Created By: A Solution
Test Bank for Principles of Auditing and Other
j j j j j j j j
Assurance Services 22nd Edition by Ray j j j j j j
Whittington, Kurt Pany A+ j j j
Answers are at the end of each chapter Chapter 1
j j j j j j j j j
Student name: j
1) Accountants are regulated by a variety of organizations. Match the statements with the jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
most directly related organization:
jjj jjj jjj
● Accounting and Review Services Committee. jjj jjj jjj jjj
● American Institute of Certified Public Accountants. jjj jjj jjj jjj jjj
● Auditing Standards Board. jjj jjj
● Federal Accounting Standards Advisory Board. jjj jjj jjj jjj
● Financial Accounting Standards Board. jjj jjj jjj
● General Accounting Office. jjj jjj
● Government Accounting Standards Board. jjj jjj jjj
● Public Company Accounting Oversight Board. jjj jjj jjj jjj
● Securities and Exchange Commission. jjj jjj jjj
● State Boards of Accountancy. jjj jjj jjj
Organizations may be used once, more than once, or not at all. jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj j jj
Statements Organizations
A. Develops accounting standards
jjj jjj jjj
for public and nonpublic companies.
jjj jjj jjj j jj
B. Develops accounting standards for the U.S. Government.
jjj jjj jjj jjj jjj jjj jjj
C. Improves standards of financial accounting for state and local
jjj jjj jjj jjj jjj jjj jjj jjj jjj
government entities. jjj
D. Issues auditing standards for public companies.
jjj jjj jjj jjj jjj jjj
E. Issues CPA certificates.
jjj jjj jjj
F. Prepares the CPA exam.
jjj jjj jjj jjj
A+ Page 1
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Organizations: American Institute of Certified Public Accountants, Federal Accounting
jjj jjj jjj jjj jjj jjj jjj jjj jjj
Standards Advisory Board, Financial Accounting Standards Board, Government Accounting
jjj jjj jjj jjj jjj jjj jjj jjj jjj
Standards Board, Public Company Accounting Oversight Board, State Boards of Accountancy.
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
jjj
2) The Sarbanes-Oxley Act of 2002 made significant reforms for public companies and
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
their auditors.jjj
a. Describe the events that led up to the passage of the Act. jjj jjj jjj jjj jjj jjj j jj jjj jjj jjj jjj
b. Describe the major changes made by the Act. jjj jjj jjj jjj jjj jjj jjj
3) Many people confuse the responsibilities of the independent auditors and the client's
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
management with respect to audited financial statements. jjj jjj jjj jjj j jj jjj
a. Describe management's responsibility regarding audited financial statements.
jjj jjj jjj jjj jjj jjj
b. Describe the independent auditors' responsibility regarding audited financial statements.
jjj jjj jjj jjj jjj jjj jjj jjj
c. Evaluate the following statement: "If the auditors disagree with management regarding
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
an accounting principle used in the financial statements, the auditors should express their views
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
jjj in the notes to the financial statements."
jjj j jj jjj j jj jjj jjj
4) An investor is considering investing in one of two companies. The companies have very
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
jjj similar reported financial position and results of operations. However, only one of the
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
companies has its financial statements audited. jjj jjj jjj jjj jjj
a. Describe what creates the demand for an audit in this situation. Include a discussion of
jjj jjj jjj jjj jjj jjj jjj jjj j jj jjj jjj jjj jjj jjj jjj
how audited financial statements facilitate this investment transaction, and the effect of the
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
audit on business risk and information risk.
jjj jjj j jj jjj jjj jjj
b. Identify the potential consequences to the company of not having its financial
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
statements audited. jjj
5) A summary of findings rather than assurance is most likely to be included in a(n):
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
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,Created By: A Solution
A) Agreed-upon procedures report. jjj jjj
B) Compilation report. j jj
C) Audit report.jjj
D) Review report. jjj
jjj
6) The Statements on Auditing Standards have been issued by the:
jjj jjj jjj jjj jjj jjj jjj jjj jjj
A) Auditing Standards Board. jjj jjj
B) Financial Accounting Standards Board.
jjj jjj jjj
C) Securities and Exchange Commission. jjj jjj jjj
D) Federal Bureau of Investigation.
jjj jjj jjj
7) The risk that a company’s financial statements will materially depart from generally
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
accepted accounting principles is referred to as:
jjj jjj jjj jjj jjj jjj
A) Business Risk. jjj
B) Information Risk. jjj
C) Detection Risk. jjj
D) Document Risk. jjj
8) Historically, which of the following has the AICPA been most concerned with
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
providing?
A) Auditing standards. jjj
B) Professional guidance for regulating financial markets.
jjj jjj jjj jjj jjj
C) Internal auditing standards.
jjj jjj
A+ Page 3
, Created By: A Solution
D) Staff support to Congress.
jjj jjj jjj
9) The organization charged with protecting investors and the public by requiring full
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
disclosure of financial information by companies offering securities to the public is the:
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
A) Auditing Standards Board. jjj jjj
B) Financial Accounting Standards Board. jjj jjj jjj
C) Government Accounting Standards Boards. jjj jjj jjj
D) Securities and Exchange Commission. jjj jjj jjj
jjj
10) An engagement in which a CPA firm arranges for a critical review of its practices by
jjj jjj jjj jjj jjj jj j jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
another CPA firm is referred to as a(n):
jjj jjj jjj j jj jjj jjj jjj
A) Peer Review Engagement.
jjj jjj
B) Quality Control Engagement. jjj jjj
C) Quality Assurance Engagement. jjj jjj
D) Attestation Engagement. jjj
11) The sequentially-numbered pronouncements issued by the Auditing Standards Board
jjj jjj jjj jjj jjj jjj jjj jjj jjj
over a period of years are known as:
jjj jjj jjj jjj jjj jjj jjj
A) Auditing Statements of Position (ASPs). jjj jjj jjj j jj
B) Accounting Series Releases (ASRs). jjj jjj jjj
C) Statements on Auditing Standards (SASs). jjj jjj jjj jjj
D) Statements on Auditing Principles (SAPs). jjj jjj jjj jjj
A+ Page 4
Test Bank for Principles of Auditing and Other
j j j j j j j j
Assurance Services 22nd Edition by Ray j j j j j j
Whittington, Kurt Pany A+ j j j
Answers are at the end of each chapter Chapter 1
j j j j j j j j j
Student name: j
1) Accountants are regulated by a variety of organizations. Match the statements with the jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
most directly related organization:
jjj jjj jjj
● Accounting and Review Services Committee. jjj jjj jjj jjj
● American Institute of Certified Public Accountants. jjj jjj jjj jjj jjj
● Auditing Standards Board. jjj jjj
● Federal Accounting Standards Advisory Board. jjj jjj jjj jjj
● Financial Accounting Standards Board. jjj jjj jjj
● General Accounting Office. jjj jjj
● Government Accounting Standards Board. jjj jjj jjj
● Public Company Accounting Oversight Board. jjj jjj jjj jjj
● Securities and Exchange Commission. jjj jjj jjj
● State Boards of Accountancy. jjj jjj jjj
Organizations may be used once, more than once, or not at all. jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj j jj
Statements Organizations
A. Develops accounting standards
jjj jjj jjj
for public and nonpublic companies.
jjj jjj jjj j jj
B. Develops accounting standards for the U.S. Government.
jjj jjj jjj jjj jjj jjj jjj
C. Improves standards of financial accounting for state and local
jjj jjj jjj jjj jjj jjj jjj jjj jjj
government entities. jjj
D. Issues auditing standards for public companies.
jjj jjj jjj jjj jjj jjj
E. Issues CPA certificates.
jjj jjj jjj
F. Prepares the CPA exam.
jjj jjj jjj jjj
A+ Page 1
,Created By: A Solution
Organizations: American Institute of Certified Public Accountants, Federal Accounting
jjj jjj jjj jjj jjj jjj jjj jjj jjj
Standards Advisory Board, Financial Accounting Standards Board, Government Accounting
jjj jjj jjj jjj jjj jjj jjj jjj jjj
Standards Board, Public Company Accounting Oversight Board, State Boards of Accountancy.
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
jjj
2) The Sarbanes-Oxley Act of 2002 made significant reforms for public companies and
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
their auditors.jjj
a. Describe the events that led up to the passage of the Act. jjj jjj jjj jjj jjj jjj j jj jjj jjj jjj jjj
b. Describe the major changes made by the Act. jjj jjj jjj jjj jjj jjj jjj
3) Many people confuse the responsibilities of the independent auditors and the client's
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
management with respect to audited financial statements. jjj jjj jjj jjj j jj jjj
a. Describe management's responsibility regarding audited financial statements.
jjj jjj jjj jjj jjj jjj
b. Describe the independent auditors' responsibility regarding audited financial statements.
jjj jjj jjj jjj jjj jjj jjj jjj
c. Evaluate the following statement: "If the auditors disagree with management regarding
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
an accounting principle used in the financial statements, the auditors should express their views
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
jjj in the notes to the financial statements."
jjj j jj jjj j jj jjj jjj
4) An investor is considering investing in one of two companies. The companies have very
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
jjj similar reported financial position and results of operations. However, only one of the
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
companies has its financial statements audited. jjj jjj jjj jjj jjj
a. Describe what creates the demand for an audit in this situation. Include a discussion of
jjj jjj jjj jjj jjj jjj jjj jjj j jj jjj jjj jjj jjj jjj jjj
how audited financial statements facilitate this investment transaction, and the effect of the
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
audit on business risk and information risk.
jjj jjj j jj jjj jjj jjj
b. Identify the potential consequences to the company of not having its financial
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
statements audited. jjj
5) A summary of findings rather than assurance is most likely to be included in a(n):
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
A+ Page 2
,Created By: A Solution
A) Agreed-upon procedures report. jjj jjj
B) Compilation report. j jj
C) Audit report.jjj
D) Review report. jjj
jjj
6) The Statements on Auditing Standards have been issued by the:
jjj jjj jjj jjj jjj jjj jjj jjj jjj
A) Auditing Standards Board. jjj jjj
B) Financial Accounting Standards Board.
jjj jjj jjj
C) Securities and Exchange Commission. jjj jjj jjj
D) Federal Bureau of Investigation.
jjj jjj jjj
7) The risk that a company’s financial statements will materially depart from generally
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
accepted accounting principles is referred to as:
jjj jjj jjj jjj jjj jjj
A) Business Risk. jjj
B) Information Risk. jjj
C) Detection Risk. jjj
D) Document Risk. jjj
8) Historically, which of the following has the AICPA been most concerned with
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
providing?
A) Auditing standards. jjj
B) Professional guidance for regulating financial markets.
jjj jjj jjj jjj jjj
C) Internal auditing standards.
jjj jjj
A+ Page 3
, Created By: A Solution
D) Staff support to Congress.
jjj jjj jjj
9) The organization charged with protecting investors and the public by requiring full
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
disclosure of financial information by companies offering securities to the public is the:
jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
A) Auditing Standards Board. jjj jjj
B) Financial Accounting Standards Board. jjj jjj jjj
C) Government Accounting Standards Boards. jjj jjj jjj
D) Securities and Exchange Commission. jjj jjj jjj
jjj
10) An engagement in which a CPA firm arranges for a critical review of its practices by
jjj jjj jjj jjj jjj jj j jjj jjj jjj jjj jjj jjj jjj jjj jjj jjj
another CPA firm is referred to as a(n):
jjj jjj jjj j jj jjj jjj jjj
A) Peer Review Engagement.
jjj jjj
B) Quality Control Engagement. jjj jjj
C) Quality Assurance Engagement. jjj jjj
D) Attestation Engagement. jjj
11) The sequentially-numbered pronouncements issued by the Auditing Standards Board
jjj jjj jjj jjj jjj jjj jjj jjj jjj
over a period of years are known as:
jjj jjj jjj jjj jjj jjj jjj
A) Auditing Statements of Position (ASPs). jjj jjj jjj j jj
B) Accounting Series Releases (ASRs). jjj jjj jjj
C) Statements on Auditing Standards (SASs). jjj jjj jjj jjj
D) Statements on Auditing Principles (SAPs). jjj jjj jjj jjj
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