Exam 1: Quality Auditing: Why It Matters

Contingent fees are prohibited for tax professionals when preparing tax returns for clients.

Management may have incentives to present biased financial information,but the various users of the statements are not likely to have conflicting interests in the financial information.

The AICPA's Code of Professional Conduct defines an indirect financial interest as an investment of one percent or less of a client's organization,and because the amount is so small it is considered immaterial.

The Financial Reporting Council's Audit Quality Framework is the only framework for audit quality recognized by audit professionals worldwide.

Which of the following employment positions could an auditor's spouse hold in a client without violating the independence requirements?

The SEC is the governmental body with oversight responsibility for the efficient operation of capital markets in the United States.

Utilitarian theory is an approach for addressing ethical problems by identifying a hierarchy of rights that should be considered in solving ethical dilemmas.

Which of the following is not an aspect of Rule 201 of the General Standards of the Code of Professional Conduct?

Rule 102,Integrity and Objectivity,of the AICPA Professional Code of Conduct,does not apply to a CPA who is a corporate CFO.

Commissions and referral fees are allowed to audit firms as long as the audit client is informed of the fees.

Safeguards implemented by the audit client include mandatory audit partner rotation requirements for public companies.

Audit Quality Drivers What are the primary drivers of audit quality according to the Financial Reporting Council's (FRC)"The Audit Quality Framework?"

Rule 201 - General Standards of the AICPA Code of Professional Conduct does not include which of the following factors?

The AICPA's conceptual framework of "threats and safeguards" included in the Code of Professional Conduct applies only to AICPA members in public practice.

The foundation for the audit opinion formulation process relies on obtaining evidence to support the auditor's opinion.

Without professional skepticism,auditors are susceptible to accepting weak or inaccurate audit evidence.

Julie Webb,CPA,takes out an automobile loan with First National Bank of Wellville (FNBW)while attending the University of Wellville.Julie graduates one year later and is hired as an auditor by Best and Driftwood,LLP.Her first assigned audit engagement is with First National Bank of Wellville,a client of Best and Driftwood.As a new audit assistant,Julie continues to pay her automobile loan payments each month.Which of the following best describes Julie's independence status?

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."

Under the AICPA definition,who among the following would not be considered a covered member?

The AICPA sets auditing standards for nonpublic companies.