Independence and other related matters

Question 1

The Public Company Accounting Oversight Board is composed of:

1. All CPAs
2. Up to five CPAs
3. At least 1 CPA
4. Exactly 2 CPAs

Answer 1

Choice “4” is correct. The PCAOB consists of exactly two CPAs and three non-CPAs.
Choices “1”, “2”, and “3” are incorrect, based on the above explanation.

Question 2

Compiled financial statements should be accompanied by a report stating that:

1. The accountant does not express an opinion but expressed only limited assurance on the compiled financial statements
2. A compilation is substantially less than an audit or a review in accordance with generally accepted auditing standards
3. The accountant is not required to perform any procedure to very the accuracy or completeness of information provided to management
4. The accountant has compiled the financial statements in accordance with standards established by the Auditing Standards Board

Answer 2

Choice “3” is correct. The accountant’s report includes a statement that the accountant is not required to perform any procedures to verify the accuracy or completeness of the information provided by management.
Choice “1” is incorrect. The accountant expresses no assurance in a compilation engagement; limited assurance is expressed in a review engagement.
Choice “2” is incorrect. The report must state that the financial statements have not been audited or reviewed, but does not compare the scope of a compilation to the scope of a review or an audit.
Choice “4” is incorrect. The financial statements are compiled in accordance with SSARS promulgated by the Accounting and Review Services Committee of the AICPA, rather than “standards established by the Auditing Standards Board.”

Question 3

When unaudited financial statements are presented in comparative form with audited financial statements in a document filed with the SEC, such statement should:

1. Marked “unaudited”, not withheld until audited and referred to in the audit report
2. Marked “unaudited, not withheld until audited and not referred to in the audit report
3. Not marked “unaudited”, withheld until audited and referred to in the audit report
4. Not marked “unaudited”, withheld until audited and not referred to in the audit report

Answer 3

Choice “2” is correct. When unaudited financial statements are presented in comparative form with audited financial statements in documents filed with the SEC, such statements should be clearly marked as “unaudited,” but should not be referred to in the auditor’s report. The statements need not be withheld until audited.
Choices “1”, “3”, and “4” are incorrect, based on explanation above.

Question 4

A person identified as an audit committee financial expert of an issuer must have acquired the attributes of a financial expert through any of the following experiences except:

1. As a principal financial officer, principal accounting officer, controller, public accountant, or auditor
2. Service at least one other issuer’s audit committee or disclosure committee of the board of directors
3. Actively supervising a principal financial officer or principal accounting officer
4. Assessing the performance of public accountants with respect to preparation, auditing, or evaluation of financial statements

Answer 4

Choice “2” is correct. Experience on an audit committee or disclosure committee of a board of directors would not enable one to acquire the attributes of a financial expert. Such experience must be acquired through involvement as a principal financial officer, principal accounting officer, controller, public accountant, auditor, or one who actively supervises or assess the performance of one of these financial jobs. Serving on at least one other issuer’s audit committee or disclosure committee is not required.
Choices “1”, “3”, and “4” are incorrect per the above explanation.

Question 5

The auditor of an issuer may provide which of the following tax services?

1. Tax services for officers of the issuer
2. Tax services for confidential tax transactions
3. Tax services for immediate family members of officers of the issuer
4. Tax planning

Answer 5

Choice “4” is correct. Permitted tax services include tax compliance, tax planning, and tax advice. The PCAOB prohibits tax services related to confidential or aggressive tax transactions and tax services to corporate officers of audit clients or immediate family members of corporate officers.