Chapter 2 Homework Flashcards
Which of the following would be considered a nonattest assurance service engagement?
I. Expressing an opinion about the reliability of an entity’s financial statements
II. Reporting that a company’s sustainability metrics are complete and accurate
A) I only
B) Neither I nor II
C) II only
D) Both I and II
Neither I nor II
Which of the following best places the events of the last decade in proper sequence?
A) Increased consulting services to auditees, Sarbanes-Oxley Act, Enron and other scandals, prohibition of most consulting work for auditees, establishment of PCAOB.
B) Enron and other scandals, Sarbanes-Oxley Act, increased consulting services to auditees, prohibition of most consulting work for auditees, establishment of PCAOB.
C) Sarbanes-Oxley Act, increased consulting services to auditees, Enron and other scandals, prohibition of most consulting work for auditees, establishment of PCAOB.
D) Increased consulting services to auditees, Enron and other scandals, Sarbanes-Oxley Act, prohibition of most consulting work for auditees, establishment of PCAOB.
Increased consulting services to auditees, Enron and other scandals, Sarbanes-Oxley Act, prohibition of most consulting work for auditees, establishment of PCAOB.
Financial Statement Auditors
Independ-audit financial statements.
Internal Auditors
Audit the company they work for.
Governmental Auditors
Report to Congress or Municipal Governments
IRS Auditors
Enforce federal tax laws only.
Most large corporations typically have a large group of ______.
Internal Auditors
Headed by the Auditor General, the work of ______ includes compliance, operational, and financial audits.
Governmental Auditors
______ perform compliance audits of income tax returns of individuals and corporations to determine that income has been computed and taxes paid as required.
IRS Auditors
______ are the only auditors that work for the company that they are auditing.
Internal Auditors
______ are required to be public accountants.
External Auditors
For each of the following descriptions, indicate which type of audit (financial statement audit, audit of internal control, compliance audit, operational audit, or fraud audit) best characterizes the nature of the audit being conducted. Also indicate which type of auditor (external auditor, internal auditor, government auditor, or fraud auditor) is likely to perform the audit engagement. If more than one type of auditor might perform the audit engagement, include every appropriate type of auditor in your answer.
A) Evaluate the policies and procedures of the Food and Drug Administration in terms of bringing new drugs to market.
Audit: Operational; Auditor: Government.
For each of the following descriptions, indicate which type of audit (financial statement audit, audit of internal control, compliance audit, operational audit, or fraud audit) best characterizes the nature of the audit being conducted. Also indicate which type of auditor (external auditor, internal auditor, government auditor, or fraud auditor) is likely to perform the audit engagement. If more than one type of auditor might perform the audit engagement, include every appropriate type of auditor in your answer.
B) Determine the fair presentation of Ajax Chemical’s balance sheet, income statement, and statement of cash flows.
Audit: Financial Statement; Auditor: External.
For each of the following descriptions, indicate which type of audit (financial statement audit, audit of internal control, compliance audit, operational audit, or fraud audit) best characterizes the nature of the audit being conducted. Also indicate which type of auditor (external auditor, internal auditor, government auditor, or fraud auditor) is likely to perform the audit engagement. If more than one type of auditor might perform the audit engagement, include every appropriate type of auditor in your answer.
C) Review the payment procedures of the accounts payable department for a large manufacturer.
Audit: Compliance or operational or possibly internal control; Auditor: Internal or External.
For each of the following descriptions, indicate which type of audit (financial statement audit, audit of internal control, compliance audit, operational audit, or fraud audit) best characterizes the nature of the audit being conducted. Also indicate which type of auditor (external auditor, internal auditor, government auditor, or fraud auditor) is likely to perform the audit engagement. If more than one type of auditor might perform the audit engagement, include every appropriate type of auditor in your answer.
D) Examine the financial records of a division of a corporation to determine if any accounting irregularities have occurred.
Audit: Fraud or Financial Statement; Auditor: Internal, External, or Fraud.