Multiple Choice Quiz

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Results Reporter
Out of 12 questions, you answered 2 correctly with a final grade of 17%
2 correct
(17%)
10
incorrect
(83%)
0
unanswer
ed (0%)

Your Results:
The correct answer for each question is indicated by a
1
INCORRECT

2
INCORRECT

Generally accepted accounting principles (GAAP) are distinguished from

generally accepted auditing standards (GAAS) in that:
GAAP are the principles for presentation of financial statements and
A) underlying transactions, while GAAS are the standards auditors should
follow when conducting an audit.
GAAP are the principles auditors follow when conducting an audit,
B) while GAAS are the standards for presentation of financial statements
and underlying transactions.
GAAP are promulgated by the SEC, while GAAS are promulgated by
C) the FASB.
When GAAP are violated, sufficiently strong GAAS may make up for
D) most GAAP deficiencies.

When GAAS often do not provide "hard and fast rules," they provide
subjective guidance which allows auditors to:
A)
B)
C)
D)

Tailor their audit to procedures requested by management.

Only apply those standards that are important to the audit.
Accurately interpret the profession's Code of Professional Conduct.
Use adequate professional judgment when applying the standards.

3 CORRECT

The Sarbanes-Oxley Act requires that auditors of certain large publicly

traded companies in the United States perform an integrated audit that
includes providing an audit report on a company's internal control and
which of the following?
A)
B)
C)
D)

4
INCORRECT

Financial statements and compliance with laws and regulations

Financial statements
Compliance with laws and regulations
Neither financial statements nor compliance with laws and regulations

Which of the following is not an underlying premise of an audit relating to

management's responsibility to provide an auditor?
Provide all information relevant to the preparation and fair presentation
A) of the financial statements.
B)

Provide any additional information requested by the auditor.

Provide inner-connectivity to all operational databases used during the

C) previous three year period.
Provide unrestricted access to those within the entity whom the auditor
D) determines it necessary to obtain audit evidence.

5
INCORRECT

The auditors provide an opinion on whether the financial statements are

presented in accordance with the:
A)
B)
C)
D)

Applicable financial reporting framework.

Attestation standards.
Current industry standards.
Generally accepted auditing standards.

6 CORRECT

The primary difference between financial statement errors and fraud is that:
Errors are intentional misstatements by management, while fraud
A) involves unintentional mistakes or omissions.
Errors are unintentional mistakes or omissions, while fraud involves
B) intentional misstatements.
C)

There is no difference as errors and fraud have the same meaning.

Errors are more likely to provide an indication that an illegal act has
D) occurred.

7
INCORRECT

Auditor responsibility for identifying "direct effect" illegal acts differs from
their responsibility for detecting:
A)
B)
C)
D)

8
INCORRECT

Errors.
Fraud.
Management fraud.
Other illegal acts.

When the Statements on Auditing Standards use the word "must" relating to
a requirement, it means that the auditor:
A)

Must fulfill the requirement when it is possible.

Must comply with the requirements unless the auditor finds that
B) alternative actions are sufficient.
May only decide not to perform the procedure in the audit of a
C) nonpublic company.
May use professional judgment in all circumstances in deciding
D) whether to meet the requirement.

9
INCORRECT

The level of assurance provided by an audit of detecting a material

misstatement is referred to as:
A)

Absolute assurance.

B)
C)
D)

10
INCORRECT

High assurance.
Negative assurance.
Reasonable assurance.

Which of the following is not a function of the Public Company Accounting

Oversight Board?
A)
B)
C)

Conduct inspections of registered public accounting firms.

Establish or adopt auditing standards.
Promulgate accounting principles.

Register public accounting firms that prepare audit reports of publicly

D) traded companies.

11
INCORRECT

If financial statements are not fairly presented on an overall basis, the most
likely type of audit opinion will be a(n):
A)
B)
C)
D)

12
INCORRECT

Adverse opinion.
Disclaimer of opinion.
Qualified opinion.
GAAP departure opinion.

Professional skepticism includes a questioning mind and a(n):

A)
B)
C)

Analysis of each transaction occurring during the period.

Critical assessment of audit evidence.
Detailed analysis of internal control procedures.
Investigation of all laws impacting the organization.

D)

E-mail Your Results

esults Reporter
Out of 12 questions, you answered 4 correctly with a final grade of 33%
4 correct
(33%)
8 incorrect
(67%)
0
unanswere
d (0%)

Your Results:
The correct answer for each question is indicated by a
1
INCORRECT

Ethical dilemmas generally involve situations in which the:

A)
B)

Welfare of one or more individuals is affected by another's decision.

AICPA has established "rulings" prohibiting conflicts of interest.

Individual involved must make a decision that affects continuation of

C) an ethical approach.
D)

The IIA Code of Conduct has recently been modified.

2 CORRECT

Which of the following forms of organization is most likely to restrict the

personal liability of CPAs not involved on a particular audit that their firm
has conducted?
A)
B)
C)
D)

Limited liability partnership

Partnership
Professional corporation
Restricted company

3
INCORRECT

Which of the following is correct concerning the AICPA Conceptual

Framework for Independence Standards?
It suggests that a CPA should evaluate whether a particular threat to
A) independence would lead another CPA, aware of all the relevant facts,
to conclude that an unacceptable risk of nonindependence exists.
B)

It relates to actual independence, not independence in appearance.

It applies only when the Code of Professional Conduct does not directly
C) address a threat to independence.
It is relevant only in those situations in which consulting services are
D) being performed.

4
INCORRECT

Which of the following is not considered by the AICPA Conceptual

Framework for Independence Standards a broad category of threat to
auditor independence?
A)
B)
C)
D)

5
INCORRECT

Adverse interest
Financial self-interest
Management participation
Safeguards

A CPA's investment in the stock of an audit client is considered a(n):

Direct financial interest which impairs independence regardless of
A) amount.
B)

Direct financial interest which impairs independence when material.

Indirect financial interest that impairs independence regardless of

C) amount.
D)

Indirect financial interest that impairs independence when material.

6 CORRECT

Which of the following statements is true with respect to the SEC's concept
of independence when an auditor both prepares financial statements and
audits those financial statements for a client?

A)

The auditor is not independent.

The auditor is independent if he or she is able to maintain a level of

B) professional detachment.
The auditor can audit the financial statements only if the of the audit
C) process does not culminate in the expression of an opinion on the
financial statements.
The auditor cannot audit the financial statements since the auditor lacks
D) integrity.

7
INCORRECT

In which circumstance is a CPA firm's independence most likely to be

impaired?
An individual on the audit has a close relative who is a receptionist for
A) the client.
The father of the audit senior holds a material financial interest in the
B) client of which the senior is unaware.
The spouse of a staff member on the audit has an immaterial common
C) stock investment in the audit client..
The partner in charge of the office's compensation is affected by office
D) profitability, a portion of which arises from this audit.

8 CORRECT

Which of the following partners is least likely to be considered a "covered

member" for purposes of the audit of Company A, performed by the
Chicago office of a national CPA firm?
A)

The partner in charge of the entire CPA firm.

A partner in the San Diego office of the CPA firm who maintains a
B) small, immaterial investment in Company A.
A partner in the Chicago office who worked on the Company A audit in
C) previous years, but currently has no responsibilities with respect to the
audit.
D)

The partner in charge of the Chicago office.

9 CORRECT

Which of the following is a correct statement concerning the SarbanesOxley Act of 2002?
A)

It applies to audits of all companies doing business in the United States.

It makes performance of nonattest services relating to financial

B) information systems design and implementation for audit clients
unlawful.
It requires the divestiture of a consulting department of any CPA firm
C) performing audits of publicly traded companies.
It requires the reporting of all illegal acts identified during an audit to
D) the Justice Department.

10
INCORRECT

Contingency fee based pricing of accounting services is:

A)
B)
C)
D)

11
INCORRECT

Always strictly prohibited in public accounting practice.

Never restricted in public accounting practice.
Prohibited if associated with the type of audit opinion received.
Considered an act discreditable to the profession.

Which of the following best describes the passing of confidential

information from a client to its auditor, that information:
A)
B)

Should in no circumstances be conveyed to third parties.

Is not legally protected and can be subpoenaed by a federal court.

Can only be released for peer reviews after receiving permission from
C) the client.
Should be conveyed to the public if it affects the "correctness" of the
D) financial statements.

12
INCORRECT

Which of the following is a correct statement concerning a publicly traded

company that purchases the practice of a public accounting firm?
A)

It must be owned by partners who are involved in public accounting.

It must separate performance of attest services and allow them to be

B) performed by the remaining "shell" public accounting firm it has
purchased (or by another public accounting firm).
It can perform all services ordinarily performed by a traditional CPA
firm within the framework of its own corporate entity.

C)
It may not restrict its liability in any manner for services it now
D) provides which previously had been provided by the traditional CPA
firm.

Results Reporter
Out of 10 questions, you answered 1 correctly with a final grade of 10%
1 correct
(10%)
9
incorrect
(90%)
0
unanswe
red (0%)

Your Results:
The correct answer for each question is indicated by a
1
INCORRECT

The form of attestation that provides the highest form of assurance is a(n):
A)
B)
C)
D)

2
INCORRECT

Assembly.
Compilation.
Review.
Examination.

Audits of financial statements include an expression of a conclusion about

which of the following financial statement characteristics?
A)
B)
C)
D)

Governance
Reliability
Relevance
Timeliness

INCORRECT

A review of a company's financial statements by a CPA firm:

Is significantly less in scope than an audit and results in a report which
A) provides positive assurance, although not absolute assurance.
Is similar in scope to an audit and adds similar credibility to the
B) statements.
Concludes with the issuance of a report expressing the CPA's opinion
C) as to the fairness of the statements.
D)

4
INCORRECT

The Sarbanes Oxley Act included provisions establishing the:

A)
B)
C)
D)

5
INCORRECT

Is designed to provide limited assurance.

Auditing Standards Board.

Congressional Auditing Overview Board.
Public Company Accounting Oversight Board.
Securities and Exchange Commission.

In performing a financial statement audit, which of the following would an

auditor be least likely to consider?
A)
B)
C)
D)

Internal control
Compliance with GAAP
Fairness of the financial statement amounts
Quality of management's business decisions

6 CORRECT

Which of the following is not considered a type of audit?

A)
B)

Operational audit
Sufficiency audit
Compliance audit

C)
D)

7
INCORRECT

Internal auditors are most likely to issue a report on which of the following?
A)
B)
C)
D)

8
INCORRECT

Annual financial statement reporting

Internal control
Tax compliance
Quarterly financial statement reporting

With which of the following is the AICPA least concerned?

A)
B)
C)
D)

9
INCORRECT

Financial statement audit

Professional standards for CPAs

Research and development of accounting standards
Standards guiding the conduct of internal auditors
Self regulation of the accounting profession

If an auditor had a substantial stock investment in a client that s(he) was

auditing, which of the following would be true?
A)
B)

The auditor would lack independence.

The auditor would be violating the FASB standards.

The auditor would be violating the Institute of Management Accounting

C) standards.
D)

The auditor would be violating the IIA standards.

10
INCORRECT

The attest function:

A)

Is an essential part of every engagement performed by a CPA.

Requires a complete review of all transactions during the period under

B) examination.
Requires a review of a sample of transactions during the period under
C) examination.
D)

Includes the preparation of a written report of the CPA's findings.