ACC 562 Week 5 Midterm Exam – Strayer
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ACC/562 Midterm Exam Chapter 1-3
TRUE/FALSE
1. The need for assurance services arises because the interests of the users of information may be different from that of the interests of those responsible for providing information.
ANS: PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
2. An audit of financial statements is a form of attestation service.
ANS: PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
3. Independence is an attribute necessary to perform assurance services.
ANS: PTS: 1 OBJ: Scope of Services
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
4. A bank using Milton Company's financial statements to determine the creditworthiness of a potential loan to Milton is a good example of the need for unbiased reporting.
ANS: PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
5. Independence is only required for assurance service providers.
ANS: PTS: 1 OBJ: Scope of Services
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
6. A CPA automatically qualifies as an assurance provider in all areas of business.
ANS: PTS: 1 OBJ: Scope of Services
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
7. Attestation services are a subset of assurance services and always involve a report that goes to a third party.
ANS: PTS: 1 OBJ: Scope of Services
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
8. The American Institute of Certified Public Accountants has the primary authority to set auditing standards for public companies.
ANS: PTS: 1 OBJ: Public Company Auditing Standards
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
9. The audit function is unique because it exists to perform services on a "client" on behalf of shareholders, directors and other parties.
ANS: PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
10. Auditing is the process of attesting to assertions about economic actions and events.
ANS: PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
11. Auditing is the process of verifying the accuracy of the financial statements.
ANS: PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
12. Internal auditing only provides assurance services to clients.
ANS: PTS: 1 OBJ: Internal and Governmental Auditors
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
13. Auditing primarily exists because users need unbiased information on which to assess management performance and make economic decisions.
ANS: PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
14. The degree of confidence that users place on management's financial statements is higher than that placed on audited financial statements because few users have direct knowledge of the company's operations and management is the most knowledgeable about operations.
ANS: PTS: 1 OBJ: Public Company Auditing Standards
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
15. U.S. nonpublic companies will have an audit performed in accordance with generally accepted auditing standards that have been promulgated by the PCAOB.
ANS: PTS: 1 OBJ: Public Company Auditing Standards
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
16. An assertion is a statement about an action, event, condition, or performance over a specified time period.
ANS: PTS: 1 OBJ: Opinion Formation Process
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
17. Management is required to comment on the fairness of the company's financial presentation. This reduces the auditor's legal responsibility for the opinion rendered on the financial statements.
ANS: PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
18. Audited financial statements should be free from all errors and fraud.
ANS: PTS: 1 OBJ: Public Company Auditing Standards
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
19. Audited financial statements should be presented fairly according to the substance of GAAP.
ANS: PTS: 1 OBJ: Professional and Regulatory Organizations
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
20. Audited financial statements should be presented fairly according to the substance of GAAS.
ANS: PTS: 1 OBJ: Professional and Regulatory Organizations
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
21. A plan to converge the U.S. generally accepted auditing standards (GAAS) with the International Standards on Auditing (ISAs) was developed by the .AICPA’s Auditing Standards Board (ASB).
ANS: PTS: 1 OBJ: Public Company Auditing Standards
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
22. Attestation is confined to an audit of client financial statements.
ANS: PTS: 1 OBJ: Scope of Services
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
23. An auditor must have a good understanding of the risks associated with a client's industry in order to ensure that the financial statements reflect the underlying substance of accounting transactions and the economic effects of such transactions.
ANS: PTS: 1 OBJ: Types of Service Providers
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
24. Public Company Accounting Oversight Board provides the criteria against which the auditor measures the fairness of financial statement presentation for public companies.
ANS: PTS: 1 OBJ: Professional and Regulatory Organizations
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
25. Generally accepted accounting principles provide the criteria against which the auditor measures the fairness of financial statement presentation.
ANS: PTS: 1 OBJ: Professional and Regulatory Organizations
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
26. Businesses that use independent auditors do not need the use of internal auditors.
ANS: PTS: 1 OBJ: Internal and Governmental Auditors
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
27. CPA certificates for auditors are issued by state boards of accountancy.
ANS: PTS: 1 OBJ: Professional and Regulatory Organizations
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
28. Internal auditing is an objective evaluation function established within an organization.
ANS: PTS: 1 OBJ: Internal and Governmental Auditors
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
29. Operational audits are designed to determine if the company’s financial statements are prepared in compliance with GAAP.
ANS: PTS: 1 OBJ: Internal and Governmental Auditors
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
30. Governmental auditors perform operational and financial statement audits.
ANS: PTS: 1 OBJ: Internal and Governmental Auditors
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
31. The internal audit profession adheres exclusively to standards set by the Public Company Accounting Oversight Board.
ANS: PTS: 1 OBJ: Internal and Governmental Auditors
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
32. The execution of solutions to issues brought to light by internal auditors are the responsibility of management of the organization.
ANS: PTS: 1 OBJ: Internal and Governmental Auditors
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
33. Governmental audit standards are developed by the Public Company Accounting Oversight Board.
ANS: PTS: 1 OBJ: Internal and Governmental Auditors
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
34. The American Institute of CPAs sets auditing standards for non-publicly traded companies.
ANS: PTS: 1 OBJ: Professional and Regulatory Organizations
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
35. Though often relying on the FASB, the SEC has authority to establish GAAP for publicly traded companies.
ANS: PTS: 1 OBJ: Professional and Regulatory Organizations
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
36. The SEC has authority to establish GAAP for all business enterprises.
ANS: PTS: 1 OBJ: Professional and Regulatory Organizations
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
37. The Public Company Accounting Oversight Board was established by the AICPA in response to Securities law.
ANS: PTS: 1 OBJ: Professional and Regulatory Organizations
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
38. Auditors of public companies need not adhere to the requirements of statutory or regulatory organizations.
ANS: PTS: 1 OBJ: Professional and Regulatory Organizations
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
39. When the auditor has no reservations about management’s financial statements, then the report issued is called a qualified report.
ANS: PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
40. Auditors need only understand the rules of accounting as the principles are outdated.
ANS: PTS: 1 OBJ: Public Company Auditing Standards
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
41. An audit is a form of an attestation service.
ANS: PTS: 1 OBJ: Auditing Defined
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
42. An audit and an assurance service both require a report to a third party.
ANS: PTS: 1 OBJ: Scope of Services
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
43. The purpose of assurance services is to improve the quality of the information provided.
ANS: PTS: 1 OBJ: Scope of Services
NAT: AACSB-Analytical skills | AICPA BB-Critical thinking
44. The internal auditor is a primary provider of assurance services.
ANS: PTS: 1 OBJ: Internal and Governmental Auditors
NA
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