Question 1

What is the applicable financial reporting framework in the U.S.known as?

Accepted Answer

A) GAAP 
B) GAAS 
C) IFRS 
D) The Internal Revenue Code

Question 2

Who are the only licensed accounting professionals in the United States?

Accepted Answer

A) Certified Public Accountants (CP
A)  
B) Chartered Accounts (C
A)  
C) Financial Accountants (F
A)  
D) Chief financial and operating officer (CFOO)

Question 3

The audit related to which of the following is specifically meant to express an opinion on the effectiveness of the company's system of internal controls over financial reporting?

Accepted Answer

A) ICFR 
B) GAAP 
C) FASB 
D) AICPA

Question 4

Who among the following users of the financial statement of a company may be particularly interested in evaluating whether the company is paying a fair amount of taxes given its reported earnings, and to gain a better understanding of the company's activities?

Accepted Answer

A) government 
B) general pubic 
C) employees 
D) investors

Question 5

Smith Corp.orally engaged TRA CPAs, to audit its financial statements.The management of Smith Corp.informed TRA CPAs that it suspected that the accounts receivable was materially overstated.Although the financial statements audited by TRA CPAs did, in fact, include a materially overstated accounts receivable balance, TRA issued an unqualified opinion.Smith Corp then relied on the financial statements in deciding to obtain a loan from Town Bank to expand its operations and Town Bank relied on the financial statements in making the loan to Smith Corp.As a result of the overstated accounts receivable balance, Smith Corp.has defaulted on the loan and has incurred a substantial loss.If Smith Corp sues TRA CPAs for negligence in failing to discover the overstatement, what is TRA CPA's best defense?

Accepted Answer

The answer of Smith Corp.orally engaged TRA CPAs, to audit...

Question 6

Which of the following beliefs will narrow the audit expectation gap?

Accepted Answer

A) There is no guarantee the auditor will find all material fraud, should fraud have occurred. 
B) The auditor is providing complete assurance. 
C) The auditor is guaranteeing the future viability of the entity. 
D) An unmodified audit opinion is an indicator of complete accuracy of the financial statements.

Question 7

The nature of audit procedures refers to the ________.

Accepted Answer

A) reliance on evidence provided by the client and its management 
B) use of judgment when preparing financial statements due to the subjectivity required when arriving at accounting estimates 
C) materiality of misstatement 
D) pressures auditors face to complete their audit within a certain time frame at a reasonable cost

Question 8

Which is the most inclusive or broadest service provided by the auditor?

Accepted Answer

A) Audit services 
B) Attestation services 
C) Assurance services 
D) A review of historical financial statements

Question 9

Compared to an audit of historical financial statements, a review engagement is _______.

Accepted Answer

A) less extensive and also less expensive 
B) more extensive and also more expensive 
C) less extensive but more expensive 
D) more extensive but less expensive

Question 10

In an audit report on the effectiveness of ICFR for a public company, the scope paragraph mentions that auditors are only required to obtain reasonable assurance about whether the company maintained, in all material respects, effective ICFR.

Accepted Answer

A) True 
 B)False

Question 11

Pressures of time and money may affect the audit due to all of the following EXCEPT ________.

Accepted Answer

A) clients want to issue their financial statements by a certain date 
B) clients refusing to pay additional fees for additional audit effort and time 
C) pressures within the CPA firm to complete all audits on a timely basis to avoid incurring costs that may not be recovered 
D) pressures by shareholders to find all misstatements in the financial reports

Question 12

One of the reasons there is a demand for financial statement audits is that users of financial statements often lack accounting and legal knowledge to fully understand complex accounting and disclosure choices.

Accepted Answer

A) True 
 B)False

Question 13

With regard to financial statements, the auditor is required to obtain reasonable assurance, which is a level of assurance that is _______.

Accepted Answer

A) high, but not absolute 
B) guaranteed, but not absolute 
C) 100%, but not objective 
D) objective, and not subjective

Question 14

In an audit report on the effectiveness of ICFR for a public company, which paragraph cautions not to use the current year opinion to assume that future internal controls will be effective?

Accepted Answer

A) definition and inherent limitations paragraph 
B) scope paragraph 
C) opinion paragraph 
D) paragraph referencing the financial statement audit

Question 15

Which two audits does an integrated audit combine?

Accepted Answer

A) A financial statement audit and an audit of the effectiveness of ICFR 
B) A financial statement audit and a compliance audit 
C) A compliance audit and an audit of the effectiveness of ICFR 
D) A performance audit and an environmental audit

Question 16

Describe the auditor's responsibility regarding the detection of fraud.

Accepted Answer

The answer of Describe the auditor's responsibility regarding the detection...

Question 17

Securities Exchange Act of 1934 regulates the ongoing trading of securities after the initial public offering and requires the annual audit of a public company's financial statements.

Accepted Answer

A) True 
 B)False

Question 18

Among the various processes relating to auditing and assurance standards, the largest umbrella represents ________ services.

Accepted Answer

A) assurance 
B) attestation 
C) audit 
D) review

Question 19

Which of the following is true of the PCAOB?

Accepted Answer

A) It can impose punishment on accounting firms that do not adhere to standards. 
B) Prior to its creation, the audit profession was highly unregulated. 
C) In 2015, it reorganized its auditing standards using several numbering systems. 
D) When it was created, it rejected nearly all the then standards of the audit profession.

Question 20

The paragraph of an unmodified audit report on the financial statements of a private firm explains that an audit was conducted and identifies the financial statements and the date of the financial statements is the _______ paragraph.

Accepted Answer

The answer of The paragraph of an unmodified audit report...

Exam 1: Introduction and Overview of Audit and Assurance

What is the applicable financial reporting framework in the U.S.known as?

Who are the only licensed accounting professionals in the United States?

The audit related to which of the following is specifically meant to express an opinion on the effectiveness of the company's system of internal controls over financial reporting?

Who among the following users of the financial statement of a company may be particularly interested in evaluating whether the company is paying a fair amount of taxes given its reported earnings, and to gain a better understanding of the company's activities?

Which of the following beliefs will narrow the audit expectation gap?

The nature of audit procedures refers to the ________.

Which is the most inclusive or broadest service provided by the auditor?

Compared to an audit of historical financial statements, a review engagement is _______.

In an audit report on the effectiveness of ICFR for a public company, the scope paragraph mentions that auditors are only required to obtain reasonable assurance about whether the company maintained, in all material respects, effective ICFR.

Pressures of time and money may affect the audit due to all of the following EXCEPT ________.

One of the reasons there is a demand for financial statement audits is that users of financial statements often lack accounting and legal knowledge to fully understand complex accounting and disclosure choices.

With regard to financial statements, the auditor is required to obtain reasonable assurance, which is a level of assurance that is _______.

In an audit report on the effectiveness of ICFR for a public company, which paragraph cautions not to use the current year opinion to assume that future internal controls will be effective?

Which two audits does an integrated audit combine?

Describe the auditor's responsibility regarding the detection of fraud.

Securities Exchange Act of 1934 regulates the ongoing trading of securities after the initial public offering and requires the annual audit of a public company's financial statements.

Among the various processes relating to auditing and assurance standards, the largest umbrella represents ________ services.

Which of the following is true of the PCAOB?

The paragraph of an unmodified audit report on the financial statements of a private firm explains that an audit was conducted and identifies the financial statements and the date of the financial statements is the _______ paragraph.