Quiz for Audit exam 1

In an attestation engagement, a CPA practitioner is engaged to:

• prepare a written report containing a conclusion about the reliability of a management assertion.

• compile a company’s financial forecast based on management’s assumptions without expressing any form of assurance.

• prepare a tax return using information the CPA has not audited or reviewed.

• give expert testimony in court on particular facts in a corporate income tax controversy.

The Sarbanes–Oxley Act of 2002 prohibits public accounting firms from providing which of the following services to an audit client?

• Bookkeeping services.

• • 
    

    Internal auditing services.

• Valuation services.

• 
  

  All of the choices are correct.

What requirements are usually necessary to become licensed as a certified public accountant?

• • 
    

    Successful completion of the Uniform CPA Examination.

• • 
    

    Experience in the accounting field.

• • 
    

    Education.

• All of the choices are correct.

The Sarbanes–Oxley Act of 2002 generally prohibits public accounting firms from:

• • 
    

    acting in a managerial decision-making role for an audit client.

• auditing the firm’s own work on an audit client.

• providing tax consulting to an audit client without audit committee approval.

• All of the choices are correct.

Which of the following is a reason to obtain professional certification?

• Certification provides credibility that an individual is technically competent.

• Certification often is a necessary condition for advancement and promotion within a professional services firm.

• Obtaining certification is often monetarily rewarded by an individual’s employer.

• 
  

  All of the choices are correct.

Which of the following would be considered an assurance engagement?

• Giving an opinion on a prize promoter’s claims about the amount of sweepstakes prizes awarded in the past.

• Giving an opinion on the conformity of the financial statements of a university with generally accepted accounting principles.

• Giving an opinion on the fair presentation of a newspaper’s circulation data.

• Giving assurance about the average drive length achieved by golfers with a client’s golf balls.

• All of the choices are correct.

It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that:

• a potential conflict of interest always exists between the auditor and the management of the enterprise under audit.

• • 
    in audits of financial statements, the auditor acts exclusively in the capacity of an auditor.

• the professional status of the independent auditor imposes commensurate professional obligations.

• financial statements and financial data are verifiable.

According to the AICPA, the purpose of an audit of financial statements is to:

• enhance the degree of confidence that intended users can place in the financial statements.

• express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the Financial Accounting Standards Board.

• express an opinion on the fairness with which they present financial position, results of operations, and cash flows in conformity with accounting standards promulgated by the U.S. Securities and Exchange Commission.

• obtain systematic and objective evidence about financial assertions and report the results to interested users.

Bankers who are processing loan applications from companies seeking large loans will probably ask for financial statements audited by an independent CPA because:

• financial statements are too complex for the bankers to analyze themselves.

• they are too far away from company headquarters to perform accounting and auditing themselves.

• the consequences of making a bad loan are very undesirable.

• they generally see a potential conflict of interest between company managers who want to get loans and the bank's needs for reliable financial statements.

Independent auditors of financial statements perform audits that reduce:

• business risks faced by investors.

• 
  

  information risk faced by investors.

• • 
    

    complexity of financial statements.

• • 
    

    timeliness of financial statements.