Professional Standards - AUD

Question 1

MCQ-02298
Which of the following provides the most authoritative guidance for the auditor of a
nonissuer?

A. An AICPA audit and accounting guide that provides specific guidance with
respect to the accounting practices in the client’s industry.
B. A Journal of Accountancy article discussing implementation of a new standard.
C. General guidance provided by a Statement on Auditing Standards.
D. Specific guidance provided by an interpretation of a Statement on Auditing
Standards.

Answer 1

Choice “C” is correct. General guidance provided by a Statement on Auditing Standards is the most authoritative of level of auditing guidance for audits of nonissuers. Auditors are required to comply with SASs, and should be prepared to justify any departures therefrom.

Choices “A” and “D” are incorrect. AICPA audit and accounting guides and SAS
interpretations are interpretive publications that provide guidance regarding how SASs
should be applied in specific situations. They are not as authoritative as SASs.
Choice “B” is incorrect. Journal of Accountancy articles have no authoritative status,
but may be helpful to the auditor.

Question 2

The phrase “U.S. generally accepted accounting principles” is an accounting term that:

A. Includes broad guidelines of general application but not detailed practices and
procedures.

B. Encompasses the conventions, rules, and procedures necessary to define U.S.
accepted accounting practice at a particular time.

C. Provides a measure of conventions, rules, and procedures governed by the AICPA.

D. Is included in the audit report to indicate that the audit has been conducted in accordance with generally accepted auditing standards (GAAS).

Answer 2

Choice “B” is correct. The literature pertaining to U.S. GAAP changes over time, and therefore U.S. generally accepted accounting principles can be said to encompass the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. U.S. GAAP is one of the financial reporting frameworks acceptable
for preparation of financial statements. IFRS is another one.

Question 3

MCQ-03208
Which of the following best describes what is meant by the term generally accepted
auditing standards?

A. Rules acknowledged by the accounting profession because of their universal
application.
B. Pronouncements issued by the Auditing Standards Board.
C. Measures of the quality of the auditor’s performance.
D. Procedures to be used to gather evidence to support financial statements.

Answer 3

Choice “C” is correct. Generally accepted auditing standards (“GAAS”) are measures of the quality of the auditor’s performance, and guide the auditor in the performance of a properly planned and executed audit.

Choice “A” is incorrect. GAAS are not “rules,” nor are they universally applicable.
GAAS are measures of the quality of an auditor’s performance.
Choice “B” is incorrect. The Auditing Standards Board (ASB) issues many types of
pronouncements, including (but not limited to) “Statements on Auditing Standards”
(SASs). While SASs are considered to be interpretations of GAAS, not all ASB
pronouncements relate to audits. Therefore, just because something is issued by the
ASB does not make it GAAS.
Choice “D” is incorrect. Auditing standards differ from auditing procedures in that
procedures relate to acts to be performed, whereas standards deal with the quality of
the performance of those acts

Question 4

MCQ-04638
Which of the following terms used within standards indicates a presumptively mandatory
requirement?

A. Must
B. Should
C. May
D. Might

Answer 4

Choice “B” is correct. The term “should” indicates a presumptively mandatory
requirement, which must be followed in all cases in which the requirement is relevant,
except in rare circumstances when departure from the requirement is permitted if there
is appropriate justification, performance of sufficient alternative procedures, and
thorough documentation.
Choice “A” is incorrect. The term “must” indicates an unconditional requirement, which
must be followed in all cases in which the requirement is relevant.
Choice “C” is incorrect. The term “may” indicates explanatory material that does not
impose a professional requirement for performance.
Choice “D” is incorrect. The term “might” indicates explanatory material that does not
impose a professional requirement for performance.