AUDITING A RISK BASED APPROACH
CERTIFICATION EVALUATION EXAMS SET
FULL QUESTIONS AND COMPLETE
SOLUTION
●● American Institute of Certified Public Accountants (AICPA)
Answer: As the primary professional organization for CPAs, it has a
number of committees to develop professional standards for the conduct
of nonpublic company audits and other services performed by its
members and to self-regulate the profession.
●● Audit quality
Answer: Performing an audit in accordance with generally accepted
auditing standards (GAAS) to provide reasonable assurance that the
audited financial statements and related disclosures are presented in
accordance with GAAP and providing assurance that those financial
statements are not materially misstated whether due to errors or fraud.
●● Center for Audit Quality (CAQ)
Answer: An organization affiliated with the AICPA that is dedicated to
enhancing investor confidence and trust in the financial markets.
●● Client acceptance decision
,Answer: The process by which a new client is evaluated by the audit
firm and individual engagement partner prior to being accepted into the
audit firm's portfolio of clients.
●● Client continuance decision
Answer: The process by which existing clients for which the audit firm
provided services in the preceding period are evaluated by the audit firm
and the individual engagement partner at the completion of the audit to
determine whether the audit firm should continue to provide services
again in the next period.
●● Committee of Sponsoring Organizations of the Treadway
Commission (COSO)
Answer: An organization that provides thought leadership and guidance
on enterprise risk management, internal control, and fraud deterrence.
●● Concurring partner review
Answer: Occurs when an audit partner not otherwise involved in the
audit independently reviews each audit to make sure that documented
evidence supports the audit opinion. Otherwise known as an engagement
quality review.
●● Due professional care
Answer: A standard of care expected to be demonstrated by a competent
professional in his or her field of expertise, set by GAAS but
, supplemented in specific implementation instances by the standard of
care expected by a reasonably prudent auditor.
●● Engagement letter
Answer: A communication between the audit firm and the audit
committee that states the scope of the work to be done on the audit so
that there can be no doubt in the mind of the client, external auditor, or
the court system as to the expectations agreed to by the external auditor
and the client.
●● Engagement quality review
Answer: Occurs when an audit partner not otherwise involved in the
audit independently reviews each audit to make sure that documented
evidence supports the audit opinion. Otherwise known as a concurring
partner review.
●● Financial statement audit
Answer: A systematic process of objectively obtaining evidence
regarding assertions about economic actions and events to ascertain the
degree of correspondence between those assertions and established
criteria and communicating the results to interested users.
●● enerally accepted accounting principles (GAAP)
Answer: GAAP refers to generally accepted accounting principles for
financial reporting. Throughout the book we recognize that the criteria
may be developed by either the FASB or the IASB. GAAP as general
CERTIFICATION EVALUATION EXAMS SET
FULL QUESTIONS AND COMPLETE
SOLUTION
●● American Institute of Certified Public Accountants (AICPA)
Answer: As the primary professional organization for CPAs, it has a
number of committees to develop professional standards for the conduct
of nonpublic company audits and other services performed by its
members and to self-regulate the profession.
●● Audit quality
Answer: Performing an audit in accordance with generally accepted
auditing standards (GAAS) to provide reasonable assurance that the
audited financial statements and related disclosures are presented in
accordance with GAAP and providing assurance that those financial
statements are not materially misstated whether due to errors or fraud.
●● Center for Audit Quality (CAQ)
Answer: An organization affiliated with the AICPA that is dedicated to
enhancing investor confidence and trust in the financial markets.
●● Client acceptance decision
,Answer: The process by which a new client is evaluated by the audit
firm and individual engagement partner prior to being accepted into the
audit firm's portfolio of clients.
●● Client continuance decision
Answer: The process by which existing clients for which the audit firm
provided services in the preceding period are evaluated by the audit firm
and the individual engagement partner at the completion of the audit to
determine whether the audit firm should continue to provide services
again in the next period.
●● Committee of Sponsoring Organizations of the Treadway
Commission (COSO)
Answer: An organization that provides thought leadership and guidance
on enterprise risk management, internal control, and fraud deterrence.
●● Concurring partner review
Answer: Occurs when an audit partner not otherwise involved in the
audit independently reviews each audit to make sure that documented
evidence supports the audit opinion. Otherwise known as an engagement
quality review.
●● Due professional care
Answer: A standard of care expected to be demonstrated by a competent
professional in his or her field of expertise, set by GAAS but
, supplemented in specific implementation instances by the standard of
care expected by a reasonably prudent auditor.
●● Engagement letter
Answer: A communication between the audit firm and the audit
committee that states the scope of the work to be done on the audit so
that there can be no doubt in the mind of the client, external auditor, or
the court system as to the expectations agreed to by the external auditor
and the client.
●● Engagement quality review
Answer: Occurs when an audit partner not otherwise involved in the
audit independently reviews each audit to make sure that documented
evidence supports the audit opinion. Otherwise known as a concurring
partner review.
●● Financial statement audit
Answer: A systematic process of objectively obtaining evidence
regarding assertions about economic actions and events to ascertain the
degree of correspondence between those assertions and established
criteria and communicating the results to interested users.
●● enerally accepted accounting principles (GAAP)
Answer: GAAP refers to generally accepted accounting principles for
financial reporting. Throughout the book we recognize that the criteria
may be developed by either the FASB or the IASB. GAAP as general
