WorksheetsCPA Firm Regulations Quiz
Total questions: 100
Worksheet time: 50mins
The legal right to perform audits is granted to a CPA firm by regulation of:
each state
the Financial Accounting Standards Board (FASB)
the American Institute of Certified Public Accountants (AICPA)
the Auditing Standards Board
Which of the following is **not** a characteristic of a small local CPA firm?
Most small firms have fewer than 25 professionals.
Small firms perform audits on small and not-for-profit businesses.
Tax services are more important than auditing services to the small firm.
Small firms are prohibited by the SEC from auditing publicly traded companies.
Sarbanes-Oxley and the Securities and Exchange Commission restrict auditors from providing many consulting services to their publicly traded audit clients. Which of the following is true for auditors of publicly traded companies?
I only
II only
I and II
Neither I nor II
Which of the following does **not** describe a size category for a CPA firm?
Big Four national firms
Big Four international firms
local firms
national and regional firms
_____ is one of the Big Four international CPA firms.
KPMG
Deloitte
Grant Thornton
Ernst & Young
PricewaterhouseCoopers
In which type of service does the CPA assemble the financial statements but provide no assurance to third parties?
audit
compilation
review
bookkeeping
Which of the following is not one of the National/Regional CPA Firms?
PwC
BDO USA
Grant Thornton
RSM US
Which of the following is not an accurate definition or description of a local CPA firm?
Some local CPA firms have several offices.
Local CPA firms do not compete for clients with the Big Four CPA firms.
Some local CPA firms are affiliated with other CPA firms to share resources.
Many local CPA firms provide primarily accounting and tax services to their clients only.
Many small, local accounting firms perform audits as their primary service to their clients. Is this statement true or false?
True
False
Under Sarbanes-Oxley and the Securities and Exchange Commission, auditors are restricted from providing many consulting services to their publicly traded audit clients. Is this statement true or false?
True
False
Small local CPA firms are allowed under Sarbanes-Oxley and the Securities and Exchange Commission a special exemption to perform audits of publicly-listed firms. Is this statement true or false?
True
False
In addition to attestation and assurance services, CPA firms provide other services to their clients. Which of the following is not one of these services?
Accounting and bookkeeping services
Tax services
Management consulting and risk advisory services
Medical consulting services
Which of the following statements is true as it relates to limited liability partnerships?
Only senior partners are liable for the partnership's debts.
Partners have no liability in a limited liability partnership arrangement.
Partners are personally liable for the acts of those under their supervision.
All partners must be AICPA members.
Which staff level in a CPA firm performs most of the detailed audit work?
partner
staff assistant
senior auditor
senior manager
Which staff level in a CPA firm manages the overall relationship with the client and manages the audit, in general?
the audit partner
the audit staff assistant
the senior or in-charge auditor with 2-5 years' experience
the audit manager
All of the Big Four accounting firms and many of the smaller CPA firms now operate as limited liability partnerships.
TRUE
FALSE
Limited liability companies are structured and taxed like a general partnership, but their owners have limited personal liability similar to that of a general corporation.
TRUE
FALSE
In a CPA firm, the audit partner coordinates the performance of audit procedures.
TRUE
FALSE
In a CPA firm, the audit senior or the in-charge auditor performs most of the detailed audit work.
TRUE
FALSE
What are the three factors that influence the organizational structure of all CPA firms?
The need for independence from clients, the importance of a structure to encourage competence, and the increased litigation risk faced by auditors.
The need for independence from clients, the importance of marketing strategies, and the increased litigation risk faced by auditors.
The need for independence from clients, the importance of a structure to encourage competence, and the need for financial incentives.
The need for independence from clients, the importance of a structure to encourage competence, and the need for tax benefits.
Which of the following is NOT one of the six organizational structures available to CPA firms?
Proprietorship
General partnership
Sole proprietorship
Limited liability partnership
The organization responsible for providing oversight for auditors of public companies is called the:
Auditing Standards Board
American Institute of Certified Public Accountants
Public Oversight Board
Public Company Accounting Oversight Board
Members of the Public Company Accounting Oversight Board are appointed and overseen by the:
U.S. Congress
American Institute of Certified Public Accountants
Auditing Standards Board
Securities and Exchange Commission
Which of the following is a function of the Public Company Accounting Oversight Board (PCAOB)?
Performs inspections of the quality controls of firms that audit public companies
Establishes auditing standards that must be followed by CPAs on all audits
Oversees auditors of private companies (public company)
Performs all of the above functions
If the Public Company Accounting Oversight Board (PCAOB) identifies a violation during its inspection of a registered accounting firm, it can:
Enforce disciplinary action against the accounting firm, report the matter to the Securities and Exchange Commission, and suspend the license to practice of the CPA guilty of the violation
Enforce disciplinary action against the accounting firm, report the matter to the Securities and Exchange Commission, but not suspend the license to practice of the CPA guilty of the violation
Enforce disciplinary action against the accounting firm, but not report the matter to the Securities and Exchange Commission or suspend the license to practice of the CPA guilty of the violation
Not enforce disciplinary action, report the matter to the Securities and Exchange Commission, or suspend the license to practice of the CPA guilty of the violation
Has audit quality improved since the passage of Sarbanes-Oxley Act (SOX)? Which of the following statements is true with regards to audit quality since the passage of SOX?
The frequency of financial statement restatements has increased since SOX.
PCAOB audit engagement findings continue to document a high level of audit deficiencies.
Finally, the auditing profession agrees on the definition of audit quality.
No progress has been made on the definition of what are called "Audit Quality Indicators" since SOX.
The Public Company Accounting Oversight Board (PCAOB) provides oversight to auditors of publicly traded and private companies. Is this statement true or false?
True
False
The PCAOB requires annual inspections of accounting firms that audit more than ten public companies. Is this statement true or false?
True
False
The PCAOB requires annual inspections of other registered accounting firms that audit less than 100 publicly listed companies at least once every 3 years. Is this statement true or false?
True
False
What are the primary functions of the Public Company Accounting Oversight Board (PCAOB) established by the Sarbanes-Oxley Act?
Provide oversight for auditors of private companies.
Establish auditing, attestation, and quality control standards for public company audits.
Perform inspections of audit engagements for private companies.
Regulate financial reporting for private companies.
Which form must be completed and filed with the Securities and Exchange Commission whenever a company experiences a significant event that is of interest to public investors?
Form S-1
Form 8-K
Form 10-K
Form 10-Q
Which form must be filed with the Securities and Exchange Commission whenever a company plans to issue new securities to the public?
Form S-1
Form 8-K
Form 10-K
Form 10-Q
Which of the following is a correct statement regarding the SEC?
The Securities Act of 1934 requires most companies planning to issue new securities to the public to submit a registration statement to the SEC for approval.
All public companies must file monthly statements with the SEC.
The Form 10-K must be filed within 30 days after the close of the fiscal year. (Within 60-90 days)
The SEC has the power to establish rules for any CPA associated with audited financial statements submitted to the commission.
With respect to the SEC, which of the following is true?
The attitude of the SEC is generally considered in any major change proposed by the FASB.
The SEC is the sole agency responsible for setting generally accepted accounting principles.
The SEC requirements of greatest interest to CPAs are set forth in their enforcement regulations.
The SEC has the power to establish rules for all CPAs.
Which of the following is **not** a publication issued by the Securities and Exchange Commission?
Accounting and Auditing Enforcement Actions
Accounting Series Releases
Regulation S-X
State Board of Accountancy Enforcement Actions
What is the difference between the Securities Act of 1933 and the Securities Act of 1934?
The 1933 Act requires audited financial statements.
The 1934 Act requires public companies to file detailed audit reports.
The 1933 Act requires public companies to file detailed audit reports.
The 1934 Act does not require audited financial statements.
Form 10-K must be filed with the SEC whenever a public company experiences a significant event. Is this statement true or false?
True
False
True for Form 8-K
False for Form 10-Q
What is the overall purpose of the Securities and Exchange Commission?
To assist in providing investors with reliable information upon which to make investment decisions.
To regulate the stock market and prevent insider trading.
To ensure public companies file monthly reports.
To establish rules for CPAs.
Form 10-Q must be filed monthly with the Securities and Exchange Commission by every publicly held company. Is this statement true or false?
True
False
Filed quarterly
Filed annually
The Securities and Exchange Commission plays a key role in setting generally accepted accounting principles. What is its primary purpose?
To regulate accounting standards and enforce compliance.
To assist CPAs in filing reports.
To establish rules for public companies.
To set guidelines for financial audits.
Statements on Standards for Accounting and Review Services (SSARS) are issued by which of the following?
Accounting and Review Services Committee.
Professional Ethics Executive Committee.
Securities and Exchange Commission.
Financial Accounting Standards Board.
The American Institute of Certified Public Accountants (AICPA) sets rules of conduct that CPAs are required to meet. Which of the following is NOT a function of the AICPA?
Issuing licenses to new CPAs.
Restricting its membership to CPAs who are independent auditors.
Setting auditing standards for both public and private companies.
Setting rules of conduct that CPAs are required to meet.
In 2017, the American Institute of CPAs joined with which of the following to form the Association of International Certified Public Accountants?
The Chartered Institute of Management Accountants.
The Securities and Exchange Commission.
The Public Accounting Oversight Board.
The Japanese Institute of Certified Public Accountants.
Membership in the AICPA is restricted to CPAs who are currently practicing as independent auditors. Is this statement true or false?
True.
False.
Membership in the AICPA is mandatory for all licensed practicing CPAs. Is this statement true or false?
True.
False.
A CPA must meet continuing education requirements to maintain their license to practice. Is this statement true or false?
True.
False.
The Auditing Standards Board (ASB) of the AICPA is responsible for issuing pronouncements on auditing matters in the U.S. for the audits of every type of entity. Is this statement true or false?
True.
False.
What are the major functions of the AICPA?
Setting rules of conduct for CPAs and issuing auditing standards.
Issuing licenses to CPAs and restricting membership to independent auditors.
Setting rules of conduct for CPAs and issuing licenses to new CPAs.
Restricting membership to independent auditors and issuing auditing standards.
Which of the following are audit standards used in professional practice by audit firms?
Yes, No, No
Yes, Yes, No
Yes, Yes, Yes
No, Yes, Yes
Who is responsible for establishing auditing standards for privately held companies?
Securities and Exchange Commission
Public Company Accounting Oversight Board
Auditing Standards Board
National Association of Accounting
Standards issued by the Public Company Accounting Oversight Board must be followed by CPAs who audit:
both private and public companies.
public companies only.
private companies, public companies, and nonprofit entities.
private companies only.
The International Standards on Auditing (ISA):
are issued by the AICPA.
override a country's regulations governing the audit of a company.
has many of the same standards as the Auditing Standards Board (ASB).
must be followed by companies whose stock is traded in the U.S.
________ are referred to as U.S. generally accepted auditing standards (GAAS).
PCAOB Auditing Standards
International Standards on Auditing
AICPA Auditing Standards
Auditing Standards Board Standards
Which of the following is a true statement regarding auditing standards?
Prior to the passage of Sarbanes-Oxley, the FASB established auditing principles for U.S. public companies.
PCAOB auditing standards are applicable to entities outside the U.S.
There are no similarities between PCAOB standards and International Standards on Auditing.
The Auditing Standards Board has revised most of its standards to converge with the international standards.
Which of the following is true with regards to the various auditing standards?
Statements on Auditing Standards (SASs) are issued by the PCAOB.
The ASB Clarity Project was intended to make the U.S. auditing standards easier to read, understand, and apply.
The ASB redrafted existing AICPA auditing standards to align them with respective International Standards on Auditing (ISA's).
Both B and C are correct.
Which of the following is not one of the main sets of auditing standards around the world today?
AICPA Auditing Standards
International Standards on Auditing
PCAOB Auditing Standards
Securities and Exchange Commission Auditing Standards
The PCAOB considers International Standards on Auditing (ISA) when developing its standards.
True
False
International Standards on Auditing are issued by the International Auditing and Assurance Standards Board (IAASB).
True
False
The ASB has revised its audit standards to converge with international standards.
True
False
International Standards on Auditing (ISAs) override a country's regulations governing the audit of financial or other information.
True
False
Historically, auditing standards have been organized into three categories, including:
Standards of field work.
Purpose of an audit.
Responsibilities of the auditor.
Proper planning and supervision.
The "Principles Underlying an Audit in Accordance with Generally Accepted Auditing Principles" provide a framework to help auditors:
understand the ten GAAS standards.
obtain complete assurance that the financial statements are free from any error.
report on the financial statements.
prevent fraud.
Which of the following is **not** one of the responsibilities of an auditor under the principles underlying an audit of financial statements?
possess appropriate competence and capabilities.
comply with relevant ethical requirements.
plan work and supervise assistants.
maintain professional skepticism and exercise professional judgment.
To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, the auditor must fulfill several performance responsibilities, including:
verifying that all audit work is performed by a CPA with a minimum of three years' experience.
obtaining sufficient, appropriate audit evidence.
exercising professional judgment.
providing an opinion on the financial statements.
The Statements on Auditing Standards issued by the Auditing Standards Board:
are regarded as authoritative literature.
mandate the amount of evidence that must be obtained.
must be followed in all situations.
are optional guidelines which an auditor may choose to follow or not follow when conducting an audit.
An auditor need not abide by a particular auditing standard if the auditor believes that:
the issue in question is immaterial in amount.
more expertise is needed to fulfill the requirement.
the requirement of the standard has not been addressed by the PCAOB.
fraud is involved.
When assessing the risk of material misstatements in the financial statements:
inadequate internal control procedures will mitigate client business risk.
GAAS specifies in detail how much and what types of evidence the auditor needs to obtain.
company management is responsible for determining materiality levels.
the auditor must understand the client's business and industry.
In order to properly plan and perform an audit, an important fact for both the auditor and the client to understand is that:
the internal control policies and procedures are developed by the auditors.
the purpose of an audit is to prevent fraud.
management is responsible for the preparation of the financial statements.
auditors are responsible for the preparation of the financial statements.
The principles underlying an audit:
Contain the procedures that must be followed during an audit.
Carry the same authority as AICPA auditing standards.
Only apply to the audits of public companies.
Provide structure for the clarified Codification.
The AICPA principles underlying an audit are organized around four principles. Which of the following is **not** one of those principles?
Fairness
Responsibilities
Reporting
Performance
Which of the following statements about Generally Accepted Audit Standards are true? I. They serve as broad guidelines to auditors for conducting an audit engagement. II. They are sufficiently specific to provide a meaningful guide to practitioners. III. They represent a framework upon which the AICPA can provide interpretations.
I and II
I and III
II and III
I, II, and III
The AICPA principles and the auditing standards should be viewed by practitioners as:
Ideals to work towards, but which are not achievable.
Maximum standards that denote excellent work.
Minimum standards of performance that must be achieved on each audit engagement.
Benchmarks to be used on all audits, reviews, and compilations.
Which of the following is an accurate statement regarding principles and auditing standards?
The principles underlying an audit give specific guidance to an auditor when a problem arises in an audit.
The principles underlying an audit state that the only objective of an audit is to provide financial statement users with an opinion.
All auditing standards issued by the PCAOB are given two classification numbers.
The Statement on Auditing Standard (SAS) number identifies the order in which it was issued in relation to other SASs.
__________ is an attitude that includes a questioning mind, being alert to conditions that might indicate possible misstatements due to fraud or error, and a critical assessment of audit evidence.
Reasonableness
Diligence
Professional skepticism
Competence
To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, the auditor fulfills several performance responsibilities. Which of the following is one of these responsibilities?
Complying with the AICPA Code of Professional Conduct
Issuing a written report on the financial statements
Determining and applying materiality levels
Having the appropriate competence to perform the audit
Which of the following is NOT true regarding the purpose of an audit performed on a set of financial statements in accordance with generally accepted auditing standards?
To provide users of the financial statements with an opinion on the financial statements
To provide users of the financial statements with absolute assurance that the financial statements contain no errors in them
To provide financial statement users with an opinion on whether the financial statements are presented fairly or not
To provide financial statement users with an opinion in accordance with the applicable financial reporting framework
In situations in which the CPA or the CPA's assistants are not qualified to perform the audit work, which of the following is NOT an option the CPA or the CPA firm has?
The CPA and the CPA's assistants have a professional obligation to acquire the required knowledge and skills
The CPA and the CPA's assistants should simply rely more upon the client's representations when performing the audit
The CPA should suggest someone else or another CPA firm which is qualified to perform the work
The CPA should decline the audit engagement
Professional skepticism must be maintained only if the auditor suspects fraud. Is this statement true or false?
True
False
Statements on Auditing Standards (SASs) are issued by the Public Company Accounting Oversight Board. Is this statement true or false?
True
False
The AU-C number identifies the order in which it was issued in relation to all other codified auditing standards. Is this statement true or false?
True
False
Similar to the Financial Accounting Standards Board (FASB) Codification, the AICPA has codified the Statement of Auditing Standards. Is this statement true or false?
True
False
The PCAOB website includes a reference tool that identifies the analogous AICPA and IAASB auditing standards for each PCAOB standard. Is this statement true or false?
True
False
An auditor should accept the fact that management of an audit client may restrict access to persons within the entity from whom the auditor may need to obtain audit evidence due to client confidentiality. Is this statement true or false?
True
False
Quality control for a CPA firm:
Includes the organizational structure of the firm and the procedures it establishes.
Is tailored to each specific audit engagement.
Is a guarantee that auditing standards are followed.
Is required only for firms auditing SEC companies.
The method used by a CPA firm to ensure that the firm meets its professional responsibilities to clients and others is:
Continuing professional education.
Compliance with generally accepted reporting standards.
Quality control.
Peer review.
Within the context of quality control, the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide its personnel with:
Technical training that assures proficiency as a valuation expert.
Professional education that is required in order to perform with due professional care.
Knowledge required to fulfill assigned responsibilities.
Knowledge required to perform a peer review.
The purpose of establishing quality control policies and procedures to accept or continue a client relationship is to:
Provide reasonable assurance that personnel are adequately trained to fulfill their responsibilities.
Monitor the risk factors concerning misstatements that arise from the misappropriation of assets.
Document objective criteria for the CPA firm's peer review.
Minimize the likelihood of associating with a client whose management may lack integrity.
Which of the following is an element of the CPA's quality control system that should be considered in establishing its quality control policies and procedures?
Considering audit risk and materiality.
Using statistical sampling techniques.
Assigning appropriately experienced personnel to engagements.
Reviewing financial statements for compliance with GAAP.
Which of the following is **not** an essential component of quality control?
Policies and procedures to ensure that firm personnel are actively engaged in marketing strategies
Policies and procedures to ensure that the work performed by firm personnel meet applicable professional standards
Policies to ensure that personnel maintain their independence in fact and in appearance
Policies that ensure that monitoring activities are effectively applied
Which one of the following is **not true** regarding the American Institute of Certified Public Accountants peer review requirement?
A CPA firm must develop and adhere to quality control standards.
Peer reviews are mandatory.
A CPA firm will lose AICPA eligibility if a peer review is not performed.
Firms required to be registered with and inspected by the PCAOB are exempt.
How often is the AICPA Peer Review Program performed on an AICPA member CPA firm administered by a State CPA Society under the overall direction of the AICPA Peer Review Board?
every year
every 2 years
every 3 years
every 5 years
Which of the following is **not** a purpose of the Center for Audit Quality which is affiliated with the AICPA?
to serve the capital markets
to serve public company auditors
to serve investors
to serve the International Accounting Standards Board (IASB)
Quality controls are established for the entire CPA firm whereas auditing standards are applicable to the individual engagement.
True
False
In order to be eligible for membership in the AICPA, public accounting firms must be enrolled in an AICPA-approved practice monitoring program. Members of the firm can still be eligible for AICPA membership even if their firms are not enrolled in an AICPA-approved practice monitoring program.
True
False
The relationship between quality control and generally accepted auditing standards is that:
Quality control ensures compliance with auditing standards.
Quality control is unrelated to auditing standards.
Auditing standards are broader than quality control.
Auditing standards are established by the AICPA Peer Review Board.
List and describe the six elements of quality control. Who establishes the standards for quality control?
The PCAOB establishes the standards for quality control.
The Center for Audit Quality establishes the standards for quality control.
The AICPA establishes the standards for quality control.
The State CPA Society establishes the standards for quality control.
The policy of determining whether to accept or reject a new client at Crystal Cove audit firm is an example of which type of standard?
Auditing standard
Quality control standard
Accounting standard
Ethical standard
Which term refers to an organizational structure where professional services are provided by one or more shareholders?
Limited liability partnership
Professional corporation
Limited liability company
Peer review
What is the term for the grantor of the right to practice public accounting?
PCAOB
AICPA
IAASB
Securities Exchange Commission
Which term describes a report filed to indicate a significant event?
Form 10-K
Form 8-K
Form S-1
1934 Securities Act
