Question 1

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:

Accepted Answer

A)  Form S-1. 
B)  Form 8-K. 
C)  Form 10-K. 
D)  Form 10-Q. 
A)  Form S-1. 
B)  Form 8-K. 
C)  Form 10-K. 
D)  Form 10-Q. A

Question 2

Generally Accepted Auditing Standards (GAAS)and Statements on Auditing Standards (SAS)should be looked upon by practitioners as:

Accepted Answer

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. 
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. C

Question 3

When assessing the risk of material misstatements in the financial statements,

Accepted Answer

A)  inadequate internal control procedures will mitigate client business risk. 
B)  GAAS specifies in detail how much and what types of evidence the auditor needs to obtain. 
C)  company management is responsible for determining materiality levels. 
D)  the auditor must have an understanding of the client's business and industry. 
A)  inadequate internal control procedures will mitigate client business risk. 
B)  GAAS specifies in detail how much and what types of evidence the auditor needs to obtain. 
C)  company management is responsible for determining materiality levels. 
D)  the auditor must have an understanding of the client's business and industry. D

Question 4

Assume the Public Company Accounting Oversight Board (PCAOB)identifies a violation during its inspection of a registered accounting firm.The PCAOB:

Accepted Answer

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

Question 5

International Standards on Auditing are issued by the International Auditing and Assurance Standards Board.

Accepted Answer

A) True 
 B)False

Question 6

All of the Big Four accounting firms and many of the smaller CPA firms now operate as Limited Liability Partnerships.

Accepted Answer

A) True 
 B)False

Question 7

The four categories for describing the size of audit firms include: the Big Four international firms; national firms; regional and local firms; and small firms.Which of the following is not a characteristic of a small firm?

Accepted Answer

A)  Most have fewer than 25 professionals. 
B)  They perform audits on small and not-for-profit businesses. 
C)  Tax services are more important to their practice than auditing. 
D)  They do not audit publicly traded companies. 
A)  Most have fewer than 25 professionals. 
B)  They perform audits on small and not-for-profit businesses. 
C)  Tax services are more important to their practice than auditing. 
D)  They do not audit publicly traded companies.

Question 8

Which of the following is not true for audit firms who audit publicly traded companies?

Accepted Answer

A)  They must undergo a PCAOB inspection on an annual basis if they audit more than 100 issuers. 
B)  They must have an AICPA peer review on all audit clients. 
C)  They must have an AICPA peer review on all non-publicly traded clients. 
D)  The audit firm can choose which CPA firm they wish to conduct their AICPA peer review. 
A)  They must undergo a PCAOB inspection on an annual basis if they audit more than 100 issuers. 
B)  They must have an AICPA peer review on all audit clients. 
C)  They must have an AICPA peer review on all non-publicly traded clients. 
D)  The audit firm can choose which CPA firm they wish to conduct their AICPA peer review.

Question 9

List the four principles underlying an audit.

Accepted Answer

•Purpose of an audit

Question 10

The SAS number identifies the order in which it was issued in relation to all other SASs.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is a true statement regarding auditing standards?

Accepted Answer

A)  Prior to the passage of Sarbanes-Oxley, the FASB established auditing principles for U.S. public companies. 
B)  PCAOB auditing standards are applicable to entities outside the U.S. 
C)  There are no similarities between PCAOB standards and International Standards on Auditing. 
D)  The Auditing Standards Board has revised most of its standards to converge with the international standards. 
A)  Prior to the passage of Sarbanes-Oxley, the FASB established auditing principles for U.S. public companies. 
B)  PCAOB auditing standards are applicable to entities outside the U.S. 
C)  There are no similarities between PCAOB standards and International Standards on Auditing. 
D)  The Auditing Standards Board has revised most of its standards to converge with the international standards.

Question 12

Which of the following statements about Generally Accepted Audit Standards are true?
I.They serve as broad guidelines to auditors for conducting an audit engagement.
II.They are sufficiently specific to provide any meaningful guide to practitioners.
III.They represent a framework upon which the AICPA can provide interpretations..

Accepted Answer

A)  I and II 
B)  I and III 
C)  II and III 
D)  I, II and III 
A)  I and II 
B)  I and III 
C)  II and III 
D)  I, II and III

Question 13

Distinguish between generally accepted auditing standards (GAAS)and generally accepted accounting principles (GAAP).What professional organization establishes GAAS?
 What professional organization establishes GAAP?

Accepted Answer

Generally accepted auditing standards ar

Question 14

The Statements on Auditing Standards issued by the Auditing Standards Board:

Accepted Answer

A)  are regarded as authoritative literature. 
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. 
A)  are regarded as authoritative literature. 
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.

Question 15

What are the major functions of the AICPA?

Accepted Answer

Major functions of the AICPA include:
•E

Question 16

The Sarbanes-Oxley Act established the Public Company Accounting Oversight Board (PCAOB).What are the PCAOB's primary functions?

Accepted Answer

The PCAOB has responsibility for providi

Question 17

Which of the following statements is true as it relates to limited liability partnerships?

Accepted Answer

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. 
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.

Question 18

Any public accounting firm can be a member of the AICPA if the firm meets the membership requirements.

Accepted Answer

A) True 
 B)False

Question 19

The International Standards on Auditing (ISAs):

Accepted Answer

A)  are issued by the AICPA. 
B)  override a country's regulations governing the audit of a company. 
C)  has many of the same standards as the Auditing Standards Board (AS
B) . 
D)  must be followed by companies whose stock is traded in the U.S. 
A)  are issued by the AICPA. 
B)  override a country's regulations governing the audit of a company. 
C)  has many of the same standards as the Auditing Standards Board (AS
B) . 
D)  must be followed by companies whose stock is traded in the U.S.

Question 20

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:

Accepted Answer

A)  investors in Hansen Corporation's stock. 
B)  stock exchange. 
C)  Securities and Exchange Commission. 
D)  management of Hansen Corporation. 
A)  investors in Hansen Corporation's stock. 
B)  stock exchange. 
C)  Securities and Exchange Commission. 
D)  management of Hansen Corporation.

Exam 2: The Audit Standards Setting Process

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:

Generally Accepted Auditing Standards (GAAS)and Statements on Auditing Standards (SAS)should be looked upon by practitioners as:

When assessing the risk of material misstatements in the financial statements,

Assume the Public Company Accounting Oversight Board (PCAOB)identifies a violation during its inspection of a registered accounting firm.The PCAOB:

International Standards on Auditing are issued by the International Auditing and Assurance Standards Board.

All of the Big Four accounting firms and many of the smaller CPA firms now operate as Limited Liability Partnerships.

The four categories for describing the size of audit firms include: the Big Four international firms; national firms; regional and local firms; and small firms.Which of the following is not a characteristic of a small firm?

Which of the following is not true for audit firms who audit publicly traded companies?

List the four principles underlying an audit.

The SAS number identifies the order in which it was issued in relation to all other SASs.

Which of the following is a true statement regarding auditing standards?

Distinguish between generally accepted auditing standards (GAAS)and generally accepted accounting principles (GAAP).What professional organization establishes GAAS? What professional organization establishes GAAP?

The Statements on Auditing Standards issued by the Auditing Standards Board:

What are the major functions of the AICPA?

The Sarbanes-Oxley Act established the Public Company Accounting Oversight Board (PCAOB).What are the PCAOB's primary functions?

Which of the following statements is true as it relates to limited liability partnerships?

Any public accounting firm can be a member of the AICPA if the firm meets the membership requirements.

The International Standards on Auditing (ISAs):

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:

The Assurance Services Market

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Audit Planning

Considering Materiality and Audit Risk

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan 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 Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Audit Completion

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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