MGMT 443 EXAM 1 QUESTIONS AND VERIFIED
ANSWERS
The final step in most audits is a consideration of internal control. This tells the auditors
whether the scope of their investigation has been adequate.
True or False - Answers - False
Financial statement audits performed under PCAOB requirements are designed to
provide which type(s) of assurance with respect to the detection of material
misstatements due to errors or fraud?
1) Reasonable: Yes; Absolute: Yes
2) Reasonable: Yes; Absolute: No
3) Reasonable: No; Absolute: Yes
4) Reasonable: No; Absolute: No - Answers - Option (2)
Associations of CPA firms provide their members with many of the benefits of having
their own professional development departments.
True or False - Answers - True
GAAP represents a financial reporting framework.
True or False - Answers - True
Which AICPA quality control standard would most likely be satisfied when a CPA firm
maintains records indicating which partners or employees of the firm were previously
employed by the CPA firm's clients?
a. professional relationship
b. engagement performance
c. relevant ethical requirements
d. monitoring - Answers - Relevant Ethical requirements
The risk that a company will not be able to meet its commitments is referred to as:
, a. business risk
b. risk of collapse
c. inherent risk
d. information risk - Answers - Business risk
Which of the following is not one of the forms of attestation presented in the AICPA
Statements on Standards for Attestation Services:
a. agreed-upon procedures
b. examination
c. inspection
d. review - Answers - Inspection
Which of the following statements concerning auditor identification of client
noncompliance with laws is correct?
a. an auditor's responsibility to detect noncompliance with laws that have an indirect
effect on the financial statements differs from that for laws that have a direct effect.
b. an audit in accordance with generally accepted auditing standards normally includes
highly effective special substantive audit procedures specially designed to detect
noncompliance with laws that have an indirect but immaterial effect on the financial
statements.
c. an auditor considers compliance with laws from the perspective of the reliability of
management's representations rather than their relation to audit objectives derived from
financial statement assertions.
d. an auditor has no responsibility to detect client noncompliance with laws that have a
direct effect on the financial statements. - Answers - An auditor's responsibility to detect
noncompliance with laws that have an indirect effect on the financial statements differs
from that for laws that have a direct effect.
An independent audit on an annual basis is required by the AICPA for all corporations.
True or False - Answers - False
ANSWERS
The final step in most audits is a consideration of internal control. This tells the auditors
whether the scope of their investigation has been adequate.
True or False - Answers - False
Financial statement audits performed under PCAOB requirements are designed to
provide which type(s) of assurance with respect to the detection of material
misstatements due to errors or fraud?
1) Reasonable: Yes; Absolute: Yes
2) Reasonable: Yes; Absolute: No
3) Reasonable: No; Absolute: Yes
4) Reasonable: No; Absolute: No - Answers - Option (2)
Associations of CPA firms provide their members with many of the benefits of having
their own professional development departments.
True or False - Answers - True
GAAP represents a financial reporting framework.
True or False - Answers - True
Which AICPA quality control standard would most likely be satisfied when a CPA firm
maintains records indicating which partners or employees of the firm were previously
employed by the CPA firm's clients?
a. professional relationship
b. engagement performance
c. relevant ethical requirements
d. monitoring - Answers - Relevant Ethical requirements
The risk that a company will not be able to meet its commitments is referred to as:
, a. business risk
b. risk of collapse
c. inherent risk
d. information risk - Answers - Business risk
Which of the following is not one of the forms of attestation presented in the AICPA
Statements on Standards for Attestation Services:
a. agreed-upon procedures
b. examination
c. inspection
d. review - Answers - Inspection
Which of the following statements concerning auditor identification of client
noncompliance with laws is correct?
a. an auditor's responsibility to detect noncompliance with laws that have an indirect
effect on the financial statements differs from that for laws that have a direct effect.
b. an audit in accordance with generally accepted auditing standards normally includes
highly effective special substantive audit procedures specially designed to detect
noncompliance with laws that have an indirect but immaterial effect on the financial
statements.
c. an auditor considers compliance with laws from the perspective of the reliability of
management's representations rather than their relation to audit objectives derived from
financial statement assertions.
d. an auditor has no responsibility to detect client noncompliance with laws that have a
direct effect on the financial statements. - Answers - An auditor's responsibility to detect
noncompliance with laws that have an indirect effect on the financial statements differs
from that for laws that have a direct effect.
An independent audit on an annual basis is required by the AICPA for all corporations.
True or False - Answers - False
