Exam 1

Question 1

Accounting

Answer 1

Recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision making.

Question 2

Assurance Service

Answer 2

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

Question 3

Attestation Service

Answer 3

Type of assurance service in which the CPA firm issues a report about a subject matter or assertion that is the responsibility of another party.

Question 4

Audit of Historical Financial Statements

Answer 4

Form of attestation service in which the auditor issues a written report stating whether the financial statements are in material conformity with accounting standards.

Question 5

Audit Report

Answer 5

Communication of audit findings to users.

Question 6

Auditing

Answer 6

Accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria.

Question 7

Certified Public Accountant

Answer 7

Person who has met state regulatory requirements, including passing the Uniform CPA Examination, and has thus been certified; a CPA may have as his or her primary responsibility the performance of the audit function on historical financial statements of commercial and noncommercial financial entities.

Question 8

Compliance Audit

Answer 8

(1) Review of an organization’s financial records performed to determine whether the organization is following specific procedures, rules, or regulations set by some higher authority; (2) an audit performed to determine whether an entity that receives financial assistance from the federal government has complied with specific laws and regulations..

Question 9

Evidence

Answer 9

Any information used by the auditor to determine whether the information being audited is stated in accordance with established criteria.

Question 10

Financial Statement Audit

Answer 10

Audit conducted to determine whether the overall financial statements of an entity are stated in accordance with specified criteria (usually US or international accounting standards).

Question 11

Government Accountability Office Auditor

Answer 11

Auditor working for the US Government Accountability Office (GAO); the GAO reports to and is responsible solely to Congress.

Question 12

Independent Auditors

Answer 12

Certified public accountants or accounting firms that perform audits of commercial and noncommercial entities.

Question 13

Information Risk

Answer 13

Risk that information upon which a business decision is made is inaccurate.

Question 14

Internal Auditors

Answer 14

Auditors employed by a company to audit for the company’s board of directors and management.

Question 15

Internal Control over Financial Reporting

Answer 15

Engagement in which the auditor reports on the effectiveness of internal control over financial reporting; such reports are required for accelerated filer public companies under Section 404 of the Sarbanes-Oxley Act

Question 16

Internal Revenue Agents

Answer 16

Auditors who work for the IRS and conduct examinations of taxpayers’ returns.

Question 17

Operational Audit

Answer 17

Review of any part of an organzation’s operating procedures and methods for the purpose of evaluating efficiency and effectiveness.

Question 18

Review of Historical Financial Statements

Answer 18

Form of attestation in which a CPA firm issues a written report that provides less assurance than an audit as to whether the financial statements are in material conformity with accounting standards.

Question 19

Sarbanes-Oxley Act

Answer 19

Federal securities law passed in 2002 that provides for additional regulation of public companies and their auditors; Act established the Public Company Accounting Oversight Board and also requires auditors of larger public companies to audit the effectiveness of internal control over financial reporting.