Test Bank for Principles of Auditing and Other Assurance Services (22nd Edition) by Ray Whittington & Kurt Pany – All Chapters A+

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Test Bank for Principles of Auditing and Other
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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
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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:
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● 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
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for public and nonpublic companies.
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B. Develops accounting standards for the U.S. Government.
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C. Improves standards of financial accounting for state and local
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government entities. jjj




D. Issues auditing standards for public companies.
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E. Issues CPA certificates.
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F. Prepares the CPA exam.
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Organizations: American Institute of Certified Public Accountants, Federal Accounting
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Standards Advisory Board, Financial Accounting Standards Board, Government Accounting
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Standards Board, Public Company Accounting Oversight Board, State Boards of Accountancy.
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jjj




2) The Sarbanes-Oxley Act of 2002 made significant reforms for public companies and
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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
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management with respect to audited financial statements. jjj jjj jjj jjj j jj jjj




a. Describe management's responsibility regarding audited financial statements.
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b. Describe the independent auditors' responsibility regarding audited financial statements.
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c. Evaluate the following statement: "If the auditors disagree with management regarding
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an accounting principle used in the financial statements, the auditors should express their views
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jjj in the notes to the financial statements."
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4) An investor is considering investing in one of two companies. The companies have very
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jjj similar reported financial position and results of operations. However, only one of the
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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
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how audited financial statements facilitate this investment transaction, and the effect of the
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audit on business risk and information risk.
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b. Identify the potential consequences to the company of not having its financial
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statements audited. jjj




5) A summary of findings rather than assurance is most likely to be included in a(n):
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A) Agreed-upon procedures report. jjj jjj




B) Compilation report. j jj




C) Audit report.jjj




D) Review report. jjj




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6) The Statements on Auditing Standards have been issued by the:
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A) Auditing Standards Board. jjj jjj




B) Financial Accounting Standards Board.
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C) Securities and Exchange Commission. jjj jjj jjj




D) Federal Bureau of Investigation.
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7) The risk that a company’s financial statements will materially depart from generally
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accepted accounting principles is referred to as:
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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
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providing?


A) Auditing standards. jjj




B) Professional guidance for regulating financial markets.
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C) Internal auditing standards.
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D) Staff support to Congress.
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9) The organization charged with protecting investors and the public by requiring full
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disclosure of financial information by companies offering securities to the public is the:
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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




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10) An engagement in which a CPA firm arranges for a critical review of its practices by
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another CPA firm is referred to as a(n):
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A) Peer Review Engagement.
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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
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over a period of years are known as:
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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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