Complete Test Bank – Principles of Auditing and Other Assurance Services, 22nd Edition | Ray Whittington & Kurt Pany | A+ Exam Prep

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Complete Test Bank – Principles of
Auditing and Other Assurance Services,
22nd Edition | Ray Whittington & Kurt
Pany | A+ Exam Prep

Answers are at the end of each chapter Chapter 1
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Student name: q




1) Accountants are regulated by a variety of organizations. Match the statements with the
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most directly related organization:
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● Accounting and Review Services Committee. q q q q




● American Institute of Certified Public Accountants.
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● Auditing Standards Board. q q




● Federal Accounting Standards Advisory Board.
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● Financial Accounting Standards Board. q q q




● General Accounting Office. q q




● Government Accounting Standards Board. q q q




● Public Company Accounting Oversight Board.
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● Securities and Exchange Commission. q q q




● State Boards of Accountancy.
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Organizations may be used once, more than once, or not at all.
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Statements Organizations
A. Develops accounting standards
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for public and nonpublic companies.
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B. Develops accounting standards for the U.S. Government.
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C. Improves standards of financial accounting for state and local
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government entities. q




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D. Issues auditing standards for public companies.
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E. Issues CPA certificates.
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F. Prepares the CPA exam.
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Organizations: American Institute of Certified Public Accountants, Federal Accounting
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Standards Advisory Board, Financial Accounting Standards Board, Government Accounting
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Standards Board, Public Company Accounting Oversight Board, State Boards of Accountancy.
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2) The Sarbanes-Oxley Act of 2002 made significant reforms for public companies and their
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q auditors.
a. Describe the events that led up to the passage of the Act.
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b. Describe the major changes made by the Act. q q q q q q q




3) Many people confuse the responsibilities of the independent auditors and the client's
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management with respect to audited financial statements.
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a. Describe management's responsibility regarding audited financial statements.
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b. Describe the independent auditors' responsibility regarding audited financial statements.
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c. Evaluate the following statement: "If the auditors disagree with management regarding an
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q accounting principle used in the financial statements, the auditors should express their views in
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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
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similar reported financial position and results of operations. However, only one of the companies
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q has its financial statements audited.
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a. Describe what creates the demand for an audit in this situation. Include a discussion of
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how audited financial statements facilitate this investment transaction, and the effect of the audit
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on business risk and information risk.
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b. Identify the potential consequences to the company of not having its financial statements
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audited.


5) A summary of findings rather than assurance is most likely to be included in a(n):
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A) Agreed-upon procedures report. q q




B) Compilation report. q




C) Audit report. q




D) Review report. q



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6) The Statements on Auditing Standards have been issued by the:
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A) Auditing Standards Board. q q




B) Financial Accounting Standards Board.
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C) Securities and Exchange Commission. q q q




D) Federal Bureau of Investigation.
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7) The risk that a company’s financial statements will materially depart from generally
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accepted accounting principles is referred to as:
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A) Business Risk. q




B) Information Risk. q




C) Detection Risk. q




D) Document Risk. q




8) Historically, which of the following has the AICPA been most concerned with providing?
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