@PROFDOCDIGITALLIBRARIES
TEST BANK
Principles of Auditing & Other Assurance Services
SO
LU
TI
O
N
S
Chapter 1
(ANSWERS AT THE END OF EVERY CHAPTER)
Student name:
1) Accountants are regulated by a variety of organizations. Match the statements with the
most directly related organization:
● Accounting and Review Services Committee.
● American Institute of Certified Public Accountants.
● Auditing Standards Board.
● Federal Accounting Standards Advisory Board.
,@PROFDOCDIGITALLIBRARIES
● Financial Accounting Standards Board.
● General Accounting Office.
● Government Accounting Standards Board.
● Public Company Accounting Oversight Board.
● Securities and Exchange Commission.
● State Boards of Accountancy.
Organizations may be used once, more than once, or not at all.
Statements Organizations
A. Develops accounting standards
for public and nonpublic
companies.
B. Develops accounting standards
SO
for the U.S. Government.
C. Improves standards of financial
accounting for state and local
government entities.
D. Issues auditing standards for
public companies.
LU
E. Issues CPA certificates.
F. Prepares the CPA exam.
Organizations: American Institute of Certified Public Accountants, Federal Accounting
TI
Standards Advisory Board, Financial Accounting Standards Board, Government Accounting
Standards Board, Public Company Accounting Oversight Board, State Boards of Accountancy.
O
N
S
,@PROFDOCDIGITALLIBRARIES
2) The Sarbanes-Oxley Act of 2002 made significant reforms for public companies and their
auditors.
a. Describe the events that led up to the passage of the Act.
b. Describe the major changes made by the Act.
SO
3) Many people confuse the responsibilities of the independent auditors and the client's
management with respect to audited financial statements.
LU
a. Describe management's responsibility regarding audited financial statements.
b. Describe the independent auditors' responsibility regarding audited financial statements.
c. Evaluate the following statement: "If the auditors disagree with management regarding an
accounting principle used in the financial statements, the auditors should express their views in
TI
the notes to the financial statements."
4) An investor is considering investing in one of two companies. The companies have very
O
similar reported financial position and results of operations. However, only one of the companies
has its financial statements audited.
N
a. Describe what creates the demand for an audit in this situation. Include a discussion of how
audited financial statements facilitate this investment transaction, and the effect of the audit on
business risk and information risk.
S
b. Identify the potential consequences to the company of not having its financial statements
audited.
5) A summary of findings rather than assurance is most likely to be included in a(n):
A) Agreed-upon procedures report.
B) Compilation report.
C) Audit report.
D) Review report.
, @PROFDOCDIGITALLIBRARIES
6) The Statements on Auditing Standards have been issued by the:
A) Auditing Standards Board.
B) Financial Accounting Standards Board.
C) Securities and Exchange Commission.
D) Federal Bureau of Investigation.
SO
7) The risk that a company’s financial statements will materially depart from generally
accepted accounting principles is referred to as:
A) Business Risk.
B) Information Risk.
LU
C) Detection Risk.
D) Document Risk.
TI
8) Historically, which of the following has the AICPA been most concerned with
providing?
O
A) Auditing standards.
B) Professional guidance for regulating financial markets.
N
C) Internal auditing standards.
D) Staff support to Congress.
S
9) The organization charged with protecting investors and the public by requiring full
disclosure of financial information by companies offering securities to the public is the:
A) Auditing Standards Board.
B) Financial Accounting Standards Board.
C) Government Accounting Standards Boards.
D) Securities and Exchange Commission.
TEST BANK
Principles of Auditing & Other Assurance Services
SO
LU
TI
O
N
S
Chapter 1
(ANSWERS AT THE END OF EVERY CHAPTER)
Student name:
1) Accountants are regulated by a variety of organizations. Match the statements with the
most directly related organization:
● Accounting and Review Services Committee.
● American Institute of Certified Public Accountants.
● Auditing Standards Board.
● Federal Accounting Standards Advisory Board.
,@PROFDOCDIGITALLIBRARIES
● Financial Accounting Standards Board.
● General Accounting Office.
● Government Accounting Standards Board.
● Public Company Accounting Oversight Board.
● Securities and Exchange Commission.
● State Boards of Accountancy.
Organizations may be used once, more than once, or not at all.
Statements Organizations
A. Develops accounting standards
for public and nonpublic
companies.
B. Develops accounting standards
SO
for the U.S. Government.
C. Improves standards of financial
accounting for state and local
government entities.
D. Issues auditing standards for
public companies.
LU
E. Issues CPA certificates.
F. Prepares the CPA exam.
Organizations: American Institute of Certified Public Accountants, Federal Accounting
TI
Standards Advisory Board, Financial Accounting Standards Board, Government Accounting
Standards Board, Public Company Accounting Oversight Board, State Boards of Accountancy.
O
N
S
,@PROFDOCDIGITALLIBRARIES
2) The Sarbanes-Oxley Act of 2002 made significant reforms for public companies and their
auditors.
a. Describe the events that led up to the passage of the Act.
b. Describe the major changes made by the Act.
SO
3) Many people confuse the responsibilities of the independent auditors and the client's
management with respect to audited financial statements.
LU
a. Describe management's responsibility regarding audited financial statements.
b. Describe the independent auditors' responsibility regarding audited financial statements.
c. Evaluate the following statement: "If the auditors disagree with management regarding an
accounting principle used in the financial statements, the auditors should express their views in
TI
the notes to the financial statements."
4) An investor is considering investing in one of two companies. The companies have very
O
similar reported financial position and results of operations. However, only one of the companies
has its financial statements audited.
N
a. Describe what creates the demand for an audit in this situation. Include a discussion of how
audited financial statements facilitate this investment transaction, and the effect of the audit on
business risk and information risk.
S
b. Identify the potential consequences to the company of not having its financial statements
audited.
5) A summary of findings rather than assurance is most likely to be included in a(n):
A) Agreed-upon procedures report.
B) Compilation report.
C) Audit report.
D) Review report.
, @PROFDOCDIGITALLIBRARIES
6) The Statements on Auditing Standards have been issued by the:
A) Auditing Standards Board.
B) Financial Accounting Standards Board.
C) Securities and Exchange Commission.
D) Federal Bureau of Investigation.
SO
7) The risk that a company’s financial statements will materially depart from generally
accepted accounting principles is referred to as:
A) Business Risk.
B) Information Risk.
LU
C) Detection Risk.
D) Document Risk.
TI
8) Historically, which of the following has the AICPA been most concerned with
providing?
O
A) Auditing standards.
B) Professional guidance for regulating financial markets.
N
C) Internal auditing standards.
D) Staff support to Congress.
S
9) The organization charged with protecting investors and the public by requiring full
disclosure of financial information by companies offering securities to the public is the:
A) Auditing Standards Board.
B) Financial Accounting Standards Board.
C) Government Accounting Standards Boards.
D) Securities and Exchange Commission.
