[TEST BANK] AUDITING AND ASSURANCE SERVICES, 16TH EDITION BY ARENS, ELDER, BEASLEY, HOGAN.

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AuditingandAssuranceServices,16e(Arens/Elder/Beasley) b b b




Chapter2 The CPA Profession
b b b b




2.1 Learning Objective 2-1 m b




1) ThelegalrighttoperformauditsisgrantedtoaCPAfirmbyregulationof
b b b b b b b b b b b b b




A) eachstate. b




B) theFinancial Accounting Standards Board (FASB).
b b b b b




C) theAmerican InstituteofCertified PublicAccountants (AICPA).
b b b b b b b




D) theAuditingStandardsBoard.
Answer: A
b b




Terms: Legalrightstoperformaudits
b




Diff: Moderate
b b




Objective: LO2-1 b b




AACSB: Reflectivethinking b b




2) Whichofthefollowingisnotacharacteristic ofasmall firm?
b b b b b b b b b b b




A) Most smallfirms havefewerthan25 professionals.
b b b b b b b




B) Smallfirmsperform audits onsmall andnot-for-profit businesses.
b b b b b b b b




C) Taxservices aremore importantthan auditingservicesto thesmall firm.
b b b b b b b b b b b




D) SmallfirmsareprohibitedbytheSECfromauditingpubliclytradedcompanies.
b b b b b b b b




Answer: D
b b




Terms: Characteristics of a smallfirm
b m b




Diff: Moderate
b b




Objective: LO2-1 b b




AACSB: Reflectivethinking b b




3) Sarbanes-Oxley and the Securities and Exchange Commission restrict auditors from providing b b b b b b b b b b




bmany consulting services to their publicly traded audit clients. Which of the following is true for
b b b b b b b b b b b b b b b




bauditors of publicly traded companies? b b b b




I. Theyarerestrictedfromprovidingconsultingservicestoprivatelyheldcompanies.
b b b b b b b b b




II. Thereisnorestrictiononprovidingconsultingservicestonon-auditclients.
b b b b b b b b b




A) Ionly
b




B) IIonly
b




C) Iand II
b b




D) NeitherI norII b m b




bAnswer: B b




Terms: Sarbanes-OxleyandSecuritiesExchangeCommissionrestrictions Diff:
b b b b b b




bModerate
Objective: LO2-1 b b




AACSB: Reflectivethinking b




bTopic: SOX b




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b b b b b b b b b b b




4) Whichofthefollowingdoes not describeasizecategoryfor aCPAfirm?
b b b b b b b b b b b b b




A) BigFournational firmsb b b




B) Big Fourinternationalfirms
m b b




C) localfirms b




D) nationaland regionalfirms m




Answer: A
b b




Terms: Threecategories fordescribingsizeofauditfirms
b b b b b




Diff: Easy
b b




Objective: LO2-1 b b




AACSB: Reflectivethinking b b




5) isoneoftheBigFourinternational CPAfirms. b b b b b b b b




A) Deloitte
B) KPMG
C) Ernst&Young b b




D) Alloftheaboveareclassifiedas BigFourinternationalCPAfirms.
b b b b b b b b b b b




Answer: D
b b




Terms: Threecategories fordescribingsizeofauditfirms
b b b b b




Diff: Moderate
b b




Objective: LO2-1 b b




AACSB: Reflectivethinking b b




6) InwhichtypeofservicedoestheCPAassemblethefinancialstatements butprovideno
b b b b b b b b b b b b b b




assurance to third parties?
b b b b




A) audit
B) compilation
C) review
D) bookkeeping
Answer: B
b b




Terms: Compilation b




Diff: Moderate
b b




Objective: LO 2-1
b b b




AACSB: Reflectivethinking b b




7) Inadditiontoattestation andassuranceservices,CPAfirmsprovideotherservices totheir
b b b b b b b b b b b b b




bclients. List three of these services.
b b b b b




Answer: Otherservices performedbyaCPAfirminclude:
b b b b b b b b




• accountingand bookkeeping services b b b




• taxservices b




• managementconsultingandriskadvisoryservices.
bTerms: Activities of CPA firms b b b b




Diff: Moderate
b




bObjective: LO2-1 b




AACSB: Reflectivethinking b b




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8) Manysmall,localaccountingfirmsperformauditsastheirprimaryservicetotheirclients.
b b b b b b b b b b b




Answer: FALSE
b b




Terms: Smallaccountingfirmsdonotperformaudits Diff:
b b b b b b b




bEasy
Objective: LO2-1 b b




AACSB: Reflectivethinking b b




9) Sarbanes-OxleyandtheSecuritiesandExchangeCommissionrestrictauditorsfromproviding b b b b b b b b b




many consulting services to their publicly traded audit clients.
b b b b b b b b b




Answer: TRUE b




Terms: Sarbanes-OxleyandSecuritiesExchangeCommissionrestrictions Diff:
b b b b b b




bEasy
Objective: LO2-1 b b




AACSB: Reflectivethinking b




Topic: SOX
b b




2.2 LearningObjective 2-2 b b




1) Whichofthefollowingstatements is true as it relates to limited liabilitypartnerships?
b b b b b b b b b b b b b




A) Onlysenior partners are liable for the partnerships debts.
b b b b b b b b




B) Partnershavenoliabilityinalimitedliabilitypartnershiparrangement.
b b b b b b b b




C) Partnersarepersonallyliablefortheacts ofthoseundertheir supervision.
b b b b b b b b b b b




D) Allpartners must beAICPAmembers. m b




Answer: C
b b




Terms: Limitedliabilitypartnerships
b




Diff: Challenging
b b




Objective: LO2-2 b b




AACSB: Reflectivethinking b b




2) Whichstafflevel in aCPAfirm performs most ofthedetailed audit work?
b b b b b b b b b b b b b




A) partner
B) staffassistant b




C) seniorauditor b




D) seniormanager
Answer: B
b b




Terms: StafflevelsinCPAfirm
b b




Diff: Easy
b b




Objective: LO2-2 b b




AACSB: Reflectivethinking b b




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