Test Bank for Principles of Auditing and Other Assurance Services

Test Bank for Principles of Auditing and Other Assurance Services 22nd Edition by Ray Whittington, Kurt Pany | Chapter 1 -21 Complete Chapter 1 The Role of the Public Accountant

True/False Questions

• Independent audits of today place more emphasis on sampling for compliance with

laws and regulations than the audits of the 19th century.

Answer: True Difficulty: Medium

• The American Institute of Certified Public Accountants issues CPA certificates and

permits CPAs to practice.

Answer: False Difficulty: Medium

• A company is either audited by the GAO or internal auditors, but not both.

Answer: False Difficulty: Easy

• The SEC does not pass on the merits of the securities that are registered with the

agency.

Answer: True Difficulty: Medium

• The American Institute of Certified Public Accountants has the primary authority to

establish accounting standards.

Answer: False Difficulty: Easy

• An annual peer review is a requirement of the AICPA.

Answer: False Difficulty: Medium

• Many small companies elect to have their financial statements reviewed by a CPA

firm, rather than incur the cost of an audit.

Answer: True Difficulty: Easy

• Staff assistants in CPA firms generally are responsible for planning and coordinating

audit engagements.

Answer: False Difficulty: Easy 1 / 4

• The Sarbanes-Oxley Act requires that auditors of publicly traded companies in the

United States perform an integrated audit that includes providing assurance on both the financial statements and on compliance with laws and regulations.

Answer: False Difficulty: Medium

• Auditing is frequently only a small part of the practice of local CPA firms.

Answer: True Difficulty: Medium

Multiple Choice Questions

• A summary of findings rather than assurance is most likely to be included in a(n):
• Agreed-upon procedures report.
• Compilation report.
• Examination report.
• Review report.

Answer: A Difficulty: Medium

12. The Statements on Auditing Standards have been issued by the:

• Auditing Standards Board.
• Financial Accounting Standards Board.
• Securities and Exchange Commission.
• Federal Bureau of Investigation.

Answer: A Difficulty: Easy

• The risk associated with a company's survival and profitability is referred to as:
• Business Risk.
• Information Risk.
• Detection Risk.
• Control Risk.

Answer: A Difficulty: Easy 2 / 4

• Historically, which of the following has the AICPA been most concerned with

providing?

• Professional standards for CPAs.
• Professional guidance for regulating financial markets.
• Standards guiding the conduct of internal auditors.
• Staff support to Congress.

Answer: A Difficulty: Medium

• The organization charged with protecting investors and the public by requiring full

disclosure of financial information by companies offering securities to the public is

the:

• Auditing Standards Board.
• Financial Accounting Standards Board.
• Government Accounting Standards Boards.
• Securities and Exchange Commission.

Answer: D Difficulty: Medium

• An engagement in which a CPA firm arranges for a critical review of its practices by

another CPA firm is referred to as a(n):

• Peer Review Engagement.
• Quality Control Engagement.
• Quality Assurance Engagement.
• Attestation Engagement.

Answer: A Difficulty: Easy

• The serially-numbered pronouncements issued by the Auditing Standards Board over

a period of years are known as:

• Auditing Statements of Position (ASPs).
• Accounting Series Releases (ASRs).
• Statements on Auditing Standards (SASs).
• Statements on Auditing Principles (SAPs).

Answer: C Difficulty: Easy 3 / 4

18. The General Accounting Office (GAO):

• Is primarily concerned with rapid processing of all accounts payable incurred by

the federal government.

• Conducts operational audits and reports the results to Congress.
• Is a multinational organization of professional accountants.
• Is primarily concerned with budgets and forecasts approved by the SEC.

Answer: B Difficulty: Easy

19. The risk that information is misstated is referred to as:

• Information risk.
• Inherent risk.
• Relative risk.
• Business risk.

Answer: A Difficulty: Easy

• The risk that a company will not be able to meet its obligations when they become due

is referred to as:

• Information risk.
• Inherent risk.
• Relative risk.
• Business risk.

Answer: D Difficulty: Easy

• Which of the following attributes most clearly differentiates a CPA who audits

management's financial statements as contrasted to management?

• Integrity.
• Competence.
• Independence.
• Keeping informed on current professional developments.

Answer: C Difficulty: Easy

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