Accounting Chapter 1 Assessment

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Questions and Answers

Independent audits today place more emphasis on sampling compared to the 19th century.

False

The American Institute of Certified Public Accountants has the primary authority to establish accounting standards.

True

The Sarbanes-Oxley Act requires auditors of certain publicly traded companies in the United States to perform an integrated audit.

True

What is the risk that a company will not be able to meet its obligations when they become due?

Liquidity risk Signup and view all the answers

What is a key difference between audits performed today and those prior to 1900?

Emphasis on technology and sampling Signup and view all the answers

The right to practice as a CPA is given by which of the following organizations?

State Board of Accountancy Signup and view all the answers

Operational auditing is primarily oriented toward:

Efficiency and effectiveness of operations Signup and view all the answers

In United States v. Arthur Young, the Supreme Court described the auditor's role as requiring independence and fidelity to:

Public trust Signup and view all the answers

What financial statement framework do U.S. public companies most likely follow?

Generally Accepted Accounting Principles (GAAP) Signup and view all the answers

Attest engagements always have:

A defined subject matter Signup and view all the answers

To attest to information means to provide assurance as to its:

Accuracy and reliability Signup and view all the answers

The forms of attestation engagements include:

Examinations, reviews, and agreed-upon procedures Signup and view all the answers

Examination engagements provide what level of assurance?

High level of assurance Signup and view all the answers

Agreed-upon procedures engagements provide what level of assurance?

No assurance Signup and view all the answers

A financial statement audit ordinarily:

Provides reasonable assurance about financial statements Signup and view all the answers

The organization that promulgates auditing standards for audits of public companies is the:

PCAOB Signup and view all the answers

The financial statement criteria followed in an audit of the financial statements of a public company are most likely to be:

GAAP Signup and view all the answers

Which term best describes the audit of a taxpayer's tax return by an IRS auditor?

Tax audit Signup and view all the answers

An integrated audit provides an explicit opinion on:

Financial statements and internal controls Signup and view all the answers

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 Signup and view all the answers

For a public company audit, management is primarily responsible for preparing the financial statements.

True Signup and view all the answers

An audit should be designed to obtain reasonable assurance of detecting non-compliance with laws.

True Signup and view all the answers

The pronouncements of the International Auditing and Assurance Standards Board override national auditing standards of its members.

False Signup and view all the answers

What is an attestation engagement?

An engagement to provide assurance on a defined subject matter Signup and view all the answers

The auditors' report for a nonpublic company should indicate:

The level of assurance provided Signup and view all the answers

A requirement for designing recruitment processes helps select individuals who meet minimum academic requirements.

True Signup and view all the answers

A peer review in which reviewers appraise a CPA firm's system of quality management is referred to as a(n):

Peer review Signup and view all the answers

Which of the following is the most likely type of audit opinion when a limitation on the scope of the audit is significant?

Disclaim opinion Signup and view all the answers

Which of the following is part of professional skepticism?

Critical assessment of audit evidence Signup and view all the answers

Which of the following organizations can revoke the right of an individual to practice as a CPA?

State Board of Accountancy Signup and view all the answers

Which standards are currently established by the AICPA?

Generally Accepted Auditing Standards (GAAS) Signup and view all the answers

Which of the following does the FASB consider a source of nonauthoritative guidance when no authoritative guidance is available?

The Industry Practice Signup and view all the answers

A basic objective of a CPA firm is to provide professional services conforming with standards. What provides reasonable assurance of achieving this?

Quality control procedures Signup and view all the answers

Study Notes

Chapter 1 Assessment

Independent audits now utilize more sampling compared to past practices, with technology enabling comprehensive audits of all transactions in large datasets.
The American Institute of Certified Public Accountants (AICPA) establishes accounting standards in the United States.
The Sarbanes-Oxley Act mandates integrated audits for certain public companies, requiring auditors to ensure the accuracy of financial statements and compliance with applicable laws.
The risk related to a company’s ability to meet obligations refers to liquidity risk.
Modern audits differ from those before 1900 in that they are more rigorous due to advanced technology and heightened regulatory requirements.
Licenses to practice as a CPA are granted by state boards of accountancy.
Operational auditing focuses on the efficiency and effectiveness of an organization's operations and internal controls.
In United States v. Arthur Young, the Supreme Court emphasized that auditors must maintain independence and fidelity to public trust.
U.S. public companies generally follow Financial Accounting Standards Board (FASB) guidelines for financial statements.
Attest engagements always require an independent assurance service on specified information.
To attest means to provide assurance about the reliability or credibility of the provided information.
Forms of attestation engagements include audits, reviews, and agreed-upon procedures.
Examination engagements offer a high level of assurance, typically expressed in a positive opinion.
Agreed-upon procedures engagements provide no assurance; instead, findings are reported based on specific procedures performed.
A traditional financial statement audit aims to express an opinion on the fairness of the financial statements.
The Financial Accounting Standards Board (FASB) establishes auditing standards for public companies.
In public company audits, financial statement criteria often adhere to Generally Accepted Accounting Principles (GAAP).
The audit of a taxpayer's tax return conducted by an IRS auditor is classified as a tax audit.
An integrated audit explicitly provides an opinion on the fairness of financial statements and internal control effectiveness.
A peer review arrangement involving an external CPA firm reviewing another firm’s operational quality is known as a peer review.

Chapter 2 Assessment

Management of public companies holds primary responsibility for the preparation of financial statements, while auditors provide an opinion based on generally accepted auditing standards.
Audits are structured to achieve reasonable assurance of identifying non-compliance with laws that materially impact financial disclosures.
International Auditing and Assurance Standards Board pronouncements do not supersede national standards, even for multinational financial statements.
Attestation engagements involve an auditor providing an assurance report based on specified information.
The auditors' report for a nonpublic company should indicate the level of assurance and the scope of the audit performed.
Establishing recruitment procedures to ensure quality compliance reflects a quality management practice in human resources.
A peer review that evaluates a CPA firm’s quality management in accounting and auditing is known as a peer review.
Significant scope limitations in audits likely result in a qualified opinion.
Professional skepticism embodies a questioning mind and a critical assessment of audit evidence to ensure thorough evaluations.
Organizations authorized to revoke CPA licenses include state boards of accountancy.
AICPA plays a crucial role in establishing professional standards specific to auditing and accounting.
Nonauthoritative guidance for FASB is sourced from entities like AICPA for situations lacking authoritative guidelines.
Achieving the objective of providing professional services that align with standards is intrinsically linked to maintaining a robust quality control system.

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Test your understanding of key concepts in Accounting with this Chapter 1 Assessment. Explore topics like independent audits, the Sarbanes-Oxley Act, and the evolution of auditing practices. Challenge yourself with questions that cover recent advancements in auditing technology and standards.

Accounting Chapter 1 Assessment

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Questions and Answers

Independent audits today place more emphasis on sampling compared to the 19th century.

The American Institute of Certified Public Accountants has the primary authority to establish accounting standards.

The Sarbanes-Oxley Act requires auditors of certain publicly traded companies in the United States to perform an integrated audit.

What is the risk that a company will not be able to meet its obligations when they become due?

What is a key difference between audits performed today and those prior to 1900?

The right to practice as a CPA is given by which of the following organizations?

Operational auditing is primarily oriented toward:

In United States v. Arthur Young, the Supreme Court described the auditor's role as requiring independence and fidelity to:

What financial statement framework do U.S. public companies most likely follow?

Attest engagements always have:

To attest to information means to provide assurance as to its:

The forms of attestation engagements include:

Examination engagements provide what level of assurance?

Agreed-upon procedures engagements provide what level of assurance?

A financial statement audit ordinarily:

The organization that promulgates auditing standards for audits of public companies is the:

The financial statement criteria followed in an audit of the financial statements of a public company are most likely to be:

Which term best describes the audit of a taxpayer's tax return by an IRS auditor?

An integrated audit provides an explicit opinion on:

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):

For a public company audit, management is primarily responsible for preparing the financial statements.

An audit should be designed to obtain reasonable assurance of detecting non-compliance with laws.

The pronouncements of the International Auditing and Assurance Standards Board override national auditing standards of its members.

What is an attestation engagement?

The auditors' report for a nonpublic company should indicate:

A requirement for designing recruitment processes helps select individuals who meet minimum academic requirements.

A peer review in which reviewers appraise a CPA firm's system of quality management is referred to as a(n):

Which of the following is the most likely type of audit opinion when a limitation on the scope of the audit is significant?

Which of the following is part of professional skepticism?

Which of the following organizations can revoke the right of an individual to practice as a CPA?

Which standards are currently established by the AICPA?

Which of the following does the FASB consider a source of nonauthoritative guidance when no authoritative guidance is available?

A basic objective of a CPA firm is to provide professional services conforming with standards. What provides reasonable assurance of achieving this?

Study Notes

Chapter 1 Assessment

Chapter 2 Assessment

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