PCAOB Responsibilities Flashcards
Which of the following is least likely to be directly examined in an inspection performed by the PCAOB? Audit engagements. Review engagements. Compilation engagements. CPA firm quality control system.
Compilation engagements.
This answer is correct because compilation standards for financial statements relate to nonpublic companies not under the jurisdiction of either the SEC or the PCAOB.
Which of the following are issued by the Securities and Exchange Commission? Journal of Accountancy. Accounting Trends and Techniques. Industry Audit Guides. Financial Reporting Releases.
Financial Reporting Releases.
This answer is correct because Financial Reporting Releases are issued by the Securities and Exchange Commission.
A person identified as an audit committee financial expert of an issuer generally must have acquired the attributes of a financial expert through any of the following experiences, except
As a principal financial officer, principal accounting officer, controller, public accountant, or auditor.
Serving on at least one other issuer’s audit committee or disclosure committee of the board of directors.
Actively supervising a principal financial officer or principal accounting officer.
Assessing the performance of public accountants with respect to preparation, auditing, or evaluation of financial statements.
Serving on at least one other issuer’s audit committee or disclosure committee of the board of directors.
This answer is correct because service on at least one other issuer’s audit committee or disclosure committee would not be an experience that would necessarily qualify the individual as a financial expert.
The organization charged with protecting investors and the public by requiring full disclosure of financial information by companies offering securities to the public is the: Auditing Standards Board. Financial Accounting Standards Board. Government Accounting Standards Board. Securities and Exchange Commission.
Securities and Exchange Commission.
This answer is correct because the Securities and Exchange Commission is the organization charged with protecting investors and the public by requiring full disclosure of financial information by companies offering securities to the public in the United States.
Section 404 of the Sarbanes-Oxley Act of 2002 requires each annual report of an issuer to include which of the following?
Representations from the company’s external auditors that the company has effective internal control over operations.
Management representations that the company’s external auditors have examined its internal control over compliance with laws and regulations.
Reasonable assurances that fraud will be identified before the issuance of the company’s annual report.
Management’s assessment of the effectiveness of internal control over financial reporting.
Management’s assessment of the effectiveness of internal control over financial reporting.
This answer is correct because Section 404 of the Sarbanes-Oxley Act of 2002 requires such a management assessment of the effectiveness of internal control over financial reporting.
Which of the following is correct concerning PCAOB inspections?
Engagements and audit areas to be inspected are selected randomly, without consideration of risk aspects.
Inspections may include consideration of aspects of practice management, such as how partner compensation is determined.
When a lack of compliance with standards is identified, the PCAOB staff attempts to determine the cause, which will ultimately lead to identification of a defect in a CPA firm’s quality control system.
All public company audits are inspected.
Inspections may include consideration of aspects of practice management, such as how partner compensation is determined.
This answer is correct because inspections may include consideration of such aspects of practice management.
The Public Company Accounting Oversight Board (PCAOB) has authority to establish which of the following relating to public companies? Attestation standards Independence standards Yes Yes Yes No No Yes No No
Yes Yes
This answer is correct because the PCAOB may establish attestation standards, independence standards, auditing standards, and quality control standards.
How many audits of public companies per year does a CPA firm that is registered with the Public Company Accounting Oversight Board (PCAOB) have to perform before it receives an annual inspection from the PCAOB?
One audit.
More than 10 audits.
More than 50 audits.
More than 100 audits.
More than 100 audits.
This answer is correct because CPA firms that audit more than 100 issuers must have an annual inspection by the PCAOB.
A financial statement audit report issued for a public company states that the audit was performed in accordance with which of the following standards?
Generally accepted auditing standards.
Public Company Accounting Oversight Board standards.
Securities and Exchange Commission standards.
Sarbanes-Oxley standards.
Public Company Accounting Oversight Board standards.
This answer is correct because PCAOB standards requires that the audit report indicate that the audit was performed in accordance with standards of the Public Company Accounting Oversight Board (United States).
Which of the following is correct concerning PCAOB guidance that uses the term “must”?
The auditor must fulfill the responsibilities if relevant to the audit.
The auditor must comply with requirements unless s/he demonstrates that alternative actions were sufficient to achieve the objectives of the standards.
The auditor should consider the guidance; whether the auditor follows depends on exercise of professional judgment in the circumstances.
The auditor has complete discretion as to whether to perform the procedure.
The auditor must fulfill the responsibilities if relevant to the audit.
This answer is correct because terms such as “must,” “shall,” and “is required to” are used to indicate that the auditor must fulfill the responsibilities if those responsibilities are relevant to the audit being performed.
Which of the following AICPA standards did the PCAOB not adopt as a part of its interim standards?
Auditing Standards Board Standards.
Attestation Standards.
Accounting and Review Services Standards.
Quality Control Standards.
Accounting and Review Services Standards.
This answer is correct because the PCAOB did not adopt the AICPA’s Accounting and Review Services Standards because they only apply to nonpublic companies (“non-issuers”).
Under the Sarbanes-Oxley Act of 2002, which of the following is not a stated responsibility of the Public Company Accounting Oversight Board?
Conducting inspections of registered public accounting firms.
Overseeing the registration of public accounting firms.
Issuing accounting standards that must be followed by issuers in financial reporting.
Issuing auditing standards that must be followed by registered public accounting firms in auditing the financial statements of issuers.
Issuing accounting standards that must be followed by issuers in financial reporting.
The PCAOB is a standard-setting body for certain matters related to registered public accounting firms (including auditing and quality control, among other matters). However, the PCAOB is not an accounting standard-setting body and does not promulgate GAAP affecting the financial statements of issuers.
The Public Company Accounting Oversight Board (PCAOB) is charged with all of the following responsibilities except:
Establishing accounting standards for public companies.
Establishing auditing standards.
Registering accounting firms that will audit public companies.
Inspecting accounting firms that will audit public companies.
Establishing accounting standards for public companies.
The FASB establishes accounting standards. PCAOB establishes auditing standards.
At least how often should the PCAOB inspect a registered public accounting firm that regularly issues audit reports to 50 issuers?
Annually.
Every two years.
Every three years.
As requested by the firm.
Every three years.
CORRECT! Registered public accounting firms that audit more than 100 issuers must be inspected annually; those that audit 100 or fewer issuers must be inspected every three years. In this case, a registered public accounting firm that issues audit report to 50 issuers would be inspected every three years.
The Sarbanes-Oxley Act of 2002 imposes a mandatory rotation applicable to both the audit engagement partner and the quality control (also called review) partner. How long in total is the partner allowed to serve as the engagement partner or review partner before someone else must serve in that capacity?
3 years.
5 years.
7 years.
10 years.
5 years.
Title II of the Sarbanes-Oxley Act of 2002 establishes 5 years as the upper limit for how long someone can serve as the engagement partner or review partner before mandatory rotation is required.
