ACCT 4301 FINAL EXAM QUESTIONS AND CORRECT ANSWERS

The Sarbanes-Oxley Act of 2002 pertains to a. Public company audits only b. private company audits only c. Both public and private company audits d. None of the above Public company audits only All of the following are changes to the audit profession as a result of SOX EXCEPT for... a. End of "self-regulation" for audits of publicly-traded companies b. Public company audits are subject to regulatory inspections c. Public companies are required to obtain an external audit d. Many non-audit services for financial audit clients are banned Public companies are required to obtain an external audit The authoritative body designed to promulgate standards concerning a CPA's association with audited financial statements of an entity that is required to file financial statements with the SEC is the: a. Financial accounting standards board b. General accounting office c. Public company accounting oversight board d. Auditing standards board Public company accounting oversight board (PCAOB) True or False: In the current audit environment, there are three main sets of auditing standards. True True or False: The financial statements (and footnotes) are management's responsibility and the external auditor. False The auditor must be independent of the auditee unless: a. The lack of independence does not influence his or her professional judgmenT b. Both parties agree that the independence issue is not a problem c. The lack of independence is insignificant d. None of the above—the auditor cannot lack independence None of the above—the auditor cannot lack independence True or False: In accordance with auditing standards, auditors can provide absolute assurance related to financial statement. False Indicated whether the following is or is not a violation of the PCAOB "GAAS" standards: The company/client told the auditor that its accounting department is short staffed and therefore, need the auditors assistance to prepare the cash flow statement. In order to ensure the audit is completed on time, the auditor assisted the client in preparing the cash flow statement Violation of PCAOB "GAAS" True or False: External auditors are hired and paid by users of the financial statements (e.g. investors and creditors). False True or False: Auditors need to maintain BOTH independence in mind and appearance. True True or False: An intern on a financial statement audit engagement team is deemed to be a "covered member." True In which of the following circumstances would a CPA who audits XM Corporation lack independence? a. The CPA and XM's president are both on the board of directors of COD Corporation b. The CPA reduced XM's usual audit fee by 40 percent because XM's financial condition was unfavorable c. The CPA's nondependent daughter works as an engineer at XM Corporation d. The CPA's wife is an internal auditor at XM Corporation The CPA's wife is an internal auditor at XM Corporation True or False: The following is NOT a violation of independence rules: The audit staff of XYZ Corporation assists in the preparation of XYZ's year-end cash flow statement. False