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ACC 4560
Intro to Auditing: Chapter 1
32
Accounting
02/01/2011

Additional Accounting Flashcards

 


 

Cards

Term

Which of the following best describes the relationship between assurance services and attest services?

 

(1) While attest services involve financial data, assurance services involve nonfinancial data.

(2) While attest service require objectivity, assurance services do not require objectivity.

(3) Attest services are a subset of assurance services.

(4) Attest and assurance services are different terms to the same types of services.

Definition
(3) Attest services are a subset of assurance services.
Term

Which of the following has primary responsibility for the fairness of the representations made in financial statements?

 

(1) Client's management.

(2) Independent auditor.

(3) Audit committee.

(4) AICPA

Definition
(1) Client's management.
Term

The most important benefit of having an annual audit by a public accounting firm is to:

 

(1) Provide assurance to investors and other outsiders that the financial statements are reliable.

(2) Enable officers and directors to avoid personal responsibility for any misstatements in the finanical statements.

(3) Meet the requirements of government agencies.

(4) Provide assurance that illegal acts, if any exist, will be brought to light.

Definition
(1) Provide assurance to investors and other outsiders that the financial statements are reliable.
Term

The Sarbanes - Oxley Act created the Public Company Accounting Oversight Board (PCAOB). Which of the following is not one of the responsibilities of that board?

 

(1) Establish independence standards for auditors of public companies.

(2) Review financial reports filed with the SEC.

(3) Establish auditing standards for audiors of public companies.

(4) Sanction registered audit firms.

Definition
(2) Review financial reports filed with the SEC.
Term

Which of these organizations has the responsiblity to perform inspections of auditors of public companies?

 

(1) American Institute of Certified Public Accountants.

(2) Securities and Exchange Commision

(3) Financial Accounting Standards Board

(4) Public Company Accounting Oversight Board

Definition
(4) Public Company Accounting Oversight Board
Term

Governmental auditing, in addition to including audits of financial statements, often includes audits of efficiency, effectiveness, and:

 

(1) Adequacy.

(2) Evaluation.

(3) Accuracy.

(4) Compliance.

 

Definition
(4) Compliance.
Term

In general, internal auditors' independence will be greatest when they report directly to the:

 

(1) Financial vice president.

(2) Corporate controller.

(3) Audit committee of the board of directors.

(4) Cheif executive officer.

Definition
(3) Audit committee of the board of directors.
Term

Which of the following did not precipitate the passage of the Sarbanes-Oxley Act of 2002 to regulate public accounting firms:

 

(1) Disclosures related to accounting irregularities at Enron and WorldCom.

(2) Restatements of financial statements by a number of public companies.

(3) Conviction of the accounting firm of Arthur Anderson LLP.

(4) Ethical scandals at the AICPA.

Definition
(4) Ethical scandals at the AICPA.
Term

Which of the following organizations establishes standards for U.S. government agencies?

 

(1) The Financial Accounting Standards Board.

(2) The Governmental Accounting Standards Board.

(3) The Federal Accounting Standards Advisory Board.

(4) The Public Company Accounting Oversight Board.

 

Definition
(3) The Federal Accounting Standards Advisory Board.
Term

Which of the following is correct about forensic audits?

 

(1) All audit engagements are forensic in nature.

(2) Forensic audits are performed by law firms; they are not performed by CPA firms.

(3) Forensic audits are equivalent to compliance audits.

(4) Forensic audits are usually performed in situations in which fruad has been found or is suspected.

Definition
(4) Forensic audits are usually performed in situations in which fruad has been found or is suspected.
Term

What best describes the purpose of the auditors' consideration of internal control in a financial statement audit for a nonpublic company?

 

(1) To determine the nature, timing, extent of audit testing.

(2) To make recommendations to the client regarding improvements in internal control.

(3) To train new auditors on accounting and control systems.

(4) To identify opportunities for fraud within the client's operations.

 

Definition
(1) To determine the nature, timing, extent of audit testing.
Term

Which of the following is an example of a compliance audit?

 

(1) An audit of financial statements.

(2) An audit of a company's policies and procedures for adhering to environmental laws and regulations.

(3) An audit of a company's internal control over financial reporting.

(4) An audit of the efficiency and effectiveness of a company's legal department.

Definition

(2) An audit of a company's policies and procedures for adhering to environmental laws and regulations.

 

 

 

Compliance Audit - an audit to measure the compliance of the organziation with some established criteria (e.g., laws and regulations, or internal controls policies and procedures)

Term

Which statemtn is correct with respect to Continuing Professional Education (CPE) requirements of members of the AICPA?

 

(1) Only members employed by the AICPA are required to take such courses.

(2) Only members in public practice are requried to take such courses.

(3) Members, regardless of whether they are in public practice, are required to meet such requirements.

(4) There is no requirement for members to participate in CPE.

Definition
(3) Members, regardless of whether they are in public practice, are required to meet such requirements.
Term
Assurance Services
Definition

The broad range of information enhancement services that are provided by CPAs

 

These services include:

-increase relability of information.

-putting info into form that facilitates decision making.

Term

What are Attestation Services?

 

Definition

Major subset of assurance services

 

To Attest to information means to provide assurance as to its reliability (provide an opinion)

 

Ex. Audits of Financial Statement or an Examination of Internal Control

Term
What is an Attest Engagement?
Definition

An engagement in which the CPAs issue:

 

-an examination

-a review,

or

-an agreed-upon procedures report on subject matter (or an asseration about subject matter that is the responsiblity of another party (e.g., management)).

Term

The risk associated with a company's survival and profitability is referred to as:

 

(1) Business Risk.

(2) Information Risk.

(3) Detection Risk.

(4) Control Risk.

Definition
(1) Business Risk.
Term
What is an Audit?
Definition
A process of gathering evidence sufficent to provide a high level of assurance that a client's financial statements follow GAAP ( or another appropriate basis).
Term

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

 

(1) Operational audit.

(2) Internal audit.

(3) Compliance audit.

(4) Government audit.

Definition

(3) Compliance audit.

 

Compliance audit: measures the compliance of the organization with some established criteria

Term

What is Suitable Criteria?

 

Definition

Standards or benchmarks used to measure and present the subjec matter and against which the CPA evaluates the subject matter.

 

Criteria that are established or developed by groups composed of experts that follow due process procedures

 

Must have:

-Objectivity

-Measurability

-Completeness

-Relevance

Term

What are the 3 Forms of Attestation?

 

Definition

1. Examination

              "Reasonable" or HIGH level of assurance

               LOW Risk of Material Misstatement

               "In our opinion..."

 

2. Review

              LIMITED level of assurance

              MODERATE Risk of Material Misstatement

              "Nothing came to our attention..."

 

3. Agreed-Upon Procedures

              SUMMARY of findings

              Risk of Material Misstatment VARIES

              Nature includes SUMMARY of procedures and findings

Term

What is Operational Audit?

 

Definition

An analysis of a department or other unit of a business or government organization to measure the effectiveness and efficiency of operations

 

ex. effectiveness of operations of receiving department of a manufacturing company

Term
What is Compliance Audit?
Definition

An audit to measure the compliance of the organization with some established criteria.

 

Dependent upon the existence of verifiable data and of recongized criteria of standards

 

Performed internally or externally

Term
What is an Integrated Audit? What is it so important?
Definition

An audit includes providing assurance on BOTH the Financial Statements AND internal controls over the financial report

 

REQUIRED for publicly traded U.S. companies

REQUIRED by SOX and PCAOB

Term

The Government Accountability Office (GAO): 

 

(1) Is a primarily concerned with rapid processing of all accounts payable incurred by the federal government.

(2) Conducts operational audits and reports the results to Congress.

(3) Is a multinational organization of professional accountants.

(4) Is primarily concerned with budgets and forecasts approved by the SEC.

 

Definition

(2) Conducts operational audits and reports the results to Congress.

 

 

 

 

GAO is headed by comptroller general

 

Has the responsibility of supporting Congress

 

-Performs Compliance, Operational, and Financial audits of government agencies

AND

-Performs EXAMINATIONS of corporate holding government contract

Term
The  _____________ of AICPA issues Statements of Standards for Accounting and Review Services (SSARSs) - for reviews and compilations of financial statements.
Definition
Accounting and Review Services Committee
Term
The ________ was established in 1990 to develop accounting standards for the U.S. government.
Definition
Financial Accounting Standards Advisory Board (FASAB).
Term
The ______ issues Statements on Standards for Attest Engagements (SSAEs) for attest engagements other than financial statements.
Definition
AICPA
Term
The __________ was designated by the AICPA as the body with power to set forth GAAP for entities other than federal, state, and local governments.
Definition
Financial Accounting Standards Board (FASB)
Term

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

 

(1) State Board of Accountancy.

(2) The AICPA.

(3) The SEC.

(4) The GAO

Definition
(1) State Board of Accountancy.
Term
What is Information Risk?
Definition
The risk that the information used by investors, creditors, and others to assess business risk is not accurate.
Term

The serially-numbered pronouncements issued by the Auditing Standards Board (ASB) over a period of years are known as:

 

(1) Auditing Statements of Position (ASPs).

(2) Accounting Series Releases (ASRs).

(3) Statement on Auditing Standards (SASs).

(4) Statement on Auditing Principles (SAPs).

Definition
(3) Statement on Auditing Standards (SASs).