[TEST BANK]
AUDITING AND
ASSURANCE
SERVICES, 16TH
EDITION BY
ARENS, ELDER,
BEASLEY, HOGAN
,Auditing and Assurance Services, (Arens)
Chapter 1 The Demand for Audit and Other Assurance Services
Learning Objective 1-1
1) The Sarbanes-Oxley Act applies to which of the following companies?
A) All companies
B) Privately held companies
C) Public companies
D) All public companies and privately held companies with assets greater than $500 million
Answer: C
Terms: Sarbanes-Oxley Act
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Topic: SOX
2) Which of the following is considered audit evidence?
A)
Oral statements Written Auditor
made by management Communications Observation
Y N N
B)
Oral statements Written Auditor
made by management Communications Observation
N Y Y
C)
Oral statements Written Auditor
made by management Communications Observation
Y Y Y
D)
Oral statements Written Auditor
made by management Communications Observation
N N Y
Answer: C
Terms: Audit evidence
Diff: Moderate
Objective: LO 1-1
AACSB: Reflective thinking skills
1
,3) Evidence is paramount to audit and attestation engagements. List the four basic types of audit
evidence.
Answer: The four types of audit and attestation evidence include:
1. Electronic and documentary data about transactions
2. Written and electronic communications with outsiders
3. Observations by the auditor
4. Oral testimony of the auditee (client)
Terms: Basic types of audit evidence
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
4) The criteria by which an auditor evaluates the information under audit may vary with the
information being audited.
A) True
B) False
Answer: A
Terms: Criteria which an auditor evaluates information
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
5) The criteria used by an external auditor to evaluate published financial statements are known
as generally accepted auditing standards.
A) True
B) False
Answer: B
Terms: Criteria used by external auditor to evaluate published financial statements
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
6) The Sarbanes-Oxley Act establishes standards related to the audits of privately held
companies.
A) True
B) False
Answer: B
Terms: Sarbanes-Oxley Act
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Topic: SOX
2
,7) The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to auditing
and financial reporting.
A) True
B) False
Answer: A
Terms: Sarbanes-Oxley Act
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Topic: SOX
8) An auditor must be competent and have an independent mental attitude.
A) True
B) False
Answer: A
Terms: Competence and independent mental attitude
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Learning Objective 1-2
1) Recording, classifying, and summarizing economic events in a logical manner for the purpose
of providing financial information for decision making is commonly called:
A) finance.
B) auditing.
C) accounting.
D) economics.
Answer: C
Terms: Recording, classifying, and summarizing economic events
Diff: Easy
Objective: LO 1-2
AACSB: Reflective thinking skills
2) An accountant:
A) must possess expertise in the accumulation of audit evidence.
B) must decide the number and types of items to test.
C) must have an understanding of the principles and rules that provide the basis for preparing the
accounting information.
D) must be a CPA.
Answer: C
Terms: Distinguishes auditors from accountants
Diff: Moderate
Objective: LO 1-2
AACSB: Reflective thinking skills
3
,3) In "auditing" financial accounting data, the primary concern is with:
A) determining whether recorded information properly reflects the economic events that
occurred during the accounting period.
B) determining if fraud has occurred.
C) determining if taxable income has been calculated correctly.
D) analyzing the financial information to be sure that it complies with government requirements.
Answer: A
Terms: Auditing financial accounting data primary concern
Diff: Moderate
Objective: LO 1-2
AACSB: Reflective thinking skills
4) The trait that distinguishes auditors from accountants is the:
A) auditor's ability to interpret accounting principles generally accepted in the United States.
B) auditor's education beyond the Bachelor's degree.
C) auditor's ability to interpret FASB Statements.
D) auditor's accumulation and interpretation of evidence related to a company's financial
statements.
Answer: D
Terms: Distinguishes auditors from accountants
Diff: Challenging
Objective: LO 1-2
AACSB: Reflective thinking skills
5) Discuss the differences and similarities between the roles of accountants and auditors. What
additional expertise must an auditor possess beyond that of an accountant?
Answer: The role of accountants is to record, classify, and summarize economic events in a
logical manner for the purpose of providing financial information for decision making. To
provide relevant information, accountants must have a thorough understanding of the principles
and rules that provide the basis for preparing the accounting information. In addition,
accountants must develop a system to ensure that the entity's economic events are properly
recorded on a timely basis and at a reasonable cost.
The role of auditors is to determine whether the recorded information prepared by accountants
properly reflects the economic events that occurred during the accounting period. Because U.S.
or international standards provide the criteria for evaluating whether financial information is
properly recorded, auditors must thoroughly understand those accounting standards. In addition
to understanding accounting, the auditor must possess expertise in the accumulation and
interpretation of audit evidence. It is this expertise that distinguishes auditors from accountants.
Determining the proper audit procedures, deciding the number and types of items to test, and
evaluating the results are unique to the auditor.
Terms: Roles of accountants and auditors
Diff: Moderate
Objective: LO 1-2
AACSB: Reflective thinking skills
4
,Learning Objective 1-3
1) risk reflects the possibility that the information upon which the business decision
was made was inaccurate.
A) Client acceptance
B) Information
C) Business
D) Control
Answer: B
Terms: Risk that reflects the possibility that information upon which business risk decision was
made
Diff: Moderate
Objective: LO 1-3
AACSB: Reflective thinking skills
Learning Objective 1-4
1) A correct relationship among the auditor, the client, and the external users is:
A) management of a public company hires the independent auditor.
B) the audit committee of a private company hires the independent auditor.
C) the client provides capital to the external users.
D) the external users can rely upon the auditor's report to reduce information risk.
Answer: D
Terms: Relationships among auditor, client, and external users
Diff: Moderate
Objective: LO 1-4
AACSB: Reflective thinking skills
2) The most common way for users to obtain reliable information is to:
A) have an internal audit.
B) have an independent audit.
C) verify all information individually.
D) verify the information with management.
Answer: B
Terms: Reducing information risk
Diff: Moderate
Objective: LO 1-4
AACSB: Reflective thinking skills
5
,3) Explain what is meant by information risk, and list the four causes of this risk.
Answer: Information risk reflects the possibility that the information upon which the business
risk decision was made was inaccurate. Four causes of information risk are:
• remoteness of information,
• biases and motives of the provider,
• voluminous data, and
• complex exchange transactions.
Terms: Information risk definition and causes
Diff: Easy
Objective: LO 1-3 and LO 1-4
AACSB: Reflective thinking skills
Learning Objective 1-5
1) In the audit of historical financial statements, what accounting criteria is most common?
A) Regulatory accounting principles
B) Applicable international accounting standards
C) Applicable U.S. accounting standards
D) B and C
E) All of the above
Answer: D
Terms: Most common accounting criteria
Diff: Easy
Objective: LO 1-5
AACSB: Reflective thinking skills
2) Any service that requires a CPA firm to issue a report about the reliability of an assertion that
is made by another party is a(n):
A) accounting and bookkeeping service.
B) attestation service.
C) assurance service.
D) tax service.
Answer: B
Terms: Strengthen internal controls over accounting for materials used in production
Diff: Easy
Objective: LO 1-5
AACSB: Reflective thinking skills
6
,3) Threet1commont1typest1oft1attestationt1servicest1are:
A) auditst1oft1historicalt1financialt1statements,t1reviewst1oft1historicalt1financialt1statements,t1andt1audi
tst1oft1internalt1controlt1overt1financialt1reporting.
B) auditst1oft1historicalt1financialt1information,t1verificationst1oft1historicalt1financialt1information,t1an
dt1attestationst1regardingt1internalt1controls.
C) reviewst1oft1historicalt1financialt1information,t1verificationst1oft1futuret1financialt1information,t1an
dt1attestationst1regardingt1internalt1controls.
D) auditst1oft1historicalt1financialt1information,t1reviewst1oft1controlst1relatedt1tot1investments,t1an
dt1verificationst1oft1historicalt1financialt1information.
Answer:t 1 A
Terms:t 1 Typest1oft1attestationt1servicest1
Diff:t 1 Easy
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
4) Whicht1oft1thet1followingt1servicest1providest1thet1lowestt1levelt1oft1assurancet1ont1at1financi
alt1statement?
A) At1review
B) Ant1audit
C) Neithert1servicet1providest1assurancet1ont1financialt1statements.
D) Eacht1servicet1providest1thet1samet1levelt1oft1assurancet1ont1financialt1statement
s.t1Answer:t 1 A
Terms:t 1 Servicet1providest1lowestt1levelt1oft1assurancet1ont1at1financialt1statement
t1Diff:t 1 Moderate
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
5) Whicht1oft1thet1followingt1ist1nott1at1SysTrustt1Servicest1principlet1ast1definedt1byt1thet1AICPA?
A) Onlinet1privacy
B) Availability
C) Processingt1integrity
D) Operationalt1integrity
t1Answer:t 1 D
Terms:t 1 SysTrustt1Servicest1principlest1definedt1byt1AICPAt1
Diff:t 1 Moderate
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
7
,6) Thet1Sarbanes-
Oxleyt1Actt1prohibitst1at1CPAt1firmt1thatt1auditst1at1publict1companyt1fromt1providingt1whicht1oft1thet1f
ollowingt1typest1oft1servicest1tot1thatt1company?
A) Reviewst1oft1quarterlyt1financialt1statements
B) Preparationt1oft1corporatet1taxt1returns
C) Mostt1consultingt1services
D) Taxt1services
t1Answer:t 1 C
Terms:t 1 Sarbanes-
Oxleyt1Actt1Diff:t 1 Challengi
ngt1Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skillst1T
opic:t 1 SOX
7) Attestationt1servicest1ont1informationt1technologyt1includet1WebTrustt1servicest1andt1SysTrust
services.t1Whicht1oft1thet1followingt1statementst1mostt1accuratelyt1describest1SysTrustt1services?
A) SysTrustt1servicest1providet1assurancet1ont1businesst1processes,t1transactiont1integrityt1an
dt1informationt1processes.
B) SysTrustt1servicest1providet1assurancet1ont1systemt1reliabilityt1int1criticalt1areast1sucht1ast1securityt1a
ndt1datat1integrity.
C) SysTrustt1servicest1providet1assurancet1ont1internalt1controlt1overt1financialt1reporting.
D) SysTrustt1servicest1providet1assurancet1ast1tot1whethert1accountingt1personnelt1aret1followin
gt1procedurest1prescribedt1byt1thet1companyt1controller.
Answer:t 1 B
Terms:t 1 Attestationt1servicest1ont1informationt1technology;t1WebTrustt1andt1Systrustt1servicest1D
iff:t 1 Challenging
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
8) Twot1typest1oft1attestationt1servicest1providedt1byt1CPAt1firmst1aret1auditst1andt1reviews.t1Discusst1t
het1similaritiest1andt1differencest1betweent1theset1twot1typest1oft1attestationt1services.t1Whicht1typet1pro
videst1thet1leastt1assurance?
Answer:t 1 Int1botht1thet1reviewt1andt1auditt1oft1thet1historicalt1financialt1statements,t1managementt1asser
tst1thatt1thet1statementst1aret1fairlyt1statedt1int1accordancet1witht1accountingt1standards.t1Thet1CPAt1prov
idest1at1lowert1levelt1oft1assurancet1fort1reviewst1oft1financialt1statementst1comparedt1tot1thet1hight1levelt
1fort1audits,t1thereforet1lesst1evidencet1ist1needed.t1At1reviewt1ist1oftent1adequatet1tot1meett1financialt1stat
ementt1users't1needs.t1Itt1cant1bet1providedt1byt1at1CPAt1firmt1att1at1mucht1lowert1feet1thant1ant1auditt1beca
uset1lesst1evidencet1ist1needed.
Ant1auditt1ist1thet1mostt1commont1assurancet1servicet1providedt1byt1CPAt1firms.t1Publiclyt1trad
edt1companiest1int1thet1U.S.t1aret1requiredt1tot1havet1auditst1undert1thet1federalt1securitiest1acts.t1
Manyt1nonpublict1companiest1havet1at1reviewt1tot1limitt1auditort1fees.
Terms:t 1 Attestationt1services;t1Auditst1andt1reviewst1oft1historicalt1financialt1statementst1D
iff:t 1 Moderate
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
8
, 9) Whatt1ist1ant1engagementt1tot1attestt1ont1internalt1controlt1overt1financialt1reporting?
Answer:t 1 Fort1ant1auditt1oft1internalt1controlt1overt1financialt1reporting,t1managementt1assertst1thatt1int
ernalt1controlst1havet1beent1developedt1andt1implementedt1followingt1wellt1establishedt1criteria.t1Secti
ont1404t1oft1thet1Sarbanes-
Oxleyt1Actt1requirest1publict1companiest1tot1reportt1management'st1assessmentt1oft1thet1effectivenesst1o
ft1internalt1controlt1overt1financialt1reporting.t1Thet1Actt1alsot1requirest1auditorst1fort1largert1publict1com
paniest1tot1attestt1tot1thet1effectivenesst1oft1internalt1controlt1overt1financialt1reporting.t1Thist1evaluation
,t1whicht1ist1integratedt1witht1thet1auditt1oft1financialt1statements,t1increasest1usert1confidencet1aboutt1fut
uret1financialt1reporting,t1becauset1effectivet1internalt1controlst1reducet1thet1likelihoodt1oft1futuret1miss
tatementst1int1thet1financialt1statements.
Terms:t 1 Engagementt1tot1attestt1ont1internalt1controlt1overt1financialt1reportingt1D
iff:t 1 Moderate
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skillst1T
opic:t 1 SOX
10) Whatt1aret1thet1fivet1categoriest1oft1attestationt1services?t1A
nswer:t 1 Thet1fivet1categoriest1oft1attestationt1servicest1include:
• Auditt1oft1historicalt1financialt1statements
• Auditt1oft1internalt1controlt1overt1financialt1reporting
• Reviewt1oft1historicalt1financialt1statements
• Attestationt1servicest1ont1informationt1technology
• Othert1attestationt1servicest1thatt1mayt1bet1appliedt1tot1at1broadt1ranget1oft1subjectt1matt
ert1Terms:t 1 Categoriest1oft1attestationt1services
Diff:t 1 Moderatet1Objectiv
e:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
11) Whatt1ist1at1WebTrustt1engagement?t1Whatt1ist1at1SysTrustt1engagement?t1Howt1dot1theyt1differ?t
1Answer:t 1 WebTrustt1ist1at1servicet1providedt1byt1at1CPAt1wheret1thet1CPAt1providest1assurancet1thatt1
thet1Webt1Sitet1ownert1hast1mett1establishedt1criteriat1relatedt1tot1businesst1practices,t1transactiont1inte
grity,t1andt1informationt1processes.
SysTrustt1ist1at1servicet1providedt1byt1at1CPAt1tot1evaluatet1andt1testt1at1systemt1reliabilityt1int1areast1sucht1a
st1securityt1andt1datat1integrity.t1Theret1aret1fivet1principlest1thatt1mustt1bet1addressedt1ont1at1SysTrustt1en
gagement:t1security,t1availability,t1processingt1integrity,t1onlinet1privacy,t1andt1confidentiality.
WebTrustt1ist1primarilyt1designedt1tot1providet1assurancet1tot1thirdt1partyt1userst1oft1at1Webt1site.t1SysTr
ustt1providest1assurancet1tot1management,t1thet1boardt1oft1directorst1ort1thirdt1partiest1aboutt1thet1reliabil
ityt1oft1informationt1systemst1usedt1tot1generatet1real-timet1information.
Terms:t 1 WebTrustt1andt1SysTrustt1engagementst1Di
ff:t 1 Challenging
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
9
AUDITING AND
ASSURANCE
SERVICES, 16TH
EDITION BY
ARENS, ELDER,
BEASLEY, HOGAN
,Auditing and Assurance Services, (Arens)
Chapter 1 The Demand for Audit and Other Assurance Services
Learning Objective 1-1
1) The Sarbanes-Oxley Act applies to which of the following companies?
A) All companies
B) Privately held companies
C) Public companies
D) All public companies and privately held companies with assets greater than $500 million
Answer: C
Terms: Sarbanes-Oxley Act
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Topic: SOX
2) Which of the following is considered audit evidence?
A)
Oral statements Written Auditor
made by management Communications Observation
Y N N
B)
Oral statements Written Auditor
made by management Communications Observation
N Y Y
C)
Oral statements Written Auditor
made by management Communications Observation
Y Y Y
D)
Oral statements Written Auditor
made by management Communications Observation
N N Y
Answer: C
Terms: Audit evidence
Diff: Moderate
Objective: LO 1-1
AACSB: Reflective thinking skills
1
,3) Evidence is paramount to audit and attestation engagements. List the four basic types of audit
evidence.
Answer: The four types of audit and attestation evidence include:
1. Electronic and documentary data about transactions
2. Written and electronic communications with outsiders
3. Observations by the auditor
4. Oral testimony of the auditee (client)
Terms: Basic types of audit evidence
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
4) The criteria by which an auditor evaluates the information under audit may vary with the
information being audited.
A) True
B) False
Answer: A
Terms: Criteria which an auditor evaluates information
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
5) The criteria used by an external auditor to evaluate published financial statements are known
as generally accepted auditing standards.
A) True
B) False
Answer: B
Terms: Criteria used by external auditor to evaluate published financial statements
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
6) The Sarbanes-Oxley Act establishes standards related to the audits of privately held
companies.
A) True
B) False
Answer: B
Terms: Sarbanes-Oxley Act
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Topic: SOX
2
,7) The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to auditing
and financial reporting.
A) True
B) False
Answer: A
Terms: Sarbanes-Oxley Act
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Topic: SOX
8) An auditor must be competent and have an independent mental attitude.
A) True
B) False
Answer: A
Terms: Competence and independent mental attitude
Diff: Easy
Objective: LO 1-1
AACSB: Reflective thinking skills
Learning Objective 1-2
1) Recording, classifying, and summarizing economic events in a logical manner for the purpose
of providing financial information for decision making is commonly called:
A) finance.
B) auditing.
C) accounting.
D) economics.
Answer: C
Terms: Recording, classifying, and summarizing economic events
Diff: Easy
Objective: LO 1-2
AACSB: Reflective thinking skills
2) An accountant:
A) must possess expertise in the accumulation of audit evidence.
B) must decide the number and types of items to test.
C) must have an understanding of the principles and rules that provide the basis for preparing the
accounting information.
D) must be a CPA.
Answer: C
Terms: Distinguishes auditors from accountants
Diff: Moderate
Objective: LO 1-2
AACSB: Reflective thinking skills
3
,3) In "auditing" financial accounting data, the primary concern is with:
A) determining whether recorded information properly reflects the economic events that
occurred during the accounting period.
B) determining if fraud has occurred.
C) determining if taxable income has been calculated correctly.
D) analyzing the financial information to be sure that it complies with government requirements.
Answer: A
Terms: Auditing financial accounting data primary concern
Diff: Moderate
Objective: LO 1-2
AACSB: Reflective thinking skills
4) The trait that distinguishes auditors from accountants is the:
A) auditor's ability to interpret accounting principles generally accepted in the United States.
B) auditor's education beyond the Bachelor's degree.
C) auditor's ability to interpret FASB Statements.
D) auditor's accumulation and interpretation of evidence related to a company's financial
statements.
Answer: D
Terms: Distinguishes auditors from accountants
Diff: Challenging
Objective: LO 1-2
AACSB: Reflective thinking skills
5) Discuss the differences and similarities between the roles of accountants and auditors. What
additional expertise must an auditor possess beyond that of an accountant?
Answer: The role of accountants is to record, classify, and summarize economic events in a
logical manner for the purpose of providing financial information for decision making. To
provide relevant information, accountants must have a thorough understanding of the principles
and rules that provide the basis for preparing the accounting information. In addition,
accountants must develop a system to ensure that the entity's economic events are properly
recorded on a timely basis and at a reasonable cost.
The role of auditors is to determine whether the recorded information prepared by accountants
properly reflects the economic events that occurred during the accounting period. Because U.S.
or international standards provide the criteria for evaluating whether financial information is
properly recorded, auditors must thoroughly understand those accounting standards. In addition
to understanding accounting, the auditor must possess expertise in the accumulation and
interpretation of audit evidence. It is this expertise that distinguishes auditors from accountants.
Determining the proper audit procedures, deciding the number and types of items to test, and
evaluating the results are unique to the auditor.
Terms: Roles of accountants and auditors
Diff: Moderate
Objective: LO 1-2
AACSB: Reflective thinking skills
4
,Learning Objective 1-3
1) risk reflects the possibility that the information upon which the business decision
was made was inaccurate.
A) Client acceptance
B) Information
C) Business
D) Control
Answer: B
Terms: Risk that reflects the possibility that information upon which business risk decision was
made
Diff: Moderate
Objective: LO 1-3
AACSB: Reflective thinking skills
Learning Objective 1-4
1) A correct relationship among the auditor, the client, and the external users is:
A) management of a public company hires the independent auditor.
B) the audit committee of a private company hires the independent auditor.
C) the client provides capital to the external users.
D) the external users can rely upon the auditor's report to reduce information risk.
Answer: D
Terms: Relationships among auditor, client, and external users
Diff: Moderate
Objective: LO 1-4
AACSB: Reflective thinking skills
2) The most common way for users to obtain reliable information is to:
A) have an internal audit.
B) have an independent audit.
C) verify all information individually.
D) verify the information with management.
Answer: B
Terms: Reducing information risk
Diff: Moderate
Objective: LO 1-4
AACSB: Reflective thinking skills
5
,3) Explain what is meant by information risk, and list the four causes of this risk.
Answer: Information risk reflects the possibility that the information upon which the business
risk decision was made was inaccurate. Four causes of information risk are:
• remoteness of information,
• biases and motives of the provider,
• voluminous data, and
• complex exchange transactions.
Terms: Information risk definition and causes
Diff: Easy
Objective: LO 1-3 and LO 1-4
AACSB: Reflective thinking skills
Learning Objective 1-5
1) In the audit of historical financial statements, what accounting criteria is most common?
A) Regulatory accounting principles
B) Applicable international accounting standards
C) Applicable U.S. accounting standards
D) B and C
E) All of the above
Answer: D
Terms: Most common accounting criteria
Diff: Easy
Objective: LO 1-5
AACSB: Reflective thinking skills
2) Any service that requires a CPA firm to issue a report about the reliability of an assertion that
is made by another party is a(n):
A) accounting and bookkeeping service.
B) attestation service.
C) assurance service.
D) tax service.
Answer: B
Terms: Strengthen internal controls over accounting for materials used in production
Diff: Easy
Objective: LO 1-5
AACSB: Reflective thinking skills
6
,3) Threet1commont1typest1oft1attestationt1servicest1are:
A) auditst1oft1historicalt1financialt1statements,t1reviewst1oft1historicalt1financialt1statements,t1andt1audi
tst1oft1internalt1controlt1overt1financialt1reporting.
B) auditst1oft1historicalt1financialt1information,t1verificationst1oft1historicalt1financialt1information,t1an
dt1attestationst1regardingt1internalt1controls.
C) reviewst1oft1historicalt1financialt1information,t1verificationst1oft1futuret1financialt1information,t1an
dt1attestationst1regardingt1internalt1controls.
D) auditst1oft1historicalt1financialt1information,t1reviewst1oft1controlst1relatedt1tot1investments,t1an
dt1verificationst1oft1historicalt1financialt1information.
Answer:t 1 A
Terms:t 1 Typest1oft1attestationt1servicest1
Diff:t 1 Easy
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
4) Whicht1oft1thet1followingt1servicest1providest1thet1lowestt1levelt1oft1assurancet1ont1at1financi
alt1statement?
A) At1review
B) Ant1audit
C) Neithert1servicet1providest1assurancet1ont1financialt1statements.
D) Eacht1servicet1providest1thet1samet1levelt1oft1assurancet1ont1financialt1statement
s.t1Answer:t 1 A
Terms:t 1 Servicet1providest1lowestt1levelt1oft1assurancet1ont1at1financialt1statement
t1Diff:t 1 Moderate
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
5) Whicht1oft1thet1followingt1ist1nott1at1SysTrustt1Servicest1principlet1ast1definedt1byt1thet1AICPA?
A) Onlinet1privacy
B) Availability
C) Processingt1integrity
D) Operationalt1integrity
t1Answer:t 1 D
Terms:t 1 SysTrustt1Servicest1principlest1definedt1byt1AICPAt1
Diff:t 1 Moderate
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
7
,6) Thet1Sarbanes-
Oxleyt1Actt1prohibitst1at1CPAt1firmt1thatt1auditst1at1publict1companyt1fromt1providingt1whicht1oft1thet1f
ollowingt1typest1oft1servicest1tot1thatt1company?
A) Reviewst1oft1quarterlyt1financialt1statements
B) Preparationt1oft1corporatet1taxt1returns
C) Mostt1consultingt1services
D) Taxt1services
t1Answer:t 1 C
Terms:t 1 Sarbanes-
Oxleyt1Actt1Diff:t 1 Challengi
ngt1Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skillst1T
opic:t 1 SOX
7) Attestationt1servicest1ont1informationt1technologyt1includet1WebTrustt1servicest1andt1SysTrust
services.t1Whicht1oft1thet1followingt1statementst1mostt1accuratelyt1describest1SysTrustt1services?
A) SysTrustt1servicest1providet1assurancet1ont1businesst1processes,t1transactiont1integrityt1an
dt1informationt1processes.
B) SysTrustt1servicest1providet1assurancet1ont1systemt1reliabilityt1int1criticalt1areast1sucht1ast1securityt1a
ndt1datat1integrity.
C) SysTrustt1servicest1providet1assurancet1ont1internalt1controlt1overt1financialt1reporting.
D) SysTrustt1servicest1providet1assurancet1ast1tot1whethert1accountingt1personnelt1aret1followin
gt1procedurest1prescribedt1byt1thet1companyt1controller.
Answer:t 1 B
Terms:t 1 Attestationt1servicest1ont1informationt1technology;t1WebTrustt1andt1Systrustt1servicest1D
iff:t 1 Challenging
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
8) Twot1typest1oft1attestationt1servicest1providedt1byt1CPAt1firmst1aret1auditst1andt1reviews.t1Discusst1t
het1similaritiest1andt1differencest1betweent1theset1twot1typest1oft1attestationt1services.t1Whicht1typet1pro
videst1thet1leastt1assurance?
Answer:t 1 Int1botht1thet1reviewt1andt1auditt1oft1thet1historicalt1financialt1statements,t1managementt1asser
tst1thatt1thet1statementst1aret1fairlyt1statedt1int1accordancet1witht1accountingt1standards.t1Thet1CPAt1prov
idest1at1lowert1levelt1oft1assurancet1fort1reviewst1oft1financialt1statementst1comparedt1tot1thet1hight1levelt
1fort1audits,t1thereforet1lesst1evidencet1ist1needed.t1At1reviewt1ist1oftent1adequatet1tot1meett1financialt1stat
ementt1users't1needs.t1Itt1cant1bet1providedt1byt1at1CPAt1firmt1att1at1mucht1lowert1feet1thant1ant1auditt1beca
uset1lesst1evidencet1ist1needed.
Ant1auditt1ist1thet1mostt1commont1assurancet1servicet1providedt1byt1CPAt1firms.t1Publiclyt1trad
edt1companiest1int1thet1U.S.t1aret1requiredt1tot1havet1auditst1undert1thet1federalt1securitiest1acts.t1
Manyt1nonpublict1companiest1havet1at1reviewt1tot1limitt1auditort1fees.
Terms:t 1 Attestationt1services;t1Auditst1andt1reviewst1oft1historicalt1financialt1statementst1D
iff:t 1 Moderate
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
8
, 9) Whatt1ist1ant1engagementt1tot1attestt1ont1internalt1controlt1overt1financialt1reporting?
Answer:t 1 Fort1ant1auditt1oft1internalt1controlt1overt1financialt1reporting,t1managementt1assertst1thatt1int
ernalt1controlst1havet1beent1developedt1andt1implementedt1followingt1wellt1establishedt1criteria.t1Secti
ont1404t1oft1thet1Sarbanes-
Oxleyt1Actt1requirest1publict1companiest1tot1reportt1management'st1assessmentt1oft1thet1effectivenesst1o
ft1internalt1controlt1overt1financialt1reporting.t1Thet1Actt1alsot1requirest1auditorst1fort1largert1publict1com
paniest1tot1attestt1tot1thet1effectivenesst1oft1internalt1controlt1overt1financialt1reporting.t1Thist1evaluation
,t1whicht1ist1integratedt1witht1thet1auditt1oft1financialt1statements,t1increasest1usert1confidencet1aboutt1fut
uret1financialt1reporting,t1becauset1effectivet1internalt1controlst1reducet1thet1likelihoodt1oft1futuret1miss
tatementst1int1thet1financialt1statements.
Terms:t 1 Engagementt1tot1attestt1ont1internalt1controlt1overt1financialt1reportingt1D
iff:t 1 Moderate
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skillst1T
opic:t 1 SOX
10) Whatt1aret1thet1fivet1categoriest1oft1attestationt1services?t1A
nswer:t 1 Thet1fivet1categoriest1oft1attestationt1servicest1include:
• Auditt1oft1historicalt1financialt1statements
• Auditt1oft1internalt1controlt1overt1financialt1reporting
• Reviewt1oft1historicalt1financialt1statements
• Attestationt1servicest1ont1informationt1technology
• Othert1attestationt1servicest1thatt1mayt1bet1appliedt1tot1at1broadt1ranget1oft1subjectt1matt
ert1Terms:t 1 Categoriest1oft1attestationt1services
Diff:t 1 Moderatet1Objectiv
e:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
11) Whatt1ist1at1WebTrustt1engagement?t1Whatt1ist1at1SysTrustt1engagement?t1Howt1dot1theyt1differ?t
1Answer:t 1 WebTrustt1ist1at1servicet1providedt1byt1at1CPAt1wheret1thet1CPAt1providest1assurancet1thatt1
thet1Webt1Sitet1ownert1hast1mett1establishedt1criteriat1relatedt1tot1businesst1practices,t1transactiont1inte
grity,t1andt1informationt1processes.
SysTrustt1ist1at1servicet1providedt1byt1at1CPAt1tot1evaluatet1andt1testt1at1systemt1reliabilityt1int1areast1sucht1a
st1securityt1andt1datat1integrity.t1Theret1aret1fivet1principlest1thatt1mustt1bet1addressedt1ont1at1SysTrustt1en
gagement:t1security,t1availability,t1processingt1integrity,t1onlinet1privacy,t1andt1confidentiality.
WebTrustt1ist1primarilyt1designedt1tot1providet1assurancet1tot1thirdt1partyt1userst1oft1at1Webt1site.t1SysTr
ustt1providest1assurancet1tot1management,t1thet1boardt1oft1directorst1ort1thirdt1partiest1aboutt1thet1reliabil
ityt1oft1informationt1systemst1usedt1tot1generatet1real-timet1information.
Terms:t 1 WebTrustt1andt1SysTrustt1engagementst1Di
ff:t 1 Challenging
Objective:t 1 LOt11-5
AACSB:t 1 Reflectivet1thinkingt1skills
9
