Auditing (Chapters 1-4) Exam Questions
and Verified Answers
members of the board of directors who do no also serve as corporate officers of have other
relationships that might impair independence
audit of financial statements answer - an examination designed to provide an opinion, the
CPA's highest level of assurance that the financial statements follow generally accepted
accounting principles, or another acceptable basis of accounting
board of directors answer - individuals elected by a corporation's shareholders to oversee the
activities of the corporation. a board of directors ordinarily is composed of executives from the
company and non executive directors
business risk (of the client) answer - the risk assumed by investors or creditors that is
associated with the company's survival and profitability
certified public accountant (CPA) answer - a person licensed by the state to practice public
accounting as a profession, based on having passed the Uniform CPA Examination and having
met certain educational and experience requirements.
compliance audit answer - an audit to measure the compliance of the organization with some
established criteria (e.g. laws and regulations, or internal control policies and procedures)
corporate governance answer - the rules, processes, and laws by which businesses are
operated, regulated and controlled. a primary concern of corporate governance is the nature
and extent of accountability of people in the corporation
,CPA examination answer - a uniform examination administered by the AICPA for state boards of
accountancy to enable them to issue CPA licenses. The examinations covers topics of accounting
and reporting, auditing, business environment, regulation and professional responsibilities
Dodd-Frank Act (the Wall Street Reform and Consumer Protection Act) answer - A U.S. federal
law that increases federal government regulation of the financial industry. The legislation,
enacted in July 2010, aims to prevent a major financial crisis by creating new financial
regulatory processes that are aimed at enforcing transparency and accountability while
implementing rules for consumer protection. the act also expands the PCAOB's authority to
oversee audits of brokers and dealers.
examination answer - an attest engagement designed to provide the highest level of assurance
that CPAs provide on an assertion. an examination of financial statement sis referred to as an
audit.
financial audit answer - an audit of the financial accounting information of an organization or
segment of the organization. this may involve a complete set of financial states of a portion of a
statement.
financial reporting framework answer - a set of criteria used to determine measurement,
recognition, presentation, and disclosure of all material items appearing in the financial
statements: for example, accounting principles generally accepted in the United States, or
International Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB).
fraud answer - intentional misstatement of financial statements by management (fraudulent
financial reporting), or theft of assets by employees (employee fraud). fraud is also referred to
as irregularities.
, generally accepted accounting principles (GAAP) answer - concepts and standards established
by such authoritative bodies as the FASB and the GASB and accepted by the accounting
profession as essential to proper financial reporting
information risk answer - the risk that information used by investors, creditors and others to
assess business risk is not accurate
integrated audit answer - as required by the Sarbanes-Oxley Act and the PCAOB, an audit that
includes providing assurance on both financial statements and internal control over financial
reporting. integrated audits are required for publicly traded companies in the USA.
International Accounting Education Standards Board (IAESB) answer - A committee of the
International Federation of Accountants, established to develop guidance to improve the
standards of accountancy education around the world. The organization focuses on (1) the
essential elements of accreditation, which are education, practical experience an tests of
professional competence, and (2) the nature and extent of continuing professional education
needed by accountants
International Auditing and Assurance Standards Board (IAASB) answer - a committee of the
International Federation of Accountants, established to issue standards on auditing and
reporting practices to improve the degree of uniformity of auditing practices and services
throughout the world
International Ethics Standards Board for Accountants (IESBA) answer - a committee of the
International Federation of Accountants, established to develop ethical standards and guidance
for use by professional accountants. It encourages member bodies to adopt high standards of
ethics for their members and promotes good ethical practices globally. The IESBA also fosters
international debate on ethical issues faced by accountants
International Federation of Accountants (IFAC) answer - A worldwide organization of national
accounting bodies established to help foster and coordinated worldwide accounting profession
with harmonized standards
and Verified Answers
members of the board of directors who do no also serve as corporate officers of have other
relationships that might impair independence
audit of financial statements answer - an examination designed to provide an opinion, the
CPA's highest level of assurance that the financial statements follow generally accepted
accounting principles, or another acceptable basis of accounting
board of directors answer - individuals elected by a corporation's shareholders to oversee the
activities of the corporation. a board of directors ordinarily is composed of executives from the
company and non executive directors
business risk (of the client) answer - the risk assumed by investors or creditors that is
associated with the company's survival and profitability
certified public accountant (CPA) answer - a person licensed by the state to practice public
accounting as a profession, based on having passed the Uniform CPA Examination and having
met certain educational and experience requirements.
compliance audit answer - an audit to measure the compliance of the organization with some
established criteria (e.g. laws and regulations, or internal control policies and procedures)
corporate governance answer - the rules, processes, and laws by which businesses are
operated, regulated and controlled. a primary concern of corporate governance is the nature
and extent of accountability of people in the corporation
,CPA examination answer - a uniform examination administered by the AICPA for state boards of
accountancy to enable them to issue CPA licenses. The examinations covers topics of accounting
and reporting, auditing, business environment, regulation and professional responsibilities
Dodd-Frank Act (the Wall Street Reform and Consumer Protection Act) answer - A U.S. federal
law that increases federal government regulation of the financial industry. The legislation,
enacted in July 2010, aims to prevent a major financial crisis by creating new financial
regulatory processes that are aimed at enforcing transparency and accountability while
implementing rules for consumer protection. the act also expands the PCAOB's authority to
oversee audits of brokers and dealers.
examination answer - an attest engagement designed to provide the highest level of assurance
that CPAs provide on an assertion. an examination of financial statement sis referred to as an
audit.
financial audit answer - an audit of the financial accounting information of an organization or
segment of the organization. this may involve a complete set of financial states of a portion of a
statement.
financial reporting framework answer - a set of criteria used to determine measurement,
recognition, presentation, and disclosure of all material items appearing in the financial
statements: for example, accounting principles generally accepted in the United States, or
International Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB).
fraud answer - intentional misstatement of financial statements by management (fraudulent
financial reporting), or theft of assets by employees (employee fraud). fraud is also referred to
as irregularities.
, generally accepted accounting principles (GAAP) answer - concepts and standards established
by such authoritative bodies as the FASB and the GASB and accepted by the accounting
profession as essential to proper financial reporting
information risk answer - the risk that information used by investors, creditors and others to
assess business risk is not accurate
integrated audit answer - as required by the Sarbanes-Oxley Act and the PCAOB, an audit that
includes providing assurance on both financial statements and internal control over financial
reporting. integrated audits are required for publicly traded companies in the USA.
International Accounting Education Standards Board (IAESB) answer - A committee of the
International Federation of Accountants, established to develop guidance to improve the
standards of accountancy education around the world. The organization focuses on (1) the
essential elements of accreditation, which are education, practical experience an tests of
professional competence, and (2) the nature and extent of continuing professional education
needed by accountants
International Auditing and Assurance Standards Board (IAASB) answer - a committee of the
International Federation of Accountants, established to issue standards on auditing and
reporting practices to improve the degree of uniformity of auditing practices and services
throughout the world
International Ethics Standards Board for Accountants (IESBA) answer - a committee of the
International Federation of Accountants, established to develop ethical standards and guidance
for use by professional accountants. It encourages member bodies to adopt high standards of
ethics for their members and promotes good ethical practices globally. The IESBA also fosters
international debate on ethical issues faced by accountants
International Federation of Accountants (IFAC) answer - A worldwide organization of national
accounting bodies established to help foster and coordinated worldwide accounting profession
with harmonized standards
