ACCY 131 EXAM 1 STUDY GUIDE UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Question:
1. Know what the purpose of an independent audit is, and
why it would be helpful to different stakeholders.
Answer:
Audits enhance the degree of confidence users can place in financial statements
by enhancing the reliability and credibility of the information included in the
financial statements.
Question:
2. Audit Expectation Gap
Answer:
occurs when there is a difference between the expectations of auditors and
financial statement users. User beliefs do not align with an auditor's professional
responsibilities. Caused by unrealistic user expectations
Question:
3. Know the types of audit reports
Answer:
Unqualified, Qualified, Adverse, Disclaimer
Question:
4. Independent in Fact
Answer:
State of mind, accountant must be completely unbiased and impartial so the
accountant's judgement cannot be subordinated in any way contrary to the public
interest. Acting with integrity and objectivity
Question:
5. Independent in Appearance
Answer:
Reflects how the accountant present themselves to the public. Does the CPA
obey rules and follow professional standards, avoid any conflicts of interest and
avoid threats to integrity and independence.
, Question:
6. Understand who is required to be independent an audit
(covered members)
Answer:
o Covered members cannot have direct or material indirect investment in the
attest client
o Any member of the engagement team or partners with the team
Question:
7. immediate family
Answer:
Same as covered member
Includes spouse, spouse equivalent, dependents, exact same as covered member.
Cannot be employed in a key position with an attest client
Question:
8. Close relatives
Answer:
such as parents, nondependent children or step children, brothers and sisters or
step brothers and sisters may not key position with an attest client or hold
material financial interest in an audit client.
Question:
9. Independence is impaired
Answer:
o when CPA involved is offered employment by client, also when partner of
accounting firm seeks employment
Question:
10. Fixing impaired independence
Answer:
report to appropriate person and remove from engagement until employment
offer is rejected or no longer being sought
QUESTIONS AND CORRECT ANSWERS
Question:
1. Know what the purpose of an independent audit is, and
why it would be helpful to different stakeholders.
Answer:
Audits enhance the degree of confidence users can place in financial statements
by enhancing the reliability and credibility of the information included in the
financial statements.
Question:
2. Audit Expectation Gap
Answer:
occurs when there is a difference between the expectations of auditors and
financial statement users. User beliefs do not align with an auditor's professional
responsibilities. Caused by unrealistic user expectations
Question:
3. Know the types of audit reports
Answer:
Unqualified, Qualified, Adverse, Disclaimer
Question:
4. Independent in Fact
Answer:
State of mind, accountant must be completely unbiased and impartial so the
accountant's judgement cannot be subordinated in any way contrary to the public
interest. Acting with integrity and objectivity
Question:
5. Independent in Appearance
Answer:
Reflects how the accountant present themselves to the public. Does the CPA
obey rules and follow professional standards, avoid any conflicts of interest and
avoid threats to integrity and independence.
, Question:
6. Understand who is required to be independent an audit
(covered members)
Answer:
o Covered members cannot have direct or material indirect investment in the
attest client
o Any member of the engagement team or partners with the team
Question:
7. immediate family
Answer:
Same as covered member
Includes spouse, spouse equivalent, dependents, exact same as covered member.
Cannot be employed in a key position with an attest client
Question:
8. Close relatives
Answer:
such as parents, nondependent children or step children, brothers and sisters or
step brothers and sisters may not key position with an attest client or hold
material financial interest in an audit client.
Question:
9. Independence is impaired
Answer:
o when CPA involved is offered employment by client, also when partner of
accounting firm seeks employment
Question:
10. Fixing impaired independence
Answer:
report to appropriate person and remove from engagement until employment
offer is rejected or no longer being sought
