1

Question 1

Contingent fee prohibited for

Answer 1

Preparation of tax return or refund claim
Audit/Review of FS
Compilation
Examination

Question 2

Independence Required/Not required

Answer 2

Required
Audits
Reviews
Examinations
Agree-upon procedures

Not required
FS preparation
Tax return
Consulting
Compilation(must be disclosed)

Question 3

CPA disclose client’s info without consent

Answer 3

Review by state CPA society
Inquiry from AICPA
Court-ordered subpoena or summons

Question 4

Covered member

Answer 4

Be in the same office
Be more than as manager
Attest firm itself and/or employee benefit plan
Perform more than 10 hours in a given year

Question 4

What percentage of client’s ownership interests would Non covered members own to be impaired independence?

Answer 4

5%

Question 5

Presumptively mandatory requirement
Unconditional requirement

Answer 5

“should”- Auditor must comply or document reason for not doing so
“must” - Auditor must comply always

Question 6

When does auditor need to document/communicate significant deficiencies or material weaknesses

Answer 6

During the audit or within 60 days of the report release date

Question 7

Auditor must report the illegal act first to?

Answer 7

Client’s board of directors

Question 8

Auditor and management responsibilities in an engagement letter

Answer 8

Auditor
-Conducting the audit with GAAS
-Obtaining reasonable assurance
-Communicating IC deficiencies to audit committee
Management
-Preparing FS,IC
- Providing relevant information

Question 9

Planning an examination of IC

Answer 9

Making preliminary judgements about IC
Identifying any changes to IC
Considering the type of evidence available

Question 10

Statements of Standards for Accounting Review Services (SSARS) apply to/not apply to

Answer 10

Apply to
-Reviews
-Compilations
-Preparations

NOT apply to
-Bookkeeping
-Reproducing
-Consulting or tax services

Question 11

Quality control elements for CPA firm
(HEAL-ME)

Answer 11

Human resources
Ethical requirements
Acceptance and continuance of client
Leadership responsibilities for quality
Monitoring
Engagement performance

Question 12

Monetary policy tools

Answer 12

Expansionary
-Buy securities
-Lower interest rate
-Decrease reserve

Contractionary
-Sell securities
-Raise interest rate
-Increase reserve

Question 13

Statements on Standards for Attestation Engagements (SSAE) apply to

Answer 13

Examination
Agree-upon procedures

Question 14

GAAS engagement quality review documentation

Answer 14

Reflects review date
Provides evidence that
-Firms engagement quality control procedures were performed
-Reviewer is unaware of unresolved or inappropriate judgments or conclusions

Question 15

What do reduction in the reserve requirements create?

Answer 15

Decrease Reserve Requirements →Excess cash reserves in bank →Make loans (leading to an increase in the money supply) →Lower Interest Rate

Question 16

How does Federal Reserve reduce inflationary pressures?

Answer 16

Contractionary Monetary Policies
-Reduce the money supply →Increase margin requirements

Question 17

Business Cycle

Answer 17

Peak→Recession→Through→Recovery

Question 18

Who does command Demand/Supply curve?

Answer 18

Demand - by consumer
Supply - by supplier

Question 19

Business cycle impact on housing sector and trade balance

Answer 19

Early expansions
Housing sector- Increase
Trade deficit- Increase

Question 20

What is control risk and inherent risk?

Answer 20

Control risk - IC will fail to prevent or detect a material misstatement on a timely basis.
Inherent risk -