Test Bank for Principles of Auditing and Other Assurance Services 22nd Edition by Ray Whittington, Kurt Pany | Complete 2023/2024

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. ● 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 for the U.S. Government. C. Improves standards of financial accounting for state and local government entities. D. Issues auditing standards for public companies. E. Issues CPA certificates. F. Prepares the CPA exam. Organizations: American Institute of Certified Public Accountants, Federal Accounting Standards Advisory Board, Financial Accounting Standards Board, Government Accounting Standards Board, Public Company Accounting Oversight Board, State Boards of Accountancy. Version 1 2 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. 3) Many people confuse the responsibilities of the independent auditors and the client's management with respect to audited financial statements. 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 the notes to the financial statements." 4) An investor is considering investing in one of two companies. The companies have very similar reported financial position and results of operations. However, only one of the companies has its financial statements audited. 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. 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. Version 1 3 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. 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. C) Detection Risk. D) Document Risk. 8) Historically, which of the following has the AICPA been most concerned with providing? A) Auditing standards. B) Professional guidance for regulating financial markets. C) Internal auditing standards. D) Staff support to Congress. 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. Version 1 4 10) An engagement in which a CPA firm arranges for a critical review of its practices by another CPA firm is referred to as a(n): A) Peer Review Engagement. B) Quality Control Engagement. C) Quality Assurance Engagement. D) Attestation Engagement. 11) The sequentially-numbered pronouncements issued by the Auditing Standards Board over a period of years are known as: A) Auditing Statements of Position (ASPs). B) Accounting Series Releases (ASRs). C) Statements on Auditing Standards (SASs). D) Statements on Auditing Principles (SAPs). 12) Government Accountability Office (GAO): A) is primarily concerned with rapid processing of all accounts payable incurred by the federal government. B) responsibilities include audits of government agencies. C) is an organization of professional accountants whose primary interest is in the effectiveness of presidential expenditures. D) is primarily concerned with budgets and forecasts approved by the PCAOB. 13) The risk associated with survivability and profitability is referred to as: Version 1 5 A) Information risk. B) Inherent risk. C) Relative risk. D) Business risk. 14) The risk that a company will not be able to meet its obligations when they become due is an aspect of: A) Information risk. B) Inherent risk. C) Relative risk. D) Business risk. 15) Which of the following attributes is more essential for an auditor than of management? A) Integrity. B) Competence. C) Independence. D) Keeping informed on current professional developments. 16) The attest function: A) Is an essential part of every engagement by the CPA, whether performing auditing, tax work, or other services. B) Includes the preparation of a report of the CPA's findings. C) Requires a consideration of internal control. D) Requires a complete review of all transactions during the period under examination. 17) Attestation risk is limited to a low level in which of the following engagement(s)? Version 1 6 A) Both examinations and reviews. B) Examinations, but not reviews. C) Reviews, but not examinations. D) Neither examinations nor reviews. 18) When compared to an audit performed prior to 1900, an audit today: A) Is more likely to use sampling in more areas. B) Is less likely to include consideration of the effectiveness of internal control. C) Has bank loan officers as the primary financial statement user group. D) Includes a more detailed examination of all individual transactions. 19) Which of the following series of pronouncements are issued by the Securities and Exchange Commission? A) Auditing RegistrarReleases. B) Form S-1. C) Accounting and Auditing Enforcement Releases. D) Statements of Position. 20) Which of the following is not correct relating to the Sarbanes-Oxley Act? A) It toughens penalties for corporate fraud. B) It restricts the types of consulting CPAs may perform for audit clients. C) It maintains identical requirements for large and small public companies. D) It eliminates a significant portion of the AICPA’s system of self-regulation. 21) An operational audit differs in many ways from an audit of financial statements. Which of the following is the best example of one of these differences? Version 1 7 A) The usual audit of financial statements covers the four basic statements, whereas the operational audit is usually limited to either the balance sheet or the income statement. B) Operational audits are more subjective and often involve evaluating efficiency and effectiveness of operations. C) Operational audits do not ordinarily result in the preparation of a report. D) The operational audit deals with pre-tax income. 22) The review of a company's financial statements by a CPA firm: A) Is substantially less in scope of procedures than an audit. B) Requires detailed analysis of the major accounts. C) Is of similar scope as an audit and adds similar credibility to the statements. D) Culminates in issuance of a report expressing the CPA's opinion as to the fairness of the statements. 23) Which statement is correct with respect to continuing professional education (CPE) requirements of CPAs? A) Only CPAs in public practice are required to meet such requirements. B) Only CPAs in public practice or business are required to meet such requirements. C) State laws require CPAs to participate in continuing education programs as a condition for license renewal. D) Participation in continuing professional education is voluntary of all CPAs. 24) The FDIC Improvement Act requires that management of large financial institutions engage auditors to attest to assertions by management about the effectiveness of the institution's internal controls over: Version 1 8 A) Broker and dealer relationships. B) Financial reporting. C) Effectiveness of operations. D) Efficiency of operations. 25) Passage of the Sarbanes-Oxley Act led to the establishment of the: A) Auditing Standards Board. B) Public Company Accounting Oversight Board. C) Public Accountancy Review Board. D) Securities and Exchange Commission. 26) Which of the following professionals has primary responsibility for the performance of an audit? A) The managing partner of the firm. B) The senior assigned to the engagement. C) The manager assigned to the engagement. D) The partner in charge of the engagement. 27) Which of the following types of services is generally provided only by CPA firms? A) Tax audits. B) Financial statement audits. C) Compliance audits. D) Operational audits. 28) The right to practice as a CPA is given by which of the following organizations?