Question 1

The state boards of accountancy work under direct control of the AICPA.

Accepted Answer

The state boards of accountancy are independent entities that regulate the accounting profession within each state, while the AICPA (American Institute of Certified Public Accountants) is a professional organization that sets ethical standards for the profession and develops the CPA examination.

Question 2

The GAO has the authority to issue standards pertaining to audits of governmental organizations and other entities that receive federal assistance.

Accepted Answer

The Government Accountability Office (GAO) has the authority to issue Government Auditing Standards (often referred to as the Yellow Book), which provide guidelines for audits of government organizations, programs, activities, and entities that receive government funds.

Question 3

The concept of independence is a key aspect of assurance services.

Accepted Answer

Independance is crucial in assurance services because it ensures that the auditor or professional providing the service is not influenced by relationships or interests that could compromise their judgment or the integrity of their evaluation.

Question 4

The four components of the profession's multilevel regulatory framework include (1) principle setting, (2) firm regulation, (3) inspection and peer review, and (4) government regulation.

Accepted Answer

The answer of The four components of the profession's multilevel...

Question 5

Although the SEC recognizes pronouncements from the FASB as constituting GAAP, in some instances the SEC's disclosure requirements exceed GAAP.

Accepted Answer

The SEC (Securities and Exchange Commission) has its own set of disclosure requirements for public companies, which in some cases are more extensive than the guidelines set by the FASB (Financial Accounting Standards Board) under GAAP (Generally Accepted Accounting Principles).

Question 6

Assurance services are independent professional services that improve the quality of information, or its context, for decision makers.

Accepted Answer

Assurance services are designed to enhance the reliability of information, making it more useful for decision makers by providing an independent evaluation of that information.

Question 7

An examination consists primarily of inquiries of an entity's management and comparative analyses of financial information.

Accepted Answer

An examination involves more comprehensive procedures such as inspections, observations, and confirmations, beyond just inquiries of management and comparative analyses.

Question 8

The securities acts give the SEC the power to establish GAAP for all domestic companies.

Accepted Answer

The SEC has the authority to establish financial reporting standards for publicly traded companies, but it has delegated the task of establishing GAAP (Generally Accepted Accounting Principles) to the Financial Accounting Standards Board (FASB).

Question 9

The US Senate enacted the Sarbanes-Oxley Act of 2002.

Accepted Answer

The Sarbanes-Oxley Act of 2002 was enacted by the US Congress, not just the Senate, and was signed into law by President George W. Bush.

Question 10

An assurance service is one in which the CPA firm issues a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party.

Accepted Answer

The answer of An assurance service is one in which...

Question 11

An agreed upon procedures engagement is one in which the auditor performs specific procedures to attest to management's assertions for an outside third party.

Accepted Answer

In an agreed-upon procedures engagement, the auditor is engaged to carry out procedures of an audit nature to which the auditor, the entity, and any appropriate third parties have agreed and to report on factual findings. The users of the report must form their own conclusions from the report by the auditor.

Question 12

The public accounting profession's national professional organization is the AICPA.

Accepted Answer

The American Institute of Certified Public Accountants (AICPA) is the national professional organization for Certified Public Accountants (CPAs) in the United States.

Question 13

Firm regulation occurs within a CPA firm

Accepted Answer

Firm regulation refers to the internal policies, procedures, and controls that a CPA firm implements to ensure compliance with professional standards, ethical guidelines, and applicable laws.

Question 14

Statement on Quality Control Standards (SQCS) No. 2 identifies six quality control elements.

Accepted Answer

Statement on Quality Control Standards (SQCS) No. 2 actually identifies five elements of quality control, not six. These elements include leadership responsibilities for quality within the firm, relevant ethical requirements, acceptance and continuance of client relationships and specific engagements, human resources, and monitoring.

Question 15

The IRS is a division of the U.S. Treasury Department.

Accepted Answer

The Internal Revenue Service (IRS) is an agency of the U.S. Department of the Treasury responsible for administering and enforcing the federal tax laws.

Question 16

The primary functions of the state societies relate to the licensing of CPAs to practice
within the state.

Accepted Answer

The primary functions of state societies of CPAs typically include providing professional development opportunities, networking, advocacy, and resources for CPAs, rather than licensing, which is handled by state boards of accountancy.

Question 17

The AICPA established its Practice Monitoring Program in the early 1980's.

Accepted Answer

The AICPA established its Practice Monitoring Program, known as the Peer Review Program, in 1988 to enhance the quality of accounting, auditing, and attestation services.

Question 18

The booklet titled Governmental Auditing Standards is known as the "green book" after the color of its cover.

Accepted Answer

The "Green Book" refers to the standards for internal control in the federal government, while the "Yellow Book" is the correct name for Government Auditing Standards.

Question 19

Over the years the demand for auditing has been reduced by professional managers who misled investors by materially misstating the financial performance of their company's financial statements.

Accepted Answer

The demand for auditing has actually increased over the years due to instances where professional managers have misled investors by materially misstating the financial performance of their companies. These incidents have highlighted the need for independent audits to ensure the accuracy and reliability of financial statements.

Question 20

The primary focus of the audit is on information presented in set of financial statements.

Accepted Answer

The primary focus of an audit is to examine the information presented in a set of financial statements to ensure its accuracy, completeness, and compliance with accounting standards and regulations.

Quiz 1: Auditing and the Public Accounting