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Auditingf&fAssurancefServices:fAfSystematicfApproach,f11ef(Messier)fC
hapterf2f ThefFinancialfStatementfAuditingfEnvironment
1) AfseriesfoffbusinessfandfrelatedfauditingffailuresfledftofthefpassagefoffthefSarbanes-
OxleyfActf(2002).
2) Thefprimaryfauditfcontextfwithfwhichfanfauditorfisfconcernedfisfthefauditee'sfindustryforfbus
iness.
3) Thefauditfcommitteefgenerallyfincludesfseniorfexecutivesfofftheforganization.
4) Affinancialfstatementfauditfisfgenerallyforganizedfbasedfonftheffivefbasicfbusinessfprocessesforfc
ycles.
5) Onefofftheffivefbasicfbusinessfprocessesfisfthefwarehousingfcycle.
6) ThefASB'sfauditingfstandardsfcontainfafprefacefthatfincludesfPrinciplesfUnderlyingfanfAuditfCo
nductedfinfAccordancefwithfGAAS.
7) PCAOBfauditingfstandardsfmustfbeffollowedfonfallffinancialfstatementfauditsfperformedfinfthe
fU.S.
8) AffinancialfstatementfauditfmustfbefconductedfbasedfonfGAAP.
9) Generally,ftheffinancialfstatementsfoffU.S.fcompaniesfmustfbefpreparedfbasedfonfGAAP.
10) PCAOBfauditingfstandardsfmustfbeffollowedfonfallfauditsfoffpublicfcompanies'ffinancialfsta
tements.
11) ThefAuditfCommitteefconsistsfof:
A) membersfoffmanagement.
B) afsubcommitteefoffthefAICPAfwhofestablishfthefSAS.
C) membersfoffthefBoardfoffDirectors.
D) appointedfgovernmentfoverseers.
12) Whatforganizationfisfresponsiblefforfsettingfauditingfstandardsfforfauditsfoffpublicly-
tradedfcompaniesfinfthefU.S.?
A) AICPA.
B) FASB.
C) GASB.
D) PCAOB.
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13) ThefPublicfCompanyfAccountingfOversightfBoard'sfrolefisfto:
A) conductftheffinalfreviewfoffauditors'fworkfbeforefthefauditor'sfopinionfisfissued.
B) overseefthefauditorsfoffpublicfcompaniesfinforderftofprotectfthefinterestsfoffinvestors.
C) conductfauditsfoffgovernmentalfentities.
D) sanctionfauditorsfwhoffailftoffollowfGAAS.
14) ThefauthoritativefbodyfdesignedftofpromulgatefstandardsfconcerningfafCPA'sfassociationfwithf
auditedffinancialfstatementsfoffanfentityfthatfisfrequiredftoffileffinancialfstatementsfwithfthefSECfisfth
e:
A) financialfaccountingfstandardsfboard.
B) generalfaccountingfoffice.
C) publicfcompanyfaccountingfoversightfboard.
D) auditingfstandardsfboard.
15) Thefauditorfmustfbefindependentfoffthefauditeefunless:
A) theflackfoffindependencefdoesfnotfinfluencefhisforfherfprofessionalfjudgment.
B) bothfpartiesfagreefthatfthefindependencefissuefisfnotfafproblem.
C) theflackfoffindependencefisfinsignificant.
D) nonefoffthefabove—thefauditorfcannotflackfindependence.
16) WhichfprinciplefoffthefPrinciplesfUnderlyingfanfAuditfConductedfinfAccordancefwithfGAAS
describesfwherefauditorsfarefrequiredftofplanfthefworkfandfproperlyfsupervisefanyfassistants?
A) PurposefoffanfAuditfandfPremisefuponfwhichfanfAuditfisfConducted.
B) Performance.
C) Reporting.
D) Responsibilities.
17) Whichfofftheffollowingfbestfdescribesfthefgeneralfcharacterfoffthefthreefprinciplesfthatfareflist
edfinfthefPerformancefsectionfoffthefPrinciplesfUnderlyingfanfAuditfConductedfinfAccordancefwi
thfGAAS?
A) Thefpurposefandfvaluefoffaffinancialfstatementfauditfandflaysfoutfthefresponsibilitiesfoffma
nagementfforfanfeffectivefauditftofbefpossible.
B) Theffundamentalfresponsibilitiesfandfcharacteristicsfoffanfauditor.
C) Auditors'fresponsibilitiesfinfperformingfanfeffectivefaudit.
D) Auditorsfprovidefafwrittenfreportfthatfexpressesftheirfopinionfaboutftheffinancialfstatements.
18) ThefResponsibilitiesfsectionfoffthefPrinciplesfUnderlyingfanfAuditfConductedfinfAccordancefwit
hfGAASfstatesfthatfauditorsfarefresponsiblefforfhavingfappropriatefcompetencefand:
A) independencefwithfrespectftoftheffinancialfstatementsfandfsupplementaryfdisclosures.
B) exercisingfprofessionalfcarefasfjudgedfbyfpeerfreviewers.
C) capabilitiesftofperformfthefaudit.
D) objectivityfasfanfauditorfasfverifiedfbyfproperfsupervision.
2
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19) ThefReportingfsectionfoffthefPrinciplesfUnderlyingfanfAuditfConductedfinfAccordancefwithfGA
ASfrequiresfthatfthefreport,f"statesfwhetherftheffinancialfstatementsfarefpresentedffairly,finfallfmateria
lfrespects,finfaccordancefwithfthefapplicableffinancialfreportingfframework."fThisfpassagefrequires:
A) afstatementfofffactfbyfthefauditor.
B) anfopinionfbyfthefauditor.
C) anfimpliedfmeasurefofffairness.
D) anfobjectivefmeasurefoffcompliance.
20) Becausefoffthefriskfoffmaterialfmisstatement,fanfauditfofffinancialfstatementsfinfaccordancefwit
hfgenerallyfacceptedfauditingfstandardsfshouldfbefplannedfandfperformedfwithfanfattitudefof:
A) objectivefcynicism.
B) independentfdifferentialism.
C) professionalfskepticism.
D) impartialfconservatism.
21) Thefaccuracyfoffinformationfincludedfinffootnotesfaccompanyingfthefauditedffinancialfstat
ementsfissuedfbyfafcompanyfwhosefsharesfareftradedfonfafstockfexchangefisfthefprimaryfrespons
ibilityfof:
A) thefstockfexchangefofficials.
B) thefindependentfauditor.
C) thefcompany'sfmanagement.
D) thefsecuritiesfandfexchangefcommission.
22) Thefprimaryfresponsibilityfforfthefadequacyfoffdisclosuresfinftheffinancialfstatementsfoffafpu
bliclyfheldfcompanyfrestsfwithfthe:
A) partnerfassignedftofthefauditfengagement.
B) managementfoffthefcompany.
C) auditorfinfchargefofftheffieldwork.
D) securitiesfandfexchangefcommission.
23) Theflargestfpublicfaccountingffirmsftypicallyfarefstructuredfas:
A) subchapterfSfcorporations.
B) professionalfcorporations.
C) limitedfliabilityfpartnerships.
D) limitedfliabilityfcorporations.
24) Typically,fanfexternalfauditorffirstfgetsfsupervisoryfexperiencefatfwhatflevelfoffauthority?
A) Associate.
B) Senior.
C) Manager.
D) Partner.
3
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Auditingf&fAssurancefServices:fAfSystematicfApproach,f11ef(Messier)fC
hapterf2f ThefFinancialfStatementfAuditingfEnvironment
1) AfseriesfoffbusinessfandfrelatedfauditingffailuresfledftofthefpassagefoffthefSarbanes-
OxleyfActf(2002).
2) Thefprimaryfauditfcontextfwithfwhichfanfauditorfisfconcernedfisfthefauditee'sfindustryforfbus
iness.
3) Thefauditfcommitteefgenerallyfincludesfseniorfexecutivesfofftheforganization.
4) Affinancialfstatementfauditfisfgenerallyforganizedfbasedfonftheffivefbasicfbusinessfprocessesforfc
ycles.
5) Onefofftheffivefbasicfbusinessfprocessesfisfthefwarehousingfcycle.
6) ThefASB'sfauditingfstandardsfcontainfafprefacefthatfincludesfPrinciplesfUnderlyingfanfAuditfCo
nductedfinfAccordancefwithfGAAS.
7) PCAOBfauditingfstandardsfmustfbeffollowedfonfallffinancialfstatementfauditsfperformedfinfthe
fU.S.
8) AffinancialfstatementfauditfmustfbefconductedfbasedfonfGAAP.
9) Generally,ftheffinancialfstatementsfoffU.S.fcompaniesfmustfbefpreparedfbasedfonfGAAP.
10) PCAOBfauditingfstandardsfmustfbeffollowedfonfallfauditsfoffpublicfcompanies'ffinancialfsta
tements.
11) ThefAuditfCommitteefconsistsfof:
A) membersfoffmanagement.
B) afsubcommitteefoffthefAICPAfwhofestablishfthefSAS.
C) membersfoffthefBoardfoffDirectors.
D) appointedfgovernmentfoverseers.
12) Whatforganizationfisfresponsiblefforfsettingfauditingfstandardsfforfauditsfoffpublicly-
tradedfcompaniesfinfthefU.S.?
A) AICPA.
B) FASB.
C) GASB.
D) PCAOB.
1
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13) ThefPublicfCompanyfAccountingfOversightfBoard'sfrolefisfto:
A) conductftheffinalfreviewfoffauditors'fworkfbeforefthefauditor'sfopinionfisfissued.
B) overseefthefauditorsfoffpublicfcompaniesfinforderftofprotectfthefinterestsfoffinvestors.
C) conductfauditsfoffgovernmentalfentities.
D) sanctionfauditorsfwhoffailftoffollowfGAAS.
14) ThefauthoritativefbodyfdesignedftofpromulgatefstandardsfconcerningfafCPA'sfassociationfwithf
auditedffinancialfstatementsfoffanfentityfthatfisfrequiredftoffileffinancialfstatementsfwithfthefSECfisfth
e:
A) financialfaccountingfstandardsfboard.
B) generalfaccountingfoffice.
C) publicfcompanyfaccountingfoversightfboard.
D) auditingfstandardsfboard.
15) Thefauditorfmustfbefindependentfoffthefauditeefunless:
A) theflackfoffindependencefdoesfnotfinfluencefhisforfherfprofessionalfjudgment.
B) bothfpartiesfagreefthatfthefindependencefissuefisfnotfafproblem.
C) theflackfoffindependencefisfinsignificant.
D) nonefoffthefabove—thefauditorfcannotflackfindependence.
16) WhichfprinciplefoffthefPrinciplesfUnderlyingfanfAuditfConductedfinfAccordancefwithfGAAS
describesfwherefauditorsfarefrequiredftofplanfthefworkfandfproperlyfsupervisefanyfassistants?
A) PurposefoffanfAuditfandfPremisefuponfwhichfanfAuditfisfConducted.
B) Performance.
C) Reporting.
D) Responsibilities.
17) Whichfofftheffollowingfbestfdescribesfthefgeneralfcharacterfoffthefthreefprinciplesfthatfareflist
edfinfthefPerformancefsectionfoffthefPrinciplesfUnderlyingfanfAuditfConductedfinfAccordancefwi
thfGAAS?
A) Thefpurposefandfvaluefoffaffinancialfstatementfauditfandflaysfoutfthefresponsibilitiesfoffma
nagementfforfanfeffectivefauditftofbefpossible.
B) Theffundamentalfresponsibilitiesfandfcharacteristicsfoffanfauditor.
C) Auditors'fresponsibilitiesfinfperformingfanfeffectivefaudit.
D) Auditorsfprovidefafwrittenfreportfthatfexpressesftheirfopinionfaboutftheffinancialfstatements.
18) ThefResponsibilitiesfsectionfoffthefPrinciplesfUnderlyingfanfAuditfConductedfinfAccordancefwit
hfGAASfstatesfthatfauditorsfarefresponsiblefforfhavingfappropriatefcompetencefand:
A) independencefwithfrespectftoftheffinancialfstatementsfandfsupplementaryfdisclosures.
B) exercisingfprofessionalfcarefasfjudgedfbyfpeerfreviewers.
C) capabilitiesftofperformfthefaudit.
D) objectivityfasfanfauditorfasfverifiedfbyfproperfsupervision.
2
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19) ThefReportingfsectionfoffthefPrinciplesfUnderlyingfanfAuditfConductedfinfAccordancefwithfGA
ASfrequiresfthatfthefreport,f"statesfwhetherftheffinancialfstatementsfarefpresentedffairly,finfallfmateria
lfrespects,finfaccordancefwithfthefapplicableffinancialfreportingfframework."fThisfpassagefrequires:
A) afstatementfofffactfbyfthefauditor.
B) anfopinionfbyfthefauditor.
C) anfimpliedfmeasurefofffairness.
D) anfobjectivefmeasurefoffcompliance.
20) Becausefoffthefriskfoffmaterialfmisstatement,fanfauditfofffinancialfstatementsfinfaccordancefwit
hfgenerallyfacceptedfauditingfstandardsfshouldfbefplannedfandfperformedfwithfanfattitudefof:
A) objectivefcynicism.
B) independentfdifferentialism.
C) professionalfskepticism.
D) impartialfconservatism.
21) Thefaccuracyfoffinformationfincludedfinffootnotesfaccompanyingfthefauditedffinancialfstat
ementsfissuedfbyfafcompanyfwhosefsharesfareftradedfonfafstockfexchangefisfthefprimaryfrespons
ibilityfof:
A) thefstockfexchangefofficials.
B) thefindependentfauditor.
C) thefcompany'sfmanagement.
D) thefsecuritiesfandfexchangefcommission.
22) Thefprimaryfresponsibilityfforfthefadequacyfoffdisclosuresfinftheffinancialfstatementsfoffafpu
bliclyfheldfcompanyfrestsfwithfthe:
A) partnerfassignedftofthefauditfengagement.
B) managementfoffthefcompany.
C) auditorfinfchargefofftheffieldwork.
D) securitiesfandfexchangefcommission.
23) Theflargestfpublicfaccountingffirmsftypicallyfarefstructuredfas:
A) subchapterfSfcorporations.
B) professionalfcorporations.
C) limitedfliabilityfpartnerships.
D) limitedfliabilityfcorporations.
24) Typically,fanfexternalfauditorffirstfgetsfsupervisoryfexperiencefatfwhatflevelfoffauthority?
A) Associate.
B) Senior.
C) Manager.
D) Partner.
3
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