Practice-Audit Questions with All
Complete Solutions.
The primary reason for an audit by an independent, external audit firm is to - Answer provide
increased assurance to users as to the fairness of the financial statements.
Independent CPA's perform audits on the financial statements of issuers. This type of auditing
can best be described as - Answer a discipline that attests to financial information presented
by management.
Users of an issuer's financial statements demand independent audits because - Answer
management may not be objective in reporting.
An audit of the financial statements of Camden Corporation is being conducted by an external
auditor. The external auditor is expected to - Answer express an opinion as to the fairness of
Camden's financial statements.
Notes that are included with financial statements are the responsibility of the - Answer
company's management
Brandnew Company is going public, and its stock will be listed on a stock exchange. Audited
financial statements are required to be filed with the SEC. Who is expected to be the primary
user of the audited financial statements? - Answer Brandnew Company's investors
The Committee of Sponsoring Organizations (COSO) of the Treadway Commission issued a
document in 1992 that has been embraced by numerous organizations, including the AICPA and
GAO. That document is titled - Answer Internal Control-- Integrated Framework
When Congress passed the Sarbanes-Oxley Act of 2002, it imposed greater regulation on issuers
and their auditors and required increased accountability. Which of the following is not a
provision of the act? - Answer Audit firms must be rotated on a periodic basis.
The authoritative body designed by the AICPA to promulgate standards concerning an
accountant's association with unaudited financial statements of a non issuer is the - Answer
Accounting and review services committee
Who establishes generally accepted auditing standards? - Answer Auditing Standards Board
and Public Company Accounting Oversight Board
,CPA's within each state have formed state societies or associations of CPA's. Which of the
following statements about these associations is false? - Answer All CPA's in the state must be
members of the state association or society.
Which of the following statements best describes the primary purpose of Statements on
Auditing Standards (SASs)? - Answer They are generally accepted auditing standards.
According to AU-C 200, presumptively mandatory requirements in the auditing standards are
indicated by which word? - Answer should
Auditing interpretations are issued by the Audit Issues Task Force of the Auditing Standards
Board (ASB) to provide timely guidance on the application of pronouncements of the ASB. They
are - Answer not auditing standards
An auditor must gain professional experience primarily to - Answer exercise professional
judgement
Competence as an independent auditor includes all of the following except - Answer
warranting the infallibility of the work performed
GAAS require the auditor to be independent. An auditor is indeed if (s)he is - Answer
independent in fact and appearance
Beth Babett, CPA, is associated with a client's financial statements but is not independent with
respect to that client. If she is requested to perform an audit on the financial statements, she
should - Answer disclaim an opinion
SarbOx has strengthened auditor independence by requiring that management - Answer
select auditors through audit committees
Audit committees have been identified as a major factor in promoting independence in both
internal and external auditors. Which of the following is the most important limitation on the
effectiveness of audit committees? - Answer Audit committees are composed of independent
directors. However, those directors may have close personal and professional relationships with
management.
The auditor should not initiate discussion with those charged with governance concerning -
Answer details of the procedures that the auditor intends to apply.
Through legal precedent, generally accepted auditing standards developed by the AICPA apply -
Answer to all CPA's
, Audit standards require that the engagement partner - Answer be responsible for the
assignment of tasks to, and supervision of, assistants
Several sources of US GAAP consulted by an auditor are in conflict as to the application of an
accounting principle. Which of the following should the auditor consider the most
authoritative? - Answer FASB Accounting Standards Codification
Which of the following most completely describes how independence has been defined by the
CPA profession? - Answer possessing the ability to act with integrity and objectivity
The Conceptual Framework for AICPA Independence Standards - Answer adapts a risk-based
approach to analysis of independence matters
An auditor strives to achieve independence in appearance to - Answer maintain public
confidence in the profession
The concept of materiality is least important to an auditor when considering the - Answer
effects of a direct financial interest in the client upon the auditor's independence
Under the ethical standards of the profession, which of the following situations involving
nondependent members of an auditor's family is most likely to impair the independence of an
individual participating in an audit engagement? - Answer A spouse's employment with a
client.
Under Conduct Rule 101, Independence, which of the following must be independent in the
performance of an audit? - Answer all individuals on the attest engagement team, except
those performing routine clerical functions.
Which of the following legal situations is considered to impair the auditor's independence? -
Answer Actual litigation by the auditor against the current management alleging management
fraud or deceit.
An audit independence issue might be raised by the auditor's participation in engagements
involving other non attest services. Which of the following statements is most consistent with
the profession's attitude toward this issue? - Answer The auditor should not make
management decisions for an audit client.
The objective of the audit of GAAP-based financial statements is to - Answer express an
opinion of the fairness with which the statements present the financial position, results of
operations, and cash flows in accordance with GAAP.
Complete Solutions.
The primary reason for an audit by an independent, external audit firm is to - Answer provide
increased assurance to users as to the fairness of the financial statements.
Independent CPA's perform audits on the financial statements of issuers. This type of auditing
can best be described as - Answer a discipline that attests to financial information presented
by management.
Users of an issuer's financial statements demand independent audits because - Answer
management may not be objective in reporting.
An audit of the financial statements of Camden Corporation is being conducted by an external
auditor. The external auditor is expected to - Answer express an opinion as to the fairness of
Camden's financial statements.
Notes that are included with financial statements are the responsibility of the - Answer
company's management
Brandnew Company is going public, and its stock will be listed on a stock exchange. Audited
financial statements are required to be filed with the SEC. Who is expected to be the primary
user of the audited financial statements? - Answer Brandnew Company's investors
The Committee of Sponsoring Organizations (COSO) of the Treadway Commission issued a
document in 1992 that has been embraced by numerous organizations, including the AICPA and
GAO. That document is titled - Answer Internal Control-- Integrated Framework
When Congress passed the Sarbanes-Oxley Act of 2002, it imposed greater regulation on issuers
and their auditors and required increased accountability. Which of the following is not a
provision of the act? - Answer Audit firms must be rotated on a periodic basis.
The authoritative body designed by the AICPA to promulgate standards concerning an
accountant's association with unaudited financial statements of a non issuer is the - Answer
Accounting and review services committee
Who establishes generally accepted auditing standards? - Answer Auditing Standards Board
and Public Company Accounting Oversight Board
,CPA's within each state have formed state societies or associations of CPA's. Which of the
following statements about these associations is false? - Answer All CPA's in the state must be
members of the state association or society.
Which of the following statements best describes the primary purpose of Statements on
Auditing Standards (SASs)? - Answer They are generally accepted auditing standards.
According to AU-C 200, presumptively mandatory requirements in the auditing standards are
indicated by which word? - Answer should
Auditing interpretations are issued by the Audit Issues Task Force of the Auditing Standards
Board (ASB) to provide timely guidance on the application of pronouncements of the ASB. They
are - Answer not auditing standards
An auditor must gain professional experience primarily to - Answer exercise professional
judgement
Competence as an independent auditor includes all of the following except - Answer
warranting the infallibility of the work performed
GAAS require the auditor to be independent. An auditor is indeed if (s)he is - Answer
independent in fact and appearance
Beth Babett, CPA, is associated with a client's financial statements but is not independent with
respect to that client. If she is requested to perform an audit on the financial statements, she
should - Answer disclaim an opinion
SarbOx has strengthened auditor independence by requiring that management - Answer
select auditors through audit committees
Audit committees have been identified as a major factor in promoting independence in both
internal and external auditors. Which of the following is the most important limitation on the
effectiveness of audit committees? - Answer Audit committees are composed of independent
directors. However, those directors may have close personal and professional relationships with
management.
The auditor should not initiate discussion with those charged with governance concerning -
Answer details of the procedures that the auditor intends to apply.
Through legal precedent, generally accepted auditing standards developed by the AICPA apply -
Answer to all CPA's
, Audit standards require that the engagement partner - Answer be responsible for the
assignment of tasks to, and supervision of, assistants
Several sources of US GAAP consulted by an auditor are in conflict as to the application of an
accounting principle. Which of the following should the auditor consider the most
authoritative? - Answer FASB Accounting Standards Codification
Which of the following most completely describes how independence has been defined by the
CPA profession? - Answer possessing the ability to act with integrity and objectivity
The Conceptual Framework for AICPA Independence Standards - Answer adapts a risk-based
approach to analysis of independence matters
An auditor strives to achieve independence in appearance to - Answer maintain public
confidence in the profession
The concept of materiality is least important to an auditor when considering the - Answer
effects of a direct financial interest in the client upon the auditor's independence
Under the ethical standards of the profession, which of the following situations involving
nondependent members of an auditor's family is most likely to impair the independence of an
individual participating in an audit engagement? - Answer A spouse's employment with a
client.
Under Conduct Rule 101, Independence, which of the following must be independent in the
performance of an audit? - Answer all individuals on the attest engagement team, except
those performing routine clerical functions.
Which of the following legal situations is considered to impair the auditor's independence? -
Answer Actual litigation by the auditor against the current management alleging management
fraud or deceit.
An audit independence issue might be raised by the auditor's participation in engagements
involving other non attest services. Which of the following statements is most consistent with
the profession's attitude toward this issue? - Answer The auditor should not make
management decisions for an audit client.
The objective of the audit of GAAP-based financial statements is to - Answer express an
opinion of the fairness with which the statements present the financial position, results of
operations, and cash flows in accordance with GAAP.
