404 Audits

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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