Question 1

The engineering department at Omni Company built a piece of equipment in the company's own shop for use in the company's operations.The auditor reviewed all work orders that were capitalized as part of the equipment costs.Which of the following is the ASB transaction assertion most closely related to the auditor's testing?

Accepted Answer

A)   Occurrence.
B)   Completeness.
C)   Accuracy.
D)   Classification. D

Question 2

What are the differences between the American Accounting Association and AICPA definitions and objectives of auditing?

Accepted Answer

The AAA definition is broad and general enough to encompass independent,internal,and governmental auditing.The AICPA has not defined auditing,but its statement on objectives of financial audits restricts auditing to independent CPA's audit of the traditional financial statements and their footnotes.The AICPA SAS also offers guides to report on internal control,letters to underwriters,and special reports.

Question 3

What is information risk? What is business risk?

Accepted Answer

Information risk is the risk that financial statements will be materially false or misleading.Business risk is the risk an entity will fail to meet its objectives.

Question 4

Assurance services involve all of the following except

Accepted Answer

A)   Relevance as well as the reliability of information.
B)   Nonfinancial information as well as traditional financial statements.
C)   Providing absolute rather than reasonable assurance.
D)   Electronic databases as well as printed reports.

Question 5

What are the four basic requirements for becoming a CPA?

Accepted Answer

The answer of What are the four basic requirements for...

Question 6

For independent auditors of financial statements in the United States,established criteria largely consist of the generally accepted accounting principles (GAAP).

Accepted Answer

A) True 
 B)False

Question 7

The auditor's judgment concerning the overall fairness of the presentation of financial position,results of operations,and cash flows is applied within the framework of

Accepted Answer

A)   Quality control.
B)   Generally accepted auditing standards, which include the concept of materiality.
C)   The auditor's evaluation of the audited company's internal control.
D)   The applicable financial reporting framework (i.e., GAAP in the United States) .

Question 8

In an attestation engagement,a CPA practitioner is engaged to

Accepted Answer

A)   Compile a company's financial forecast based on management's assumptions without expressing any form of assurance.
B)   Prepare a written report containing a conclusion about the reliability of a management assertion.
C)   Prepare a tax return using information the CPA has not audited or reviewed.
D)   Give expert testimony in court on particular facts in a corporate income tax controversy.

Question 9

It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that

Accepted Answer

A)   A potential conflict of interest always exists between the auditor and the management of the enterprise under audit.
B)   In audits of financial statements, the auditor acts exclusively in the capacity of an auditor.
C)   The professional status of the independent auditor imposes commensurate professional obligations.
D)   Financial statements and financial data are verifiable.

Question 10

Define assurance,attestation,and auditing in the context of "lending credibility."

Accepted Answer

The answer of Define assurance,attestation,and auditing in the context of...

Question 11

The objective of the ordinary examination of financial statements by the independent auditor is the expression of a(n)_____________________________ on the _____________________________ of financial statements.

Accepted Answer

The answer of The objective of the ordinary examination of...

Question 12

Four conditions that create demand for reliable information are complexity,remoteness,timeliness,and consequences.

Accepted Answer

A) True 
 B)False

Question 13

The concept "professional skepticism" requires that auditors assume management is dishonest and should not be trusted.

Accepted Answer

A) True 
 B)False

Question 14

The PCAOB audit objective related to the completeness assertion is to establish evidence that assets,liabilities,and equities actually exist.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not a role of the AICPA?

Accepted Answer

A)   Refine the body of professional knowledge, regulate membership admissions, and police conduct of members.
B)   Prepare and grade the uniform CPA examination.
C)   License the practices of CPAs in the various states.
D)   Issue public statements on practice standards.

Question 16

Which of the PCAOB assertions (A-E)are best verified by the following audit procedures (1-4)?
A. Existence or occurrence.
B. Rights and obligations.
C. Valuation or allocation.
D. Completeness.
E. Presentation and disclosure.

Accepted Answer

The answer of Which of the PCAOB assertions (A-E)are best...

Question 17

The risk to investors that a company's financial statements may be materially misleading is called

Accepted Answer

A)   Client acceptance risk.
B)   Information risk.
C)   Moral hazard.
D)   Business risk.

Question 18

The probability that the information circulated by a company will be false or misleading is referred to as

Accepted Answer

A)   Business risk.
B)   Information risk.
C)   Assurance risk.
D)   Audit risk.

Question 19

The audit process involves obtaining and evaluating ____________________________.

Accepted Answer

The answer of The audit process involves obtaining and evaluating...

Question 20

An attestation engagement is one in which a CPA is engaged to

Accepted Answer

A)   Issue a report on subject matter or an assertion about the subject matter that is the responsibility of another party.
B)   Provide tax advice or prepare a tax return based on financial information the CPA has not audited or reviewed.
C)   Testify as an expert witness in accounting, auditing, or tax matters, given certain stipulated facts.
D)   Assemble prospective financial statements based on the assumptions of the entity's management without expressing any assurance.

Exam 1: Auditing and Assurance Services

What are the differences between the American Accounting Association and AICPA definitions and objectives of auditing?

What is information risk? What is business risk?

Assurance services involve all of the following except

What are the four basic requirements for becoming a CPA?

For independent auditors of financial statements in the United States,established criteria largely consist of the generally accepted accounting principles (GAAP).

The auditor's judgment concerning the overall fairness of the presentation of financial position,results of operations,and cash flows is applied within the framework of

In an attestation engagement,a CPA practitioner is engaged to

It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that

Define assurance,attestation,and auditing in the context of "lending credibility."

The objective of the ordinary examination of financial statements by the independent auditor is the expression of a(n)_ on the _ of financial statements.

Four conditions that create demand for reliable information are complexity,remoteness,timeliness,and consequences.

The concept "professional skepticism" requires that auditors assume management is dishonest and should not be trusted.

The PCAOB audit objective related to the completeness assertion is to establish evidence that assets,liabilities,and equities actually exist.

Which of the following is not a role of the AICPA?

Which of the PCAOB assertions (A-E)are best verified by the following audit procedures (1-4)? A. Existence or occurrence. B. Rights and obligations. C. Valuation or allocation. D. Completeness. E. Presentation and disclosure.

The risk to investors that a company's financial statements may be materially misleading is called

The probability that the information circulated by a company will be false or misleading is referred to as

The audit process involves obtaining and evaluating ____________________________.

An attestation engagement is one in which a CPA is engaged to