ACCT 3222-3, Wiley, LSU, Exam 1 Questions with 100% Correct Answers 2024

ACCT 3222-3, Wiley, LSU, Exam 1 Questions with 100% Correct Answers 2024 Audit Services - answerservices 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 - answerServices 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) - answerAudit - 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 - answerindependent professional services that improve the quality of information, or its context, for decision makers Applicable financial reporting framework refers to - answerthe 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 - answersomeone who was not involved with the creation of the information and who is objective in the evaluation of the information Quality refers to - answerthe relevance and realiability of the information Information refers to - answersubject 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 - answerLicensed accounting professionals in the US. Licenses are issued at the state level, not federal A state board of accountancy will only issue - answera licence to practice after all three Es have been earned CPA Es - answerEducation, Exam, and Experience Public companies, or issuers, in the US are required by federal government to have - answeran annual financial statement audit and an ICFR audit Private companies, or non-issuers, are _______ to have an annual audit by federal government, but - answerNot required by law, other interested users may request audited financial statements (i.e., lenders) ICFR - answerInternal Control over Financial Reporting Integrated Audit - answerAn audit that combines the financial statement audit with an audit of the effectiveness of ICFR The limitations of an audit are cause by - answer1. 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 - answerthe 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 - answerReliance on evidence provided by the client and its managements, as well as the concept of materiality Materiality - answerthe ability of information to influence decisions that users make on the basis of the financial information of a specific reporting entity Compliance Audit - answeran audit to determine whether the entity has conformed with regulations, rules, or processes Operational (Performance) Audit - answerAn assessment of the economy, efficiency, and effectiveness of an organization's operations Operational Audit economy, efficiency, and effectiveness refer to - answerEconomy 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 - answerA function within an entity which generally evaluates and improves risk management, internal control procedures, and elements of the governance process Those charged with governance - answerPersons 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 - answerInternal auditors when evaluating the evidence needed to form an opinion on the financial statements or on ICFR Financial Statement Users include - answerInvestors, suppliers, customers, lenders, employees, governments, and the general public Sources of demand for audit and assurance services - answerRemoteness (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 - answer1. 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 - answer1. 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