Ethics, Prof Resp. & Gen. Princ. - 15-25%

Question 1

What are the 6 assertions to test account balances, and related disclosures, at the period end?

Answer 1

1. Existence
2. Rights and obligations
3. Completeness
4. Accuracy, Valuation, and allocation
5. Classification
6. Presentations

Question 2

What are the 6 assertions to test classes of transactions and events, and related disclosures, for the period under audit?

Answer 2

1. Occurrence
2. Accuracy
3. Completeness
4. Cutoff
5. Presentation
6. Classification

Question 3

When testing account balances, and related disclosures, at the period end, which assertion is identified by the testing below:
Assets, liabilities, and equity interest exists.

Answer 3

Existence

Question 4

When testing account balances, and related disclosures, at the period end, which assertion is identified by the testing below:
The entity holds or controls the rights to assets, and liabilities are the obligation of the entity.

Answer 4

Rights and obligation

Question 5

When testing account balances, and related disclosures, at the period end, which assertion is identified by the testing below:
All assets, liabilities and equity interests that should have been recorded have been recorded, and all related disclosures that should have been included in the financial statements have been included.

Answer 5

Completeness

Question 6

When testing account balances, and related disclosures, at the period end, which assertion is identified by the testing below:
Assets, liabilities, and equity interests have been included in the financial statements at appropriate amounts, any resulting valuation or allocation adjustments have been appropriately recorded, and related disclosures have been appropriately measured and described.

Answer 6

Accuracy, valuation, and allocation

Question 7

When testing account balances, and related disclosures, at the period end, which assertion is identified by the testing below:
Assets, liabilities, and equity interests have been recorded in the proper account.

Answer 7

Classification

Question 8

A client company has not paid its year 1 audit fees. According to the AICPA Code of Professional Conduct, in order for the auditor to be considered independent with respect to the year 2 audit, the year 1 audit fees must be paid before the:

Answer 8

Year 2 report is issued.

The professional standards require payment prior to issuance of the subsequent year audit report.

Question 9

List 4 types of “covered members” in an audit.

Answer 9

• Any member of an attest engagement
• Any person in a position to influence an attest engagement
• A partner or manager who provides more than 10 hours of non-attest engagement services to a client within the last year
• A partner in the same office building as the lead engagement partner

Question 10

What type of lawsuit by a client, against their audit firm, will not impose a threat to independence?

Answer 10

Billing disputes, regardless of materiality will not threaten independence.

Question 11

Which of the following areas of professional responsibility should be observed by a CPA not in public practice: Objectivity, and/ or Independence?

Answer 11

Objectivity - Yes
Independence - No
A CPA not in public practice need not adhere to the independence standards but must adhere to the objectivity standards.

Question 12

At least how often should the PCAOB inspect a registered public accounting firm that regularly issues audit reports to 50 issuers?

Answer 12

Every three years.

Firms that audit > 100 issuers must be inspected annually. Anything <100 must be inspected every three years.

Question 13

The employment restrictions in the Code of Professional Conduct apply to:

Answer 13

All “partners and professional employees (POPEs)