Question 1

The standards of the PCAOB encompass three broad categories including: general standards,fieldwork standards and reporting standards.

Accepted Answer

The PCAOB standards are indeed categorized into general standards, fieldwork standards, and reporting standards.

Question 2

Without independence,the value of the auditor's attestation function would be nil.

Accepted Answer

Independence is a crucial element for the credibility and reliability of the auditor's attestation function. Without independence, the auditor's report would not be trustworthy, and its value would be diminished or even null. The public relies on auditors to provide an unbiased and objective opinion on the financial statements of companies, and independence is a key factor that ensures the auditor's opinion is impartial and free from any conflicts of interest. Therefore, without independence, the auditor's attestation function would lack credibility and value.

Question 3

The process of understanding the client includes the preparation of the audit program.

Accepted Answer

The audit program is developed based on the understanding of the client's business and industry, as well as the risks specific to the audit engagement. Therefore, a thorough understanding of the client is necessary to prepare an effective audit program.

Question 4

The standards of the PCAOB consist of seven principles.

Accepted Answer

The answer of The standards of the PCAOB consist of...

Question 5

An auditor must be independent in fact and in appearance.

Accepted Answer

This is a fundamental principle of auditing, as it ensures that the auditor is not influenced by any undue pressures or biases and maintains objectivity while carrying out the audit. The auditor should not only be independent in reality but also should appear independent to the stakeholders of the organization.

Question 6

The AICPA's fundamental principles can be divided into four sections: purpose of the audit,responsibility of the auditor,performance of the audit,and reporting of the results.

Accepted Answer

The AICPA's fundamental principles are indeed divided into these four sections, as outlined in the question.

Question 7

An audit must be performed by persons who can make sound judgments relating to complex accounting issues.

Accepted Answer

An audit requires persons with specialized knowledge, skills, and experience in accounting, auditing, and financial reporting to be able to make informed judgments on complex accounting issues.

Question 8

The Generally Accepted Auditing Standards represent the minimum standards for performing an audit.

Accepted Answer

The Generally Accepted Auditing Standards (GAAS) represent the minimum standards for performing an audit. These standards are established by the American Institute of Certified Public Accountants (AICPA) and apply to all audits of financial statements, whether conducted in-house or by an external auditor.

Question 9

The PCAOB's general standards provide guidance to audit firms in selecting and training their professionals.

Accepted Answer

The PCAOB's general standards do provide guidance to audit firms in selecting and training their professionals, among other things.

Question 10

The auditing standards issued by the PCAOB are identical to the auditing standards issued by the AICPA.

Accepted Answer

The auditing standards issued by the PCAOB and the AICPA have some similarities, but they are not identical. The PCAOB standards are focused on public company audits, while the AICPA standards cover a wider range of audits, including private company audits. The PCAOB also has more rigorous requirements for auditor independence and quality control, given its oversight of public company audits.

Question 11

Auditing standards requires technical knowledge in auditing but not in the client's business.

Accepted Answer

Auditing standards require auditors to have both technical knowledge in auditing and an understanding of the client's business to effectively assess risks and perform the audit.

Question 12

The auditor needs to obtain absolute assurance as to whether the financial statements are free from material misstatement.

Accepted Answer

The auditor aims to obtain reasonable assurance, not absolute assurance, that the financial statements are free from material misstatement, due to inherent limitations in auditing.

Question 13

The PCAOB requires the audit be conducted with due professional care,which is a standard of care that would be expected of a reasonably prudent auditor.

Accepted Answer

The statement is true. The PCAOB does require audits to be conducted with due professional care, which is a standard of care that would be expected of a reasonably prudent auditor.

Question 14

Generally accepted auditing standards are the cornerstone for the interpretation of financial accounting.

Accepted Answer

Generally accepted auditing standards (GAAS) are guidelines for auditors, while generally accepted accounting principles (GAAP) are the cornerstone for the interpretation of financial accounting.

Question 15

Auditors are responsible for having the appropriate competence and capabilities to perform the audit,should comply with ethical requirements,and maintain professional skepticism throughout the audit.

Accepted Answer

This statement accurately reflects the responsibilities of auditors. They must be competent and capable of performing the audit, adhere to ethical requirements, and maintain professional skepticism throughout the process.

Question 16

According to the AICPA,the purpose of an audit is to enhance the degree of confidence that users can place in the financial statement.

Accepted Answer

This statement accurately reflects the purpose of an audit according to the AICPA (American Institute of Certified Public Accountants). Auditors perform procedures to obtain evidence and provide an opinion on whether the financial statements are fairly presented in accordance with generally accepted accounting principles. The resulting opinion is intended to increase the degree of confidence users can place in the financial statements.

Question 17

The reporting standard of the PCAOB includes consistency,disclosure,and due professional care.

Accepted Answer

The PCAOB (Public Company Accounting Oversight Board) reporting standards include due professional care, but consistency and disclosure are part of the AICPA (American Institute of Certified Public Accountants) standards, not PCAOB.

Question 18

The PCAOB's second fieldwork standard requires auditors develop an understanding of the client's controls as an important prerequisite to developing specific audit tests.

Accepted Answer

This statement is true. The PCAOB's second fieldwork standard, "Audit Planning," requires auditors to gain an understanding of the client's internal control environment as a key step in identifying areas of potential risk and developing effective audit procedures. This understanding helps auditors assess the design and operating effectiveness of the client's controls, which in turn informs the development of specific audit tests.

Question 19

Audit firms use close supervision and review of audit work to ensure that audits are conducted with due professional care.

Accepted Answer

Close supervision and review of audit work is a method used by audit firms to ensure that audits are conducted with due professional care. This helps to minimize the risk of errors, omissions, or misstatements that could potentially impact the accuracy and reliability of the audit findings. By closely supervising and reviewing the work of auditors, the audit firm can identify any issues or concerns and take corrective action to ensure that the audit is completed to a high standard of quality.

Question 20

Part of the understanding the client process of an audit is identifying factors that may require extension or modification of the audit tests,such as potential related-party transactions or the possibility of material misstatements.

Accepted Answer

This statement is true. Identifying such factors is important to ensure that the audit tests are appropriate and sufficient to address any potential risks to the financial statements.

Quiz 5: Professional Auditing Standards and the Audit Opinion Formulation Process