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1 1. An Chapter independent audit of a small business by a CPA firm usually results in an unconditional guarantee of the accuracy of the financial statements. (Points : 1) True False 2. Managers are often assigned to supervise several concurrent audit engagements. (Points : 1) True False 3. Auditors ordinarily have a more significant effect on information risk than on business risk. (Points : 1) True False 4. The term "peer review" refers to the process of evaluating CPA staff members for promotion to partnership in the firm. (Points : 1) True False 5. The AICPA issues CPA certificates to candidates that pass the CPA examination. (Points : 1) True False 6. An independent audit on an annual basis is required by the AICPA for all corporations (Points : 1) True False 7. The economic interests of the providers of financial information and the users of the information are the same, and this common interest creates the demand for an annual independent audit. (Points : 1) True False 8. Since corporations have limited liability, CPA firms are never organized as corporations. (Points : 1) True False 9. The internal auditing staff of a large corporation usually reports to a committee of the board of directors or to a member of the top management group. (Points : 1) True False 10. A registration statement containing audited financial statements generally must be filed with the SEC before a new issue of securities is offered for sale to the public. (Points : 1) True False 11. A senior auditor may plan and conduct an audit, in which case that auditor takes ultimate responsibility for the engagement. (Points : 1) True False 12. Partners maintain relations with clients, but do not get directly involved in the audit engagements. (Points : 1) True False 13. CPA firms sometimes compile or review financial statements for small companies not having trained accountants in their employ. Under these circumstances the CPA firm issues a report, but a report that differs from that issued as a result of an audit. (Points : 1) True False 14. If the independent auditors satisfy themselves that a client's accounting records are up-to-date and reliable, and that internal control is strong, they will not need to gather evidence from banks or other outside sources. (Points : 1) True False 15. The primary purpose of an audit is the detection or prevention of fraud. (Points : 1) True False 16. Because of the prospective nature of financial forecasts, auditors never are involved with attesting to reasonableness of this type of data. (Points : 1) True False 17. Attest services are one form of assurance services. (Points : 1) True False 18. The form of attestation that provides the highest form of assurance is a(n): (Points : 1) Assembly. Compilation. Review. Examination. 19. Audits of financial statements include an expression of a conclusion about which of the following financial statement characteristics? (Points : 1) Governance. Reliability. Relevance. Timeliness. 20. A review of a company's financial statements by a CPA firm: (Points : 1) Is significantly less in scope than an audit and results in a report which provides positive assurance, although not absolute assurance. Is similar in scope to an audit and adds similar credibility to the statements. Concludes with the issuance of a report expressing the CPA's opinion as to the fairness of the statements. Is designed to provide only limited, or moderate assurance. 21. The Sarbanes Oxley Act included provisions establishing the: (Points : 1) Auditing Standards Board. Congressional Auditing Overview Board. Public Company Accounting Oversight Board. Securities and Exchange Commission. 22. In performing a financial statement audit, which of the following would an auditor be least likely to consider? (Points : 1) Internal control. Compliance with GAAP. Fairness of the financial statement amounts. Quality of managements' business decisions. 23. Which of the following is not considered a type of audit? (Points : 1) Operational audit. Sufficiency audit. Compliance audit. Financial statement audit. 24. Internal auditors are most likely to issue a report on which of the following? (Points : 1) Annual financial statement reporting. Internal control. Tax compliance. Quarterly statement financial reporting. 25. With which of the following is the AICPA least concerned? (Points : 1) Professional standards for CPAs. Research and development of accounting standards. Standards guiding the conduct of internal auditors. Self regulation of the accounting profession. 26. If an auditor had a substantial stock investment in a client that s(he) was auditing, which of the following would be true? (Points : 1) The auditor would lack independence. The auditor would be violating the FASB standards. The auditor would be violating the Institute of Management Accounting standards. The auditor would be violating the IIA standards. 27. The attest function: (Points : 1) Is an essential part of every engagement performed by a CPA. Requires a complete review of all transactions during the period under examination. Requires a review of a sample of transactions during the period under examination. Includes the preparation of a written report of the CPA's findings. 28. Match the following organizations with the related descriptions: (Points : 1) Answer Potential Matches: : SEC 1 : Group created to oversee and discipline CPAs and public accounting firms that audit public companies : FASB 2 : Body designated to establish accounting standards for state and local accounting : GAO 3 : International organization of internal auditors : IIA 4 : Body designated to establish accounting standards for entities other than state and local accounting : FASAB 5 : Administers the Secjurities Act : PCAOB 6 : National organizations of CPAs : AICPA 7 : Body designated to establish accounting standards for the federal government : GASB 8 : The audit arm of Congress 29. Independence is an attribute necessary to perform assurance services. (Points : 1) True False 30. Congress delegated to the U. S. Government Accountability Office the responsibility for developing auditing standards for governmental audits. (Points : 1) True False 31. An audit of financial statements is a form of attestation service. (Points : 1) True False 32. The SEC has authority to establish GAAP for all business enterprises. (Points : 1) True False 33. CPAs are licensed by the AICPA after they pass the Uniform CPA Examination. (Points : 1) True False 34. Assurance services must always be accompanied by a report. (Points : 1) True False 35. Auditing exists because companies need unbiased information on which to assess management performance and make economic decisions. (Points : 1) True False 36. Audited financial statements should be presented fairly according to the substance of GAAS. (Points : 1) True False 37. The primary goal of the CPA in performing the attest function is to (Points : 1) detect fraud examine individual transactions so that the auditor may certify as to their validity determine whether the client's assertions are fairly stated assure the consistent application of correct accounting procedures 38. The single feature that most clearly distinguishes auditing, attestation, and assurance is: (Points : 1) type of service training required to perform the service scope of services CPA's approach to the services 39. A typical objective of an operational audit is to determine whether an entity's (Points : 1) financial statements fairly present financial position and cash flows financial statements present fairly the results of operations financial statements fairly present financial position, results of operations, and cash flows specific operating units are functioning efficiently and effectively 40. Senior auditors typically perform all of the following tasks, except: (Points : 1) supervise staff assistants draft the audit report. sign the audit report review the working papers prepared by staff assistants. 41. Some of the following criteria are essential to satisfactory performance in several professions. Which one is unique to audit work by CPAs? (Points : 1) Due professional care. Independence. General competence. Familiarity with a complex body of technical knowledge. 42. Which of the following pronouncements are published by the Securities and Exchange Commission? (Points : 1) Industry audit and accounting guides. Statements on Financial Accounting Standards. Accounting Research Bulletins. Regulation S-X. ... View Full Document

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