Chapter 1 LO5

Question 1

assurance service improves the quality of information for whom?

Answer 1

decision makers

Question 2

the evaluation of interal control over financial reporting is integrated with what?

Answer 2

the audit of fianncial statement

Question 3

the the federal securities act says what kind of companies are required to have audits?

Answer 3

publicly traded companies in US

Question 4

what are the 4 primary categories of attestation services?

Answer 4

1. Audits of historical financial statements 2. Audits of internal control over financial reporting 3. Reviews of historical financial statements 4/. Other attestation that may be applied to a broad range of subjects

Question 5

an assurance service improves what?

Answer 5

the quality of information

Question 6

what is an audit of internal control over financial reporting?

Answer 6

management asserts that internal controls have been developed and implemented following well established criteria .

Question 7

why do government and not for profit entitite often have audits ?

Answer 7

to meet the requirments of lenders or funding sources

Question 8

CPAs have expanded types of assurance services they provide to include other info of interest to investors such as ?

Answer 8

1. CSR 2. sustainabilty reports

Question 9

how are other assurance services that CPA provide different from attestation srvices. how do they dont meet the definition?

Answer 9

1. a written report not required 2. it doesn’t have to be about the reliability of another partys assertion about compliance with specified criteria

Question 10

a category of assurance service provided by CPAs in which they issue a report about a subject matter or assertion that is made by another party? what kind of service is this?

Answer 10

attestation service

Question 11

Assurance services by CPAs have been common for years, especially regarding what?

Answer 11

historical financial statement information

Question 12

an audit is designed to provide what?

Answer 12

reasonable assurance that the financial statements are free of material misstatement

Question 13

what is an audit of historical financial statements?

Answer 13

a form of attestation service in which the auditor issues a written report expressing an opinion about whether the financial statements are fairly stated in accordance with applicable accounting standards

Question 14

where can poublicly traded companies audited fiancial statements be accessed?

Answer 14

1. SEC EDGAR database 2. from companies website

Question 15

how is a review of historical financial statement the same and different from an audit

Answer 15

1. same- attestation service that management asserts statements are fairly stated in accordance with accounting standard. 2. different- CPA provides lower level of assurance so less evidence is needed. can be provided for lower fee because less evidence needed, many non public companies will use to provide limited assurance on their finanical statments

Question 16

what are other attestation services?

Answer 16

CPA engages to provide written assurance about reliability of assertion made by management. or ex. laon agreement may require compnay to engage CPA to provide assurance about compnay comliance with financial provisions of loan ex. service provider engage auditor to provide attestation report on design and effectiveness of controls at service organi. like it they provide payrool to another company

Question 17

what is an assurance service?

Answer 17

independent professional service that improves the quality of information for decision makers.

Question 18

Publicly traded companies in US are required to have audits under what?

Answer 18

the federal securities act

Question 19

why do many privately held cdompnaies have their annual financial statements audited?

Answer 19

to obtain finanicng from banks and other financial insttitutions

Question 20

independent professional service that improves the quality of information for decision makers is what kind of service?

Answer 20

an assurance service

Question 21

Section 404 of the Sarbanes-Oxley Act now requires assurance regarding what?

Answer 21

internal controls over financial reporting for larger public companies.

Question 22

a form of attestation service in which the auditor issues a written report expressing an opinion about whether the financial statements are fairly stated in accordance with applicable accounting standards. what is this?

Answer 22

an audit of historical financial statements

Question 23

what does section 404 of sarbanes oxley require ?(2)

Answer 23

1. public companies to report managments assessment of the effectiveness of internal control over financial reporting 2. requires auditors for larger public companies to attest to the effectiveness of internal control.

Question 24

what are some examples of assurance services provided by those that are not CPAs

Answer 24

1. consumers union’ consumers reports- tests product for consumers 2. BBB 3. Nielsen televsion and Internet ratings 4. ARbitron radio ratings

Question 25

what are some nonassurance services CPAs perform. 3 ex?

Answer 25

1. accounging and bookkeeping services 2. tax services 3. managment consulting services

Question 26

who can assurance services be provided by?

Answer 26

CPAs or other professionals

Question 27

what does the evaulation of internal control of finanical reporting do for users?

Answer 27

increases their confidence about future financial reporting since effective internal controls reduce likelihood of future mistatments

Question 28

what is an attestation service?

Answer 28

a category of assurance service provided by CPAs in which they issue a report about a subject matter or assertion that is made by another party

Question 29

what is the most common assurance service provided by CPA firms?

Answer 29

Audits of historical financial statements