Question 1. Question : (TCO 3) The organization that is responsible for providing oversight for auditors of public companies is called the _____ Student Answer: Auditing Standards Board. American Institution of Public Accountants. Accounting Oversight Board. Public Company Accounting Oversight Board. Question 2. Question : (TCO 1) Which one of the following is not a field work standard? Student Answer: Adequate planning and supervision Due professional care Understand the entity and its environment, including internal control Sufficient appropriate audit evidence Question 3. Question : (TCO 1) Which of the following is not an example of the application of professional skepticism? Student Answer: Designing additional auditing procedures to obtain more reliable evidence in support of a particular financial statement assertion Obtaining corroboration of management’s explanations through consultation with a specialist Inquiring of prior year engagement personnel regarding their assessment of management’s honesty and integrity Using third-party confirmations to provide support for management’s representations. Question 4. Question : (TCO 1) An operational audit has as one of its objectives to Student Answer: determine whether the financial statements fairly present the entity’s operations. evaluate the feasibility of attaining the entity’s operational objectives. make recommendations for improving performance. report on the entity’s relative success in attaining profit maximization. Question 5. Question : (TCO 1) Which of the following services do not need to be preapproved by the audit committee of an issuer? Student Answer: Tax services Nonaudit services that are less than 5 % of total revenues from the audit client Services provided by the auditor on a recurring basis Nonaudit services related to internal control over financial reporting Question 6. Question : (TCO 3) The concept of materiality would be least important to an auditor when considering the Student Answer: adequacy of disclosure of a client’s illegal act. discovery of weaknesses in a client’s internal control. effects of a direct financial interest in the client on the CPA’s independence. decision whether to use positive or negative confirmations of accounts receivable. Question 7. Question : (TCO 3) Independence in auditing means Student Answer: remaining aloof from a client. not being financially dependent on a client. taking an unbaised and objective viewpoint. being an advocate for a client. Question 8. Question : (TCO 3) The financial interests of which of the following parties would not be included as a direct financial interest of the CPA? Student Answer: Spouse Dependent child Relative supported by the CPA Sibling living in the same city as the CPA Question 9. Question : (TCO 1) The phrase U.S. generally accepted accounting principles is an accounting term that Student Answer: includes broad guidelines of general application but not detailed practices and procedures. encompasses the conventions, rules, and procedures necessary to define U.S. accepted accounting practice at a particular time. provides a measure of conventions, rules, and procedures governed by the AICPA. is included in the audit report to indicate that the audit has been conducted in accordance with generally accepted auditing standards (GAAS). Question 10. Question : (TCO 1) Which of the following items impairs independence under U.S. ethics standards but does not necessarily impair independence under the IFAC Code of Ethics for Professional Accountants? Student Answer: An immaterial direct financial interest in an audit client Employment at a client of an immediate family member of the engagement partner in a key accounting position The auditor also provides internal audit outsourcing services Contingent fee arrangements for audit engagements
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