Question 1

Which one of the following attributes is not required of an auditor?
A)Independence.
B)Bias.
C)Integrity.
D)Technical competence.

Accepted Answer

Bias is not a required attribute of an auditor as it conflicts with the requirement of independence. Auditors are required to be independent, show integrity, and possess technical competence to perform their duties objectively and without any personal bias towards the entity under audit.

Question 2

All audit evidence is the result of the application of audit procedures.

Accepted Answer

This statement is true. Audit evidence is obtained through the application of various audit procedures such as inspection, observation, inquiry, and confirmation. These procedures help the auditor to gather sufficient and appropriate evidence to support their audit opinion on the financial statements.

Question 3

What are the PCAOB standards that present guidance in testing assertions and planning for the audit are known as?
A)General standards.
B)Fieldwork standards.
C)Reporting standards.
D)None of the above.

Accepted Answer

The PCAOB standards that present guidance in testing assertions and planning for the audit are known as fieldwork standards. The general standards refer to auditor qualifications and independence, while reporting standards pertain to the presentation of the audit report.

Question 4

The PCAOB does not currently have a mandate for convergence with other auditing standards.

Accepted Answer

The PCAOB does not have a specific mandate for convergence with other auditing standards, although it does work to promote convergence and consistency where possible.

Question 5

Assertions are relevant to the audit process because they are the representations of management embodied in the financial statements.

Accepted Answer

Assertions play a crucial role in the audit process as they are the management's representations that are embodied in the financial statements. The auditor evaluates these assertions and makes sure that they are accurate and complete.

Question 6

Which auditing standards apply to private companies?
A)The AICPA Standards.
B)The IASSB Standards.
C)The Standards of the PCAOB.
D)All of the above.

Accepted Answer

The AICPA Standards (also known as the Generally Accepted Auditing Standards or GAAS) apply to audits of private companies in the United States. The IASSB Standards apply to international audits, and the Standards of the PCAOB apply to audits of public companies in the United States.

Question 7

The AICPA includes which of the following categories that guide the conduct of an audit?
A)Purpose of an audit and premise upon which an audit is conducted.
B)Responsibilities.
C)Performance.
D)All of the above.

Accepted Answer

The AICPA includes all three categories (Purpose of an audit and premise upon which an audit is conducted, Responsibilities, and Performance) that guide the conduct of an audit. Therefore, the correct answer is D.

Question 8

The American Institute of Certified Public Accountants no longer retains the right to set audit standards for any engagements as the Securities Exchange Commission has relinquished such power.

Accepted Answer

The American Institute of Certified Public Accountants (AICPA) still sets audit standards for non-public company engagements, while the Public Company Accounting Oversight Board (PCAOB), overseen by the SEC, sets standards for public companies.

Question 9

The PCAOB requires that the auditor will express an opinion on the financial statements as a whole.

Accepted Answer

The answer of The PCAOB requires that the auditor will...

Question 10

What is the scope of applicability of the auditing standards of the AICPA?
A)Nonpublic companies traded in non-U.S.markets.
B)Nonpublic companies in the U.S.
C)Public companies traded in non-U.S.markets.
D)Public companies traded in the U.S.

Accepted Answer

The auditing standards of the AICPA (American Institute of Certified Public Accountants) are primarily applicable to nonpublic companies in the U.S. Public companies in the U.S. are audited in accordance with the standards of the PCAOB (Public Company Accounting Oversight Board).

Question 11

To satisfy the fieldwork standards,what must an auditor do?
A)Act with due care.
B)Gather sufficient appropriate evidence.
C)Be independent in mental attitude.
D)Have adequate knowledge about the client's industry.
E)All of the above.

Accepted Answer

The answer of To satisfy the fieldwork standards,what must an...

Question 12

What are the PCAOB standards that cover the essential elements of communication,the criteria against which the assertions were tested,and an explanation of the basis for the auditor's opinion are known as?
A)General standards.
B)Standards of fieldwork.
C)Standards of reporting.
D)None of the above.

Accepted Answer

The standards that cover these essential elements are the Standards of Reporting, which require the auditor to communicate the basis for their opinion and provide information about the criteria used in their testing. This is done through the auditor's report, which should be clear, concise, and contain all necessary information for the readers to understand the auditor's opinion.

Question 13

The PCAOB has authority over the AICPA.

Accepted Answer

The PCAOB (Public Company Accounting Oversight Board) and the AICPA (American Institute of Certified Public Accountants) are separate entities with different roles. The PCAOB oversees the audits of public companies, while the AICPA sets standards for private company audits and provides guidance for CPAs.

Question 14

The first general standard of the PCAOB requires that an audit be performed by which type of person?
A)An auditor with seasoned judgment in varying degrees of supervision and review.
B)An auditor with appropriate technical training and proficiency.
C)An auditor with adequate knowledge of the standards of field work and reporting.
D)An auditor satisfying the independence standards.

Accepted Answer

The first general standard of the PCAOB requires that an audit be performed by an auditor with appropriate technical training and proficiency. This means that the auditor has the necessary education, experience, and skills to perform the audit.

Question 15

The AICPA requires that auditor expresses an opinion as to whether the financial statements are free of material misstatement or states that an opinion cannot be expressed.

Accepted Answer

This statement is true. The AICPA requires that the auditor express an opinion on the financial statements, either stating that they are free of material misstatement or that an opinion cannot be expressed. A qualified or adverse opinion may also be given if the financial statements contain material misstatements.

Question 16

AICPA standards are frequently called ISAs.

Accepted Answer

AICPA standards are not called ISAs. ISAs are International Standards on Auditing developed by the International Auditing and Assurance Standards Board.

Question 17

Which one of the following organizations provides auditing standards for public companies?
A)GAO.
B)AICPA.
C)GAAP.
D)PCAOB.

Accepted Answer

PCAOB (Public Company Accounting Oversight Board) provides auditing standards for public companies in the US. GAO (Government Accountability Office) is an independent agency that provides auditing, evaluation, and investigative services for Congress. AICPA (American Institute of Certified Public Accountants) is a professional organization for CPAs and provides guidance and best practices for accounting and auditing, but does not provide auditing standards for public companies. GAAP (Generally Accepted Accounting Principles) is a set of accounting standards for financial reporting, but it does not provide auditing standards.

Question 18

Presentation and disclosure assertions imply that all transactions and balances are properly presented,disclosures represent what actually happened,and the footnote disclosures are appropriate and adequate.

Accepted Answer

Presentation and disclosure assertions ensure that financial statements provide reliable and accurate information to users. These assertions help to ensure that transactions and balances are properly presented, and that disclosures reflect what actually happened and are appropriate and adequate to enable users to make informed decisions about the entity's financial position and performance.

Question 19

The AICPA,IASSB,and PCAOB have conceptually the same sets of financial statement assertions,but the technical wording varies among the standards.

Accepted Answer

While the three organizations may use slightly different terminology, they all generally have the same sets of financial statement assertions.

Question 20

The standards of competence,independence,and due professional care are covered by what standards?
A)General standards.
B)Standards of fieldwork.
C)Reporting standards.
D)None of the above.

Accepted Answer

The standards of competence, independence, and due professional care are covered by the general standards of GAAS (Generally Accepted Auditing Standards).

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

Which one of the following attributes is not required of an auditor?

All audit evidence is the result of the application of audit procedures.

What are the PCAOB standards that present guidance in testing assertions and planning for the audit are known as?

The PCAOB does not currently have a mandate for convergence with other auditing standards.

Assertions are relevant to the audit process because they are the representations of management embodied in the financial statements.

Which auditing standards apply to private companies?

The AICPA includes which of the following categories that guide the conduct of an audit?

The American Institute of Certified Public Accountants no longer retains the right to set audit standards for any engagements as the Securities Exchange Commission has relinquished such power.

The PCAOB requires that the auditor will express an opinion on the financial statements as a whole.

What is the scope of applicability of the auditing standards of the AICPA?

To satisfy the fieldwork standards,what must an auditor do?

What are the PCAOB standards that cover the essential elements of communication,the criteria against which the assertions were tested,and an explanation of the basis for the auditor's opinion are known as?

The PCAOB has authority over the AICPA.

The first general standard of the PCAOB requires that an audit be performed by which type of person?

The AICPA requires that auditor expresses an opinion as to whether the financial statements are free of material misstatement or states that an opinion cannot be expressed.

AICPA standards are frequently called ISAs.

Which one of the following organizations provides auditing standards for public companies?

Presentation and disclosure assertions imply that all transactions and balances are properly presented,disclosures represent what actually happened,and the footnote disclosures are appropriate and adequate.

The AICPA,IASSB,and PCAOB have conceptually the same sets of financial statement assertions,but the technical wording varies among the standards.

The standards of competence,independence,and due professional care are covered by what standards?