ACG4651 Midterm Questions Flashcards
The primary reason for an audit by an independent, external audit firm is to
Provide increased assurance to users as to the fairness of the FS
Independent CPAS perform audits on the FS of issuers. This type of auditing can be best described as
A discipline that attests to financial info presented by management
Who establishes GAAS
Auditing Standards Board (ASB) & Public Company Accounting Oversight Board (PCAOB)
Users of an issuer’s FS demand independent audits because
Management may not be objective in reporting
An audit of the FS of a corp is being conducted by an external auditor. The auditor is expected to
Express an opinion to the fairness of the corp’s FS
Disclosures included in FS are the responsibility of
Reporting entity’s management
Company is going public; its stocks will be listed in stock exchange; Audited FS are required to be filed with SEC. Who are the primary users of the audited FS?
The company’s investors
Audit committees have been identified as a major factor in promoting independence in both internal and external auditors. Which of the following is the most important limitation on the effectiveness of audit committees?
Audit committees are composed of independent directors. However, those directors may have close personal and professional friendships.
Audit standards require that the engagement partner
Be responsible for the assignment of tasks to, and supervision of assistants
Which of the following services, if any, may an accountant who is not independent provide?
Preparations and compilations but not reviews
The Conceptual Framework for AICPA Independence Standards
Adopts a risk-based approach to analysis of independence matters
Which of the following statements about audit evidence is true?
The sufficiency and appropriateness of an audit evidence is a matter of professional judgement
The AICPA Code of Professional Conduct states that a CPA should maintain integrity and objectivity. Objectivity refers to a CPA’s ability
To maintain an impartial attitude on all matters under CPA’s review
Under AICPA Code of Prof. Conduct, a CPA may express an unmodified opinion on FS that contains a departure from GAAP… Which of the following is an example of unusual circumstances that could justify such a departure?
New legislation
When Congress passed the Sarbanes-Oxley Act of 2002, it imposed greater regulation on public companies and their auditors and required increased accountability. Which of the following is not a provision of the act?
Audit firms must be rotated on a periodic basis
Eagle Company’s FS contains a departure from GAAP because. due to unusual circumstances, the statements would otherwise be misleading. The auditor should express an opinion that is
Unmodified and describe the departure in an other-matter paragraph
The SOX Act limits the non-audit services that an audit firm can provide to issuer audit clients. Which of the following services is still an allowable service that an auditor may provide to an issuer client?
Tax compliance services
Which of the following legal situations would be considered to impair the auditor’s independence?
Actual litigation by the auditor against the current management fraud of deceit
With respect to records in a CPA’s possession, the Code of Professional Conduct provides that
Extensive analyses of inventory prepared by the client at the auditor’s request are working papers that belong to the auditor and need not be furnished to the client upon request
Audit risk at the assertion level consists of inherent risk, control risk, and detection risk. Which of the following statements is true?
Cash has a greater inherent risk than inventory of coal because it is more susceptible to theft
