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Question 1

Statements on Standards for Accounting and Review Services (SSARS) require auditor to:

Answer 1

Used the information in a general ledger to prepare financial statements outside of an accounting software system.

SSARS apply when an accountant prepares, compiles, or reviews financial statements. Using information in the general ledger to prepare financial statements outside an accounting software system is considered a preparation engagement.

Question 2

Statements on Standards for Accounting and Review Services (SSARS) TYPES of services:

Answer 2

> prepares
reviews
compiles

FS

Question 3

SSARS requires compiled financial statements to be accompanied by a compilation report even if

Answer 3

the financial statements are not expected to be used by a third party.

Question 4

When an accountant performs more than one level of service (for example, a compilation and a review, or a compilation and an audit) concerning the financial statements of a nonissuer, the accountant generally should issue the report that is appropriate for the

Answer 4

highest level of service rendered.

Question 5

Accounting and Review Services Committee

Answer 5

is the authoritative body designated to promulgate standards concerning an accountant’s association with unaudited financial statements of a nonissuer (i.e., an entity that is not required to file financial statements with an agency regulating the issuance of the entity’s securities).

Question 6

departures from SSARS.

Answer 6

An accountant should be able to justify departures from SSARS.

Question 7

Reproducing client-prepared financial statements is NOT an example of Statements on Standards for Accounting and Review Services

Answer 7

Reproducing client-prepared financial statements is NOT an example of Statements on Standards for Accounting and Review Services

Question 8

SSARS does not apply when an accountant prepares personal financial statements for inclusion in written personal financial plans.

Answer 8

Other situations where SSARS does not apply is when the accountant prepares financial statements:

> solely for submission to taxing authorities,
in conjunction with litigation services that involve pending or potential legal or regulatory proceedings, or
in conjunction with business valuation services.

Question 9

GAGAS (Generally accepted government auditing standards) specifically include all of the following ethics principles except:

Answer 9

Fraud detection.

Ethics, as defined by GAGAS, address the topics of:
>serving the public interest
> integrity,
> objectivity,
>proper use of government information,
> resources and positions, and professional behavior.

Question 10

auditor should be independent of mind and appearance in providing audits is included in the Generally Accepted Government Auditing Standard ethics principle of:

Answer 10

Objectivity.

Question 11

honest effort in the performance of professional services in accordance with relevant technical and professional standards is included in the Generally Accepted Government Auditing Standard ethics principle of:

Answer 11

Professional behavior.

Question 12

A government internal audit function is presumed to be free from organizational independence impairments for reporting internally when :

Answer 12

The head of the organization is removed from political pressures to conduct audits objectively, without fear of political reprisal.

Question 13

GAGAS Self-interest threat =

Answer 13

threat that a financial or other interest will inappropriately influence an auditor’s judgment or behavior.

Question 14

GAGAS Self-review threat =

Answer 14

threat that an auditor or audit organization that has provided nonaudit services will not appropriately evaluate the results of previous judgments made or services performed as part of the nonaudit services when forming a judgment significant to an audit.

Question 15

A critical component of the determination of whether providing a nonaudit service would create a threat to independence is consideration of management’s ability to effectively oversee the nonaudit service to be performed.

Answer 15

A critical component of the determination of whether providing a nonaudit service would create a threat to independence is consideration of management’s ability to effectively oversee the nonaudit service to be performed.

Question 16

GAGAS Management participation threat=

Answer 16

results from an auditor’s taking on the role of management or otherwise performing management functions on behalf of the entity undergoing an audit.

Question 17

GAGAS Familiarity threat=

Answer 17

threat that aspects of a relationship with management or personnel of an audited entity, such as a close or long relationship, or that of an immediate or close family member, will lead an auditor to take a position that is not objective.

Question 18

During Management participation threat

Answer 18

IT IS so significant that no safeguards could reduce the threat to an acceptable level.

Question 19

Examples of independence impaired in an EBP

Answer 19

> Auditor’s spouse has obtained an immaterial direct financial interest in the employee benefit plan. Any direct financial interest in the employee benefit plan by the covered member or the covered member’s immediate family impairs independence.

> member of the auditor’s firm was an investment advisor to the employee benefit plan during the period of professional engagement.

> auditor obtained a material indirect financial interest in the employee benefit plan.

Question 20

NO independence impairment under EBP EXAMPLE

Answer 20

Independence would not be impaired when a member of the auditor’s firm was a voting trustee of the plan in a prior year but has since disassociated from the plan and did not participate in auditing the financial statements of the plan.

Question 21

partner rotate off the audit engagement

ISSUER vs NON-ISSUER

Answer 21

SOX/PCAOB/SEC- 5YRS

AICPA Code of Professional Conduct = does not require audit partner rotation.

Question 22

PCAOB must conduct an inspection

Answer 22

100 or fewer audit reports. =once every 3 years

100 or MORE audit reports. = Annual

Question 23

The Public Company Accounting Oversight Board (PCAOB) consists of:

Answer 23

The PCAOB consists of exactly 2 CPAs and 3 non-CPAs.

Question 24

Which organizations was established by the Sarbanes-Oxley Act of 2002 to control the auditing profession?

Answer 24

Public Company Accounting Oversight Board (PCAOB).

Question 25

To participate in the preparation of audit reports for a company registered with the SEC, a CPA firm must first register with… ?`

Answer 25

Public Company Accounting Oversight Board (PCAOB)

Question 26

sanctions imposed by the PCAOB

Answer 26

I. Financial penalties.

II. Suspension or revocation of PCAOB registration.

III. Required continuing professional education (CPE) courses.

Question 27

the retention period for audit working

Answer 27

5 years - non issuers

7 years for issuers

Question 28

example of an action that does not impair the auditor’s independence.

Answer 28

An auditor of an issuer is permitted to provide factual accounts in testimony explaining positions taken during the performance of any services provided to the client.

Question 29

PROHIBITED services an auditor can provide under PCAOB:

Answer 29

> bookkeeping,
appraisal,
valuation, or actuarial services, or management functions

Question 30

PCOB Rules for working at a client:

Answer 30

an audit team member may not accept employment as a chief executive, chief financial or chief accounting officer, or controller of an audit client that files reports with the Securities and Exchange Commission for 1 year.

Question 31

The Sarbanes-Oxley Act addresses the problems related to inadequate board oversight by requiring public companies to have an:

Answer 31

Audit committee.

Question 32

The Sarbanes-Oxley dictated that Accounting Firm (external auditors) report directly to

Answer 32

Audit Committee

Question 33

According to COSO, which of the following organizational structures best promotes internal control?

Answer 33

Corporate internal audit staff with direct reporting to the corporate director of internal audit, who in turn reports to the audit committee.

Question 34

Audit committee members are to be members of the issuer’s Board of Directors but also must be otherwise independent. Independence criteria are as follows:

Answer 34

> Audit committee members may not accept compensation from the issuer for consulting or advisory services.

> Audit committee members may not be an affiliated person of the issuer (affiliation means a person has the ability to influence financial decisions).

Question 35

Who is required to make special certification (SIGN the report/representations) statements regarding the establishment of internal control systems on Form 10-K?

Answer 35

Sarbanes-Oxley Act of 2002, the principal executive and financial officers (typically the CEO and CFO) of a public company must sign representations in the annual and quarterly financial reports produced by the company.

Question 36

Audit committee members

Answer 36

must be members of the company’s board of directors.
They must be independent, which means that they cannot accept compensation for consulting or advisory services and may not be an affiliated person of the company.

Question 37

Sarbanes-Oxley Act of 2002 (The Act), the audit committee should establish a complaint procedure that is

Answer 37

Confidential and that allows for anonymous reports of audit or accounting irregularities.

Question 38

Sarbanes-Oxley Act of 2002 on improper influence on the conduct of audits

Answer 38

occurs when an officer or director of an issuer fraudulently influences, coerces, manipulates, or misleads the independent auditor of the financial statements for the purpose of rendering the financial statements materially misleading.

Question 39

The Sarbanes-Oxley Act of 2002 requires that : In the financial reports, the issuer must disclose the existence of financial expert(s) on the committee or the reasons why the committee does not have a financial expert.

Answer 39

The Sarbanes-Oxley Act of 2002 requires that : In the financial reports, the issuer must disclose the existence of financial expert(s) on the committee or the reasons why the committee does not have a financial expert.

Question 40

the following is necessary to be an audit committee financial expert, according to the criteria specified in the Sarbanes-Oxley Act of 2002?

Answer 40

Experience with internal accounting controls.

Question 41

codes of conduct

Answer 41

> Should be in writing and available to employees who want to read it (not required to be displayed in public areas)

> needs to be comprehensive, rather than just addressing one or two potential issues.

> should establish that certain behaviors are acceptable/unacceptable and should also provide guidance to employees as to how to handle situations where they encounter unacceptable behavior.

> Employees should periodically review and acknowledge the code of conduct.

Question 42

A financial expert qualifies through

Answer 42

education, past experience as a public accountant, or past experience as a principal financial officer, controller, or principal accounting officer for an issuer.

Question 43

Section 404 of the Sarbanes-Oxley Act of 2002 requires each annual report of an issuer to include…?

Answer 43

Management’s assessment of the effectiveness of internal control over financial reporting.

& REPORT MUST Attest to and report on the internal control assessment made by the management of the issuer.

Question 44

Sarbanes-Oxley Act of 2002, an issuer must disclose whether or not it has adopted a code of ethics for …?

Answer 44

The issuer’s senior financial officers (e.g., CEO, CFO, controller, etc.), but not for other employees of the issuer.

Question 45

SOX 2002:
If an issuer discloses that it has an audit committee financial expert, it also must disclose the expert’s name.

Answer 45

SOX 2002:
If an issuer discloses that it has an audit committee financial expert, it also must disclose the expert’s name.

Question 46

Sarbanes-Oxley Act of 2002, the penalty for intentionally destroying documents to impede, obstruct, or influence an investigation will be

Answer 46

a fine, imprisonment for not more than 20 years, or both.

Question 47

Sarbanes-Oxley Act of 2002, a chief executive officer or chief financial officer who misrepresents the company’s finances may be penalized by being:

Answer 47

Fined and imprisoned.

Question 48

A CPA in charge of the external audit of a nonissuer received an unexpected inheritance that includes 100 shares of the audit client’s common stock. Which of the following actions should the CPA take to avoid violating independence rules?

Answer 48

Sell or donate the stock within 30 days after receipt of ownership rights.

Question 49

An auditor’s independence is not impaired if the auditor has a cash balance in a brokerage account that is fully covered by the Securities Investor Protection Corporation.

Answer 49

An auditor’s independence is not impaired if the auditor has a cash balance in a brokerage account that is fully covered by the Securities Investor Protection Corporation.

Question 50

the independence of the registered public accounting firm would not be considered impaired if the former partner has no remaining capital balance in the registered public accounting firm.

Answer 50

the independence of the registered public accounting firm would not be considered impaired if the former partner has no remaining capital balance in the registered public accounting firm.

Question 51

All audit partners must rotate off the audit engagement after five years ??? TRUE OF FALSE ?

Answer 51

FALSE…Under the SEC’s rules, the lead and concurring partner must rotate off the engagement after 5 years and other audit partners must rotate after 7 years.

Question 52

Non-audit services to perform financial information systems design and implementation is a service that will impairing independence

Answer 52

Financial information systems design and implementation to an attestation client would impair independence. B/C auditor will be designing them and then testing them so that is not RIGHT

Question 53

The provision of services involving contingent fee arrangements impairs the auditor’s independence .. EXAMPLE=

Answer 53

Preparation of Perigee’s routine annual tax return, where Jackson’s fee will be calculated as a percentage of the tax refund obtained.

El pago al auditor depende de cuanto TAX Refund the company will gent = contingent fee

Question 54

Personal tax services provided to employees do not impair the auditor’s independence; however, personal tax services provided to corporate officers or their families would impair independence.

Answer 54

Personal tax services provided to employees do not impair the auditor’s independence; however, personal tax services provided to corporate officers or their families would impair independence.

Question 55

Permitted tax services include

Answer 55

> tax compliance
tax planning
and tax advice.

The PCAOB prohibits tax services related to confidential or aggressive tax transactions and tax services to corporate officers of audit clients or immediate family members of corporate officers.

Question 56

An issuer’s auditor is prohibited from providing tax services to

Answer 56

Corporate officers manage the day-to-day operations of the corporation and include positions such as the CEO, CFO, and COO.

Question 57

The following types of loans do not impair independence

Answer 57

1. Automobile loans
2. Loans of the surrender value under terms of an insurance policy
3. Borrowings fully collateralized by cash deposits at the same financial institution
4. Credit cards and cash advances on checking accounts with an aggregate unpaid balance of $10,000 or less

Question 58

Violation of ethical standards - client records

Answer 58

Failure to return records to a client after the client makes a demand is considered to be an act discreditable to the profession, and as such violates the profession’s ethical standards.

Question 59

prohibited acts by CPA

Answer 59

Accepting a commission for recommending a product to an audit client.

Question 60

Which statements best explains why the CPA profession has found it essential to promulgate ethical standards and to establish means for ensuring their observance?

Answer 60

A distinguishing mark of a profession is its acceptance of responsibility to the public.

Question 61

AICPA code of professional conduct applies to:

Answer 61

Compilations and reviews of the financial statements of nonissuers.

Question 62

Due Care =

Answer 62

Providing services with competence and diligence

Competence is demonstrated by observing the profession’s technical and ethical standards and continually improving competence and the quality of service.
Diligence is demonstrated by acting with professional responsibility to the best of the member’s ability.

Question 63

Under the ethical standards of the profession, which of the following investments in a client is not considered to be a direct financial interest?

Answer 63

An investment held through a nonclient regulated mutual fund.

Question 64

Compilation

Answer 64

Independence is not required for compilation engagements or for preparation of a tax return.

Question 65

According to the Code, a close relative is defined as

Answer 65

parent, sibling, or nondependent child.

Question 66

A CPA who is going to join as BOD of a bank can not accept if any of the following are present:

Answer 66

> One of Bingham’s clients has several business loans outstanding with the bank.

> Several of Bingham’s clients are in negotiations with this and other banks for operating loans.

> One of Bingham’s clients, who is struggling financially, is in the loan application process at the bank.

Question 67

After completing disassociation from client (he used ot be ocntroller at client now audit manager at firm)the senior manager can audit that as an auditor if:

Answer 67

audit of a period that begins after his or her employment and disassociation with the client.

Question 68

Under the ethical standards of the profession, Advisor to a client’s board of trustees would generally not impair an auditor’s independence because:

Answer 68

An advisor of an audit client’s board of directors is not an employee, nor is the advisor able to make management decisions for the audit client. The advisor does not make decisions, the advisor simply gives advice that the client is free to accept or reject.

Question 69

independence impaired examples

Answer 69

bookkeeping activities that include authorizing, executing or consummating a transaction on behalf of a client or preparing source documents or originating data (e.g., purchase orders).

Question 70

The AICPA Code of Professional Conduct’s general standards include all the following:

Answer 70

> Due professional care.
Sufficient relevant data.
Planning and supervision.

Question 71

Independence is impaired if ….

Answer 71

if more than one year’s fees due from a client remain unpaid.

i.e. Issued an unqualified opinion on the Year 2 financial statements when fees for the Year 1 audit were unpaid.

Question 72

According to the profession’s ethical standards, a departure from U.S. GAAP.

Answer 72

may be justified if the CPA can demonstrate that due to unusual circumstances,
> such as new legislation or
>the evolution of a new form of business transaction, the financial statements would otherwise be misleading.

Question 73

Contingent fees to auditor only allowed if:

Answer 73

If fixed by courts, other public authorities, or in tax matters if based on the results of judicial proceedings.

i.e. (Seeking a private letter ruling.)

Question 74

circumstances under which a CPA firm may or may not disclose the names of its clients without the clients’ express permission?

Answer 74

Name can be disclosed if: this information unless disclosure would suggest that the client may be experiencing financial difficulties.

Basicamente si el CPA no lo comunica estaria cubriendolo

Question 75

Which of the following best describes the effect of a contingent fee arrangement on the auditor’s independence?

Answer 75

The contingent fee arrangement impairs independence.

si la prgunta es solita entonces esa es la mejor opcion … pero si nos dice cuales estan permitidas entonces tienen que ser FIXED BY COURTS, TAX AUTHORITIES,Seeking Private Ruling etc

Question 76

According to the AICPA Code of Professional Conduct, which of the following activities results in an act discreditable to the profession?

Answer 76

A CPA solicits recent Uniform CPA Examination questions without written authorization from the AICPA.

Question 77

Compiled financial statements that omit substantially all the disclosures required by GAAP are not comparable to financial statements that do include required GAAP disclosures.

Answer 77

CAN’T BE REPORTED on comparative format

Question 78

Compilation

Answer 78

Is not an assurance engagement & report does not provide any opinion or conclusion on the financial statements

Question 79

Attestation Services

Answer 79

> Review of financial statements
Agreed-upon procedures (AUP)
Examination of prospective financial information

For all Accountant is accountant is required to issue a report that indicates their findings

Question 80

Compilation

Answer 80

The accountant is NOT required to make inquiries nor perform procedures to corroborate the information provided by the client.

Question 81

Review engagement (attestation service)

Answer 81

obtaining corroborating external evidence would generally not be required.

Normally Accountant DO perform the following:
A. Inquiring of the accounting department’s management.
B. Reading the available minutes of the latest stockholders’ meeting.
C. Applying financial ratios to the interim financial information.