ACC 406 EXAM 1 MC PRACTICE QUESTIONS &
ANSWERS
a. Which of the following best describes the relationship between assurance services
and attest services? - Answer -Both attest and assurance services require
independence.
b. Which of the following has primary responsibility for the fairness of the
representations made in financial statements? - Answer -Client's management.
c. The most important benefit of having an annual audit by a public accounting firm is to:
- Answer -Provide assurance to investors and other outsiders that the financial
statements are reliable.
d. The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board
(PCAOB). Which of the following is not one of the responsibilities of that board? -
Answer -Review financial reports filed with the SEC.
e. Which of these organizations has the responsibility to perform inspections of auditors
of public companies? - Answer -Public Company Accounting Oversight Board.
f. Governmental auditing, in addition to including audits of financial statements, often
includes audits of efficiency, effectiveness, and: - Answer -Compliance
g. In general, internal auditors' independence will be greatest when they report directly
to the: - Answer -Audit committee of the board of directors.
h. Which of the following did not precipitate the passage of the Sarbanes-Oxley Act of
2002 to regulate public accounting firms: - Answer -Ethical scandals at the AICPA.
i. Which of the following organizations establishes accounting standards for U.S.
government agencies? - Answer -The Federal Accounting Standards Advisory Board.
j. Which of the following is correct about forensic audits? - Answer -Forensic audits are
usually performed in situations in which fraud has been found or is suspected.
k. What best describes the purpose of the auditors' consideration of internal control in a
financial statement audit for a nonpublic company? - Answer -To determine the nature,
timing, and extent of audit testing.
l. Which of the following is an example of a compliance audit? - Answer -An audit of a
company's policies and procedures for adhering to environmental laws and regulations.
, The risk that a company will not be able to meet its commitments is referred to as: -
Answer -business risk.
The CPA exam: - Answer -has four sections
Which of the following is not an example of an assurance service? - Answer -
Preparation of a tax return.
Which of the following is a type of attest engagement? - Answer -Agreed-upon
procedures.
The audit of an income tax return by an auditor of the Internal Revenue Service is
considered a (an): - Answer -compliance audit.
Some of the following criteria are essential to satisfactory performance in several
professions. Which one is unique to audit work by CPAs? - Answer -Independence
An effect of the Sarbanes-Oxley Act of 2002 was to: - Answer -reduce the accounting
profession's level of self-regulation.
Which of the following is an area in which the Public Company Accounting Oversight
Board is not empowered to establish or adopt standards? - Answer -Accounting
Independent auditors of the year 1900 differed from the auditors of today in that auditors
in 1900 were more concerned with: - Answer -the accuracy of the balance sheet.
Senior auditors typically perform all of the following tasks, except: - Answer -sign the
audit report.
An audit designed to detect violations of laws and regulations would be referred to as: -
Answer -a compliance audit.
To improve the quality of financial statements filed with it, the SEC has adopted. -
Answer -Regulation S-X.
Independent audits of today place more emphasis on sampling than did the audits of
the 19th century. - Answer -True
The American Institute of Certified Public Accountants creates the CPA Exam, while
individual states issue CPA certificates and permits CPAs to practice. - Answer -True
The GAO is limited by statute to performing only compliance audits. - Answer -False
The SEC does not pass on the merits of the securities that are registered with the
agency. - Answer -True
ANSWERS
a. Which of the following best describes the relationship between assurance services
and attest services? - Answer -Both attest and assurance services require
independence.
b. Which of the following has primary responsibility for the fairness of the
representations made in financial statements? - Answer -Client's management.
c. The most important benefit of having an annual audit by a public accounting firm is to:
- Answer -Provide assurance to investors and other outsiders that the financial
statements are reliable.
d. The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board
(PCAOB). Which of the following is not one of the responsibilities of that board? -
Answer -Review financial reports filed with the SEC.
e. Which of these organizations has the responsibility to perform inspections of auditors
of public companies? - Answer -Public Company Accounting Oversight Board.
f. Governmental auditing, in addition to including audits of financial statements, often
includes audits of efficiency, effectiveness, and: - Answer -Compliance
g. In general, internal auditors' independence will be greatest when they report directly
to the: - Answer -Audit committee of the board of directors.
h. Which of the following did not precipitate the passage of the Sarbanes-Oxley Act of
2002 to regulate public accounting firms: - Answer -Ethical scandals at the AICPA.
i. Which of the following organizations establishes accounting standards for U.S.
government agencies? - Answer -The Federal Accounting Standards Advisory Board.
j. Which of the following is correct about forensic audits? - Answer -Forensic audits are
usually performed in situations in which fraud has been found or is suspected.
k. What best describes the purpose of the auditors' consideration of internal control in a
financial statement audit for a nonpublic company? - Answer -To determine the nature,
timing, and extent of audit testing.
l. Which of the following is an example of a compliance audit? - Answer -An audit of a
company's policies and procedures for adhering to environmental laws and regulations.
, The risk that a company will not be able to meet its commitments is referred to as: -
Answer -business risk.
The CPA exam: - Answer -has four sections
Which of the following is not an example of an assurance service? - Answer -
Preparation of a tax return.
Which of the following is a type of attest engagement? - Answer -Agreed-upon
procedures.
The audit of an income tax return by an auditor of the Internal Revenue Service is
considered a (an): - Answer -compliance audit.
Some of the following criteria are essential to satisfactory performance in several
professions. Which one is unique to audit work by CPAs? - Answer -Independence
An effect of the Sarbanes-Oxley Act of 2002 was to: - Answer -reduce the accounting
profession's level of self-regulation.
Which of the following is an area in which the Public Company Accounting Oversight
Board is not empowered to establish or adopt standards? - Answer -Accounting
Independent auditors of the year 1900 differed from the auditors of today in that auditors
in 1900 were more concerned with: - Answer -the accuracy of the balance sheet.
Senior auditors typically perform all of the following tasks, except: - Answer -sign the
audit report.
An audit designed to detect violations of laws and regulations would be referred to as: -
Answer -a compliance audit.
To improve the quality of financial statements filed with it, the SEC has adopted. -
Answer -Regulation S-X.
Independent audits of today place more emphasis on sampling than did the audits of
the 19th century. - Answer -True
The American Institute of Certified Public Accountants creates the CPA Exam, while
individual states issue CPA certificates and permits CPAs to practice. - Answer -True
The GAO is limited by statute to performing only compliance audits. - Answer -False
The SEC does not pass on the merits of the securities that are registered with the
agency. - Answer -True
