Test bank for auditing and assurance services an integrated approach 13th edition

Test Bank for Auditing and Assurance Services An Integrated Approach 13th Edition Recording, classifying, and summarizing economic events in a logical manner for the purpose of providin

Test Bank for Auditing and Assurance Services An Integrated

Approach 13th Edition

Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:

1. a finance

2 b auditing

3 c accounting

4 d economics

In the audit of historical financial statements, which of the following accounting bases

is the most common?

1. a Regulatory accounting principles

2 b Cash basis of accounting.

3 c Generally accepted accounting principles

4 d Liquidation basis of accounting

Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n):

1. a accounting and bookkeeping service

2 b attestation service

3 c assurance service

4 d tax service

Three common types of attestation services are:

1. a audits, reviews, and “other” attestation services

2 b audits, verifications, and “other” attestation services

3 c reviews, verifications, and “other” attestation services

4 d audits, reviews, and verifications

The organization that is responsible for providing oversight for auditors of public companies is called the

1. a Auditing Standards Board

2 b American Institute of Certified Public Accountants

3 c Public Oversight Board

4 d Public Company Accounting Oversight Board

The Sarbanes-Oxley Act applies to which of the following companies?

1. a All companies

2 b Privately held companies

3 c Public companies

4 d All public companies and privately held companies with assets greater than $500 million

Providing quantitative information that management and others can use to make decisions is the function of:

1. a management information systems

2 b auditing

3 c finance

4 d accounting

An audit of historical financial statements most commonly includes the:

1. a balance sheet, the income statement, and the statement of cash flows

2 b income statement, the statement of cash flows, and the statement of net working capital

3 c statement of cash flows, the balance sheet, and the retained earnings statement

4 d balance sheet, the income statement, and the statement of cash flows

The _ rate may be defined as approximately the rate a bank could earn by investing in U.S treasury notes for the same length as the length of a business

loan

1. a nominal

2 b stated

3 c risk-free

4 d prevailing

The use of the Certified Public Accountant title is regulated by:

1. a the federal government

2 b state law through a licensing department or agency of each state

3 c the American Institute of Certified Public Accountants through the licensing

departments of the tax and auditing committees

4 d the Securities and Exchange Commission

An operational audit has as one of its objectives to:

1. a determine whether the financial statements fairly present the entity’s operations

2 b evaluate the feasibility of attaining the entity’s operational objectives

3 c make recommendations for improving performance

4 d report on the entity’s relative success in attaining profit maximization

An audit of historical financial statements is most often performed to determine

whether the:

1. a organization is operating efficiently and effectively

2 b entity is following specific procedures or rules set down by some higher authority

3 c management team is fulfilling its fiduciary responsibilities to shareholders

4 d none of these choices

An examination of part of an organization’s procedures and methods for the purpose of evaluating efficiency and effectiveness is what type of audit?

1. a Operational audit

2 b Compliance audit

3 c Financial statement audit

4 d Production audit

An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n):

1. a audit of financial statements

2 b compliance audit

3 c operational audit

4 d production audit

Which of the following is a type of audit evidence?

1. a Oral responses to the auditor from employees of the company under audit

2 b Written communications from company employees or outsiders

3 c Observations made by an auditor

4 d Evidence may take any of the above forms

Which of the following services provides the lowest level of assurance on a financial statement?

1. a A review

2 b An audit

3 c Neither service provides assurance on financial statements

4 d Each service provides the same level of assurance on financial statements

The three requirements for becoming a CPA include all but which of the following?

1. a Uniform CPA examination requirement

2 b Educational requirements

3 c Character requirements

4 d Experience requirement

In “auditing” financial accounting data, the primary concern is with:

1. a determining whether recorded information properly reflects the economic events that occurred during the accounting period

2 b determining if fraud has occurred

3 c determining if taxable income has been calculated correctly

4 d analyzing the financial information to be sure that it complies with government requirements

Financial statement users often receive unreliable financial information from

companies Which of the following is not a common reason for this?

1. a Complex business transactions

2 b Large amounts of data

3 c Lack of firsthand knowledge about the business

4 d Each of these choices is a common reason for unreliable financial information

Which of the following is not a Trust Services principle as defined by the AICPA or CICA?

1. a Online privacy

2 b Availability

3 c Processing integrity

4 d Operational integrity

Which one of the following is more difficult to evaluate objectively?

1. a Presentation of financial statements in accordance with generally accepted accounting principles

2 b Compliance with government regulations

3 c Efficiency and effectiveness of operations

4 d All three of the above are equally difficult

The Sarbanes-Oxley Act prohibits a CPA firm that audits a public company from

providing which of the following types of services to that company?

1. a Reviews of quarterly financial statements

2 b Preparation of corporate tax returns

3 c Most consulting services

4 d Tax services

Which of the following audits can be regarded as generally being a compliance

audit?

1. a IRS agents’ examinations of taxpayer returns

2 b GAO auditor’s evaluation of the computer operations of governmental units

3 c An internal auditor’s review of a company’s payroll authorization procedures

4 d A CPA firm’s audit of the local school district

Which of the following can be significantly affected by an audit?

1. a Business risk

2 b Information risk

3 c The risk-free interest rate

4 d Inherent risk

The trait that distinguishes auditors from accountants is the:

1. a auditor’s ability to interpret accounting principles generally accepted in the United States

2 b auditor’s education beyond the Bachelor’s degree

3 c auditor’s ability to interpret FASB Statements

4 d auditor’s accumulation and interpretation of evidence related to a company’s financial statements

Total Points: 0 correct out of 25

Attestation services on information technology include WebTrust services and SysTrust services Which of the following statements most accurately describes SysTrust

services?

1. a SysTrust services provide assurance on business processes, transaction integrity and information processes

2 b SysTrust services provide assurance on system reliability in critical areas such as security and data integrity

3 c ysTrust services provide assurance on internal control over financial reporting

4 d SysTrust services provide assurance as to whether accounting personnel are following procedures prescribed by the company controller

The criteria by which an auditor evaluates the information under audit may vary with the information being audited

1. a True

2 b False

The criteria used by an external auditor to evaluate published financial statements are known as generally accepted auditing standards

1. a True

2 b False

The Sarbanes-Oxley Act establishes standards related to the audits of privately held companies

1. a True

2 b False

The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to auditing and financial reporting

1. a True

2 b False

Only companies that file annual statements with the Securities and Exchange

Commission are required to have an annual external audit

1. a True

2 b False

The financial statements most commonly audited by external auditors are the balance sheet, the income statement, and the statement of changes in retained earnings

1. a True

2 b False

The primary purpose of a compliance audit is to determine whether the financial statements are prepared in compliance with generally accepted accounting

principles

1. a True

2 b False

Results of compliance audits are typically reported to someone within the

organizational unit being audited rather than to a broad spectrum of outside users

1. a True

2 b False

The primary role of the United States General Accounting Office is the enforcement of the federal tax laws as defined by Congress and interpreted by the courts

1. a True

2 b False

CPA firms are never allowed to provide bookkeeping services for audit clients

1. a True

2 b False

Section 404 of the Sarbanes-Oxley Act requires public companies to have an external auditor attest to their internal control over financial reporting

1. a True

2 b False

The Sarbanes-Oxley Act requires a company’s chairman of the board of directors, CEO, and CFO to certify the company’s financial statements

1. a True

2 b False

The criterion that is most likely to be used as a framework in evaluating a company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act is the Enterprise Risk Management framework

1. a True

2 b False

Most public companies’ audited financial statements are available on the SEC’s EDGAR database

1. a True

2 b False