Answers are at the end of each chapter Chapter 1
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.
● 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
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,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.
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."
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,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.
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.
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, C) Detection Risk.
D) Document Risk.
8) Historically, XXwhich XXof XXthe XXfollowing XXhas XXthe XXAICPA XXbeen XXmost XXconcerned
with XXproviding?
XX
A) Auditing XXstandards.
B) Professional XXguidance XXfor XXregulating XXfinancial XXmarkets.
C) Internal XXauditing XXstandards.
D) Staff XXsupport XXto XXCongress.
9) The XXorganization XXcharged XXwith XXprotecting XXinvestors XXand XXthe XXpublic XXby
requiring XXfull XXdisclosure XXof XXfinancial XXinformation XXby XXcompanies XXoffering XXsecurities XXto
XX
the XXpublic XXis XXthe:
XX
A) Auditing XXStandards XXBoard.
B) Financial XXAccounting XXStandards XXBoard.
C) Government XXAccounting XXStandards XXBoards.
D) Securities XXand XXExchange XXCommission.
XX
10) An XXengagement XXin XXwhich XXa XXCPA XXfirm XXarranges XXfor XXa XXcritical XXreview XXof XXits
practices XXby XXanother XXCPA XXfirm XXis XXreferred XXto XXas XXa(n):
XX
A) Peer XXReview XXEngagement.
B) Quality XXControl XXEngagement.
C) Quality XXAssurance XXEngagement.
D) Attestation XXEngagement.
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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.
● 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
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,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.
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."
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,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.
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.
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, C) Detection Risk.
D) Document Risk.
8) Historically, XXwhich XXof XXthe XXfollowing XXhas XXthe XXAICPA XXbeen XXmost XXconcerned
with XXproviding?
XX
A) Auditing XXstandards.
B) Professional XXguidance XXfor XXregulating XXfinancial XXmarkets.
C) Internal XXauditing XXstandards.
D) Staff XXsupport XXto XXCongress.
9) The XXorganization XXcharged XXwith XXprotecting XXinvestors XXand XXthe XXpublic XXby
requiring XXfull XXdisclosure XXof XXfinancial XXinformation XXby XXcompanies XXoffering XXsecurities XXto
XX
the XXpublic XXis XXthe:
XX
A) Auditing XXStandards XXBoard.
B) Financial XXAccounting XXStandards XXBoard.
C) Government XXAccounting XXStandards XXBoards.
D) Securities XXand XXExchange XXCommission.
XX
10) An XXengagement XXin XXwhich XXa XXCPA XXfirm XXarranges XXfor XXa XXcritical XXreview XXof XXits
practices XXby XXanother XXCPA XXfirm XXis XXreferred XXto XXas XXa(n):
XX
A) Peer XXReview XXEngagement.
B) Quality XXControl XXEngagement.
C) Quality XXAssurance XXEngagement.
D) Attestation XXEngagement.
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