Ethics, Professional Responsibilities and General Principles

Question 1

What is the purpose of an audit?

Answer 1

The purpose of an audit is to have an independent auditor issue an opinion as to whether financial statements are presented fairly in accordance with GAAP.

Question 2

Reviews provide what type of assurance?

Answer 2

Limited assurance

Question 3

Compilations provide what type of assurance?

Answer 3

No assurance and is an attest engagement

Question 4

What does the DOL define as a “covered member”?

Answer 4

all partners, partner equivalents, or shareholder employees of the public accounting firm.

Question 5

Sarbanes-Oxley Act rules apply to which of the following public accounting firms?

Answer 5

Both U.S. and foreign accounting firms.

Question 6

According to SOX, what is the maximum number of years an auditor can perform audit services for an issuer before rotating out?

Answer 6

5 years

Question 7

True or False? A review is an assurance engagement, as well as an attest engagement

Answer 7

TRUE (limited assurance only)

Question 8

What rules are non-issuer audits governed by?

Answer 8

Clarified Auditing Standards (AU-C’s) issued by the ASB.

Question 9

What rules are issuer audits governed by?

Answer 9

Audit Standards of the PCAOB (ex: AS 1015)

Question 10

Existence

Answer 10

All assets, liabilities and equity interests exist

Question 11

Completeness

Answer 11

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.

Question 12

Classification

Answer 12

Assets, liabilities and equity have been recorded in the proper accounts

Question 13

Section 103 of SOX Title I, “Auditing, Quality Control, and Independence Standards and Rules,” dictates that:

Answer 13

the PCAOB has the authority to set, amend, update, and modify auditing, quality control, and ethics standards.