Question 1

The IAASB and the ASB collaborated on a replacement for the 10 GAAS standards which include principles underlying an audit conducted in accordance with generally accepted auditing standards.

Accepted Answer

A) True 
 B)False

Question 2

The auditor must be independent of the auditee unless

Accepted Answer

A)  The lack of independence does not influence his or her professional judgment. 
B)  Both parties agree that the independence issue is not a problem. 
C)  The lack of independence is insignificant. 
D)  None of the above-the auditor cannot lack independence.

Question 3

One of the five basic business processes is the warehousing cycle.

Accepted Answer

A) True 
 B)False

Question 4

The primary responsibility for the adequacy of disclosures in the financial statements of a publicly held company rests with the

Accepted Answer

A)  Partner assigned to the audit engagement. 
B)  Management of the company. 
C)  Auditor in charge of the fieldwork. 
D)  Securities and Exchange Commission.

Question 5

Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

Accepted Answer

A)  Objective cynicism. 
B)  Independent differentialism. 
C)  Professional skepticism. 
D)  Impartial conservatism.

Question 6

Mike has just graduated from State University with a bachelor's degree in accounting. He would like to pursue a career in auditing. What options does Mike have? Describe three auditing career options, including a description of the organization Mike would work for.

Accepted Answer

The answer of Mike has just graduated from State University...

Question 7

Define corporate governance, the board of directors, and the audit committee and explain how they relate to each other.

Accepted Answer

The answer of Define corporate governance, the board of directors,...

Question 8

A CPA is most likely to refer to one or more of the three PCAOB general auditing standards in determining

Accepted Answer

A)  The nature of the CPA's report qualification. 
B)  The scope of the CPA's auditing procedures. 
C)  Requirements for the review of the entity and its environment. 
D)  Whether the CPA should undertake an audit engagement.

Question 9

The largest public accounting firms typically are structured as

Accepted Answer

A)  Subchapter S corporations. 
B)  Professional corporations. 
C)  Limited liability partnerships. 
D)  Limited liability corporations.

Question 10

What are the three PCAOB general auditing standards found within the 10 GAAS (NOT the three main categories of GAAS) and why is each important?

Accepted Answer

The answer of What are the three PCAOB general auditing...

Question 11

The first PCAOB standard of reporting requires that, "the report shall state whether the financial statements are presented in accordance with generally accepted accounting principles." This passage requires

Accepted Answer

A)  A statement of fact by the auditor. 
B)  An opinion by the auditor. 
C)  An implied measure of fairness. 
D)  An objective measure of compliance.

Question 12

Which of the following is not explicitly a part of the IIA's definition of internal auditing?

Accepted Answer

A)  Internal auditing is an objective assurance activity. 
B)  Internal auditing is a consulting activity. 
C)  Internal auditing should help an organization accomplish its objectives. 
D)  Internal auditors should help external auditors complete the annual financial statement audit.

Question 13

Which of the following best describes the general character of the three PCAOB generally accepted auditing standards that are classified as standards of fieldwork?

Accepted Answer

A)  The competence, independence, and professional care of persons performing the audit. 
B)  Criteria for the content of the auditor's report on financial statements and related footnote disclosures. 
C)  The criteria of audit planning and evidence-gathering. 
D)  The need to maintain independence in mental attitude in all matters relating to the audit.

Question 14

The Audit Committee consists of

Accepted Answer

A)  Members of management. 
B)  A subcommittee of the AICPA who establish the SAS. 
C)  Members of the Board of Directors. 
D)  Appointed government overseers.

Question 15

Due professional care requires

Accepted Answer

A)  Auditors to plan and perform their duties with the skill and care that is commonly expected of accounting professionals. 
B)  The examination of all available corroborating evidence. 
C)  The exercise of error-free judgment. 
D)  A study and review of internal controls that includes tests of controls.

Question 16

You are the owner of a small grocery store, Corner Marketplace. Explain the five process categories and how they apply to your business.

Accepted Answer

The answer of You are the owner of a small...

Question 17

What is the general character of the work conducted in performing a forensic audit for a company?

Accepted Answer

A)  Providing assurance that the financial statements are not materially misstated. 
B)  Detecting or deterring fraudulent activity. 
C)  Offering an opinion on the reliability of the specific assertions made by management. 
D)  Identifying the causes of an entity's financial difficulties.

Question 18

There are several types of audit services that are provided by auditors. Identify and define three of these types of audits.

Accepted Answer

The answer of There are several types of audit services...

Question 19

The primary audit context with which an auditor is concerned is the auditee's industry or business.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements regarding the PCAOB is incorrect?

Accepted Answer

A)  It is a public-sector, nonprofit corporation. 
B)  It is overseen by the SEC. 
C)  It sets standards for public company audits. 
D)  It has delegated all of its standard-setting authority to the AICPA.

Exam 2: The Financial Statement Auditing Environment

The IAASB and the ASB collaborated on a replacement for the 10 GAAS standards which include principles underlying an audit conducted in accordance with generally accepted auditing standards.

The auditor must be independent of the auditee unless

One of the five basic business processes is the warehousing cycle.

The primary responsibility for the adequacy of disclosures in the financial statements of a publicly held company rests with the

Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

Mike has just graduated from State University with a bachelor's degree in accounting. He would like to pursue a career in auditing. What options does Mike have? Describe three auditing career options, including a description of the organization Mike would work for.

Define corporate governance, the board of directors, and the audit committee and explain how they relate to each other.

A CPA is most likely to refer to one or more of the three PCAOB general auditing standards in determining

The largest public accounting firms typically are structured as

What are the three PCAOB general auditing standards found within the 10 GAAS (NOT the three main categories of GAAS) and why is each important?

The first PCAOB standard of reporting requires that, "the report shall state whether the financial statements are presented in accordance with generally accepted accounting principles." This passage requires

Which of the following is not explicitly a part of the IIA's definition of internal auditing?

Which of the following best describes the general character of the three PCAOB generally accepted auditing standards that are classified as standards of fieldwork?

The Audit Committee consists of

Due professional care requires

You are the owner of a small grocery store, Corner Marketplace. Explain the five process categories and how they apply to your business.

What is the general character of the work conducted in performing a forensic audit for a company?

There are several types of audit services that are provided by auditors. Identify and define three of these types of audits.

The primary audit context with which an auditor is concerned is the auditee's industry or business.

Which of the following statements regarding the PCAOB is incorrect?