ACCT 3222-3, Wiley, LSU, Exam 1 Quizzes Exam
With Complete Solutions Graded A+
QUESTIONS AND ANSWERS
Audit Services. ANSWER -services by an independent CPA that provide financial
statement users with (1) an opinion on whether the financial statements are presented fairly,
in all material respects, in accordance with an applicable financial reporting framework and
(2) an opinion on the effectiveness of ICFR, which enhance the degree of confidence that
intended users can place in the financial statements
Attestation Services. ANSWER -Services performed when an independent practitioner, or
CPA, is engaged to issue a report on subject matter that is the responsibility of another
party
Relationship of assurance, attestation, and auditing services from most to least improved of
quality (i.e., assurance). ANSWER -Audit - highest quality/reasonable assurance (i.e.,
historical financial statements)
Attestation - mid quality/limited assurance (i.e., review of historical financial statements,
examination of internal controls, review of financial forecast)
Assurance - lowest quality (i.e., compilation of historical financial statements, website
security, IT operations, non-financial information)
Assurance Services. ANSWER -independent professional services that improve the quality
of information, or its context, for decision makers
Applicable financial reporting framework refers to. ANSWER -the set of standards used in
preparing the historical financial statements (i.e., GAAP, IFRS, or federal income tax basis
of accounting)
Independent implies that the service is performed by. ANSWER -someone who was not
involved with the creation of the information and who is objective in the evaluation of the
information
Quality refers to. ANSWER -the relevance and realiability of the information
,Information refers to. ANSWER -subject matter that can be financial or nonfinancial,
historical or prospective, standalone data or entire systems of data, internal or external to a
company
CPAs are the only _________ accounting professionals in the US and the ________ are
issued at the ____________ level. ANSWER -Licensed accounting professionals in the US.
Licenses are issued at the state level, not federal
A state board of accountancy will only issue. ANSWER -a licence to practice after all three
Es have been earned
CPA Es. ANSWER -Education, Exam, and Experience
Public companies, or issuers, in the US are required by federal government to have.
ANSWER -an annual financial statement audit and an ICFR audit
Private companies, or non-issuers, are _______ to have an annual audit by federal
government, but. ANSWER -Not required by law, other interested users may request
audited financial statements (i.e., lenders)
ICFR. ANSWER -Internal Control over Financial Reporting
Integrated Audit. ANSWER -An audit that combines the financial statement audit with an
audit of the effectiveness of ICFR
The limitations of an audit are cause by. ANSWER -1. the nature of financial reporting
2. the nature of audit procedures
3. the need for the audit to be conducted within a reasonable period of time at a reasonable
cost
The nature of financial reporting refers to. ANSWER -the use of judgment when preparing
financial statements due to the subjectivity required when arriving at accounting estimates
and judgment required when selecting and applying accounting methods
,The nature of audit procedures refers to. ANSWER -Reliance on evidence provided by the
client and its managements, as well as the concept of materiality
Materiality. ANSWER -the ability of information to influence decisions that users make on
the basis of the financial information of a specific reporting entity
Compliance Audit. ANSWER -an audit to determine whether the entity has conformed
with regulations, rules, or processes
Operational (Performance) Audit. ANSWER -An assessment of the economy, efficiency,
and effectiveness of an organization's operations
Operational Audit economy, efficiency, and effectiveness refer to. ANSWER -Economy
refers to the cost of inputs
Efficiency refers to the relationship between inputs and outputs
Effectiveness refers to the achievement of certain goals or the production of a certain level
of outputs
Internal Audit. ANSWER -A function within an entity which generally evaluates and
improves risk management, internal control procedures, and elements of the governance
process
Those charged with governance. ANSWER -Persons with responsibility for overseeing the
strategic direction of the entity and the obligations related to the accountability of the entity
The external auditor may rely on the work done by. ANSWER -Internal auditors when
evaluating the evidence needed to form an opinion on the financial statements or on ICFR
Financial Statement Users include. ANSWER -Investors, suppliers, customers, lenders,
employees, governments, and the general public
Sources of demand for audit and assurance services. ANSWER -Remoteness (users do not
have access to the company)
Complexity (amounts affected by significant estimates requiring knowledge and experience
to evaluate)
, Competing incentives (determine biased information)
Reliability
Management is responsible for. ANSWER -1. Ensuring the information included in the
financial statements is presented fairly and complies with the applicable financial reporting
frameowrk
2. Designing, implementing, and maintaining internal control relevant to the preparation
and fair presentation of the financial statements
3. Providing the auditor with access to all records, documentation, and personnel relevant to
the preparation and fair presentation of the financial statements, and any additional
information the auditors may consider relevant to complete the audit
Also, mgmt is responsible for making estimates for some f/s items and selecting appropriate
accounting policies within the applicable financial reporting framework
Auditors are responsible for. ANSWER -1. Conducting the audit in accordance with the
appropriate auditing standards
2. Planning and performing the audit with professional skepticism
3. Planning and performing the audit with professional judgment
Professional Skepticism. ANSWER -An attitude that includes a questioning mind, being
alert to conditions that may indicate possible misstatement due to fraud or error, and a
critical assessment of audit evidence
Professional judgment. ANSWER -The application of relevant training, knowledge, and
experience in making informed decisions about the courses of action that are appropriate in
the circumstances of the audit engagement
PCAOB. ANSWER -Public Company Accounting Oversight Board
Oversees the audits of public companies
PCAOB is a. ANSWER -non-profit corporation established through the SOX legislation in
2002.
Auditing Standards. ANSWER -(AS)
With Complete Solutions Graded A+
QUESTIONS AND ANSWERS
Audit Services. ANSWER -services by an independent CPA that provide financial
statement users with (1) an opinion on whether the financial statements are presented fairly,
in all material respects, in accordance with an applicable financial reporting framework and
(2) an opinion on the effectiveness of ICFR, which enhance the degree of confidence that
intended users can place in the financial statements
Attestation Services. ANSWER -Services performed when an independent practitioner, or
CPA, is engaged to issue a report on subject matter that is the responsibility of another
party
Relationship of assurance, attestation, and auditing services from most to least improved of
quality (i.e., assurance). ANSWER -Audit - highest quality/reasonable assurance (i.e.,
historical financial statements)
Attestation - mid quality/limited assurance (i.e., review of historical financial statements,
examination of internal controls, review of financial forecast)
Assurance - lowest quality (i.e., compilation of historical financial statements, website
security, IT operations, non-financial information)
Assurance Services. ANSWER -independent professional services that improve the quality
of information, or its context, for decision makers
Applicable financial reporting framework refers to. ANSWER -the set of standards used in
preparing the historical financial statements (i.e., GAAP, IFRS, or federal income tax basis
of accounting)
Independent implies that the service is performed by. ANSWER -someone who was not
involved with the creation of the information and who is objective in the evaluation of the
information
Quality refers to. ANSWER -the relevance and realiability of the information
,Information refers to. ANSWER -subject matter that can be financial or nonfinancial,
historical or prospective, standalone data or entire systems of data, internal or external to a
company
CPAs are the only _________ accounting professionals in the US and the ________ are
issued at the ____________ level. ANSWER -Licensed accounting professionals in the US.
Licenses are issued at the state level, not federal
A state board of accountancy will only issue. ANSWER -a licence to practice after all three
Es have been earned
CPA Es. ANSWER -Education, Exam, and Experience
Public companies, or issuers, in the US are required by federal government to have.
ANSWER -an annual financial statement audit and an ICFR audit
Private companies, or non-issuers, are _______ to have an annual audit by federal
government, but. ANSWER -Not required by law, other interested users may request
audited financial statements (i.e., lenders)
ICFR. ANSWER -Internal Control over Financial Reporting
Integrated Audit. ANSWER -An audit that combines the financial statement audit with an
audit of the effectiveness of ICFR
The limitations of an audit are cause by. ANSWER -1. the nature of financial reporting
2. the nature of audit procedures
3. the need for the audit to be conducted within a reasonable period of time at a reasonable
cost
The nature of financial reporting refers to. ANSWER -the use of judgment when preparing
financial statements due to the subjectivity required when arriving at accounting estimates
and judgment required when selecting and applying accounting methods
,The nature of audit procedures refers to. ANSWER -Reliance on evidence provided by the
client and its managements, as well as the concept of materiality
Materiality. ANSWER -the ability of information to influence decisions that users make on
the basis of the financial information of a specific reporting entity
Compliance Audit. ANSWER -an audit to determine whether the entity has conformed
with regulations, rules, or processes
Operational (Performance) Audit. ANSWER -An assessment of the economy, efficiency,
and effectiveness of an organization's operations
Operational Audit economy, efficiency, and effectiveness refer to. ANSWER -Economy
refers to the cost of inputs
Efficiency refers to the relationship between inputs and outputs
Effectiveness refers to the achievement of certain goals or the production of a certain level
of outputs
Internal Audit. ANSWER -A function within an entity which generally evaluates and
improves risk management, internal control procedures, and elements of the governance
process
Those charged with governance. ANSWER -Persons with responsibility for overseeing the
strategic direction of the entity and the obligations related to the accountability of the entity
The external auditor may rely on the work done by. ANSWER -Internal auditors when
evaluating the evidence needed to form an opinion on the financial statements or on ICFR
Financial Statement Users include. ANSWER -Investors, suppliers, customers, lenders,
employees, governments, and the general public
Sources of demand for audit and assurance services. ANSWER -Remoteness (users do not
have access to the company)
Complexity (amounts affected by significant estimates requiring knowledge and experience
to evaluate)
, Competing incentives (determine biased information)
Reliability
Management is responsible for. ANSWER -1. Ensuring the information included in the
financial statements is presented fairly and complies with the applicable financial reporting
frameowrk
2. Designing, implementing, and maintaining internal control relevant to the preparation
and fair presentation of the financial statements
3. Providing the auditor with access to all records, documentation, and personnel relevant to
the preparation and fair presentation of the financial statements, and any additional
information the auditors may consider relevant to complete the audit
Also, mgmt is responsible for making estimates for some f/s items and selecting appropriate
accounting policies within the applicable financial reporting framework
Auditors are responsible for. ANSWER -1. Conducting the audit in accordance with the
appropriate auditing standards
2. Planning and performing the audit with professional skepticism
3. Planning and performing the audit with professional judgment
Professional Skepticism. ANSWER -An attitude that includes a questioning mind, being
alert to conditions that may indicate possible misstatement due to fraud or error, and a
critical assessment of audit evidence
Professional judgment. ANSWER -The application of relevant training, knowledge, and
experience in making informed decisions about the courses of action that are appropriate in
the circumstances of the audit engagement
PCAOB. ANSWER -Public Company Accounting Oversight Board
Oversees the audits of public companies
PCAOB is a. ANSWER -non-profit corporation established through the SOX legislation in
2002.
Auditing Standards. ANSWER -(AS)
