Question 1

The Sarbanes-Oxley Act of 2002 requires that the key company officials certify the financial statements.Certification means that the company CEO and CFO must sign a statement indicating

Accepted Answer

The Sarbanes-Oxley Act of 2002 requires that the key company officials certify the financial statements by signing a statement indicating that they have read the financial statements, are not aware of any false or misleading statements (or any key omitted disclosures), and believe that the financial statements present an accurate picture of the company's financial condition. Therefore, all of the above choices are correct.

Question 2

Inquiries of warehouse personnel concerning possible obsolete or slow-moving inventory items provide assurance about the PCAOB assertion of

Accepted Answer

Inquiries of warehouse personnel concerning possible obsolete or slow-moving inventory items provide assurance about the PCAOB assertion of valuation, as it helps to ensure that inventory is valued accurately and is not being overstated with items that are unlikely to be sold in the near future.

Question 3

The accounting,auditing,and investigating agency of the U.S.Congress that is headed by the U.S.Comptroller General is known as

Accepted Answer

The U.S. General Accountability Office (GAO) is the accounting, auditing, and investigating agency of the U.S. Congress that is headed by the U.S. Comptroller General. The other options are not correct as they have different roles and responsibilities within the U.S. government.

Question 4

Which of the following best describes assurance services?

Accepted Answer

Assurance services are independent services that improve the quality of information for decision makers. They provide credibility and reliability to information by analyzing, assessing, and enhancing the underlying data and processes. They do not necessarily report on the financial statements or specific management assertions, nor do they improve the client's operations directly.

Question 5

The process by which a CPA obtains a certificate and license in a state other than the state in which the CPA's certificate was originally obtained is referred to as

Accepted Answer

The process described in the question is known as substantial equivalency. This process allows a CPA who is licensed in one state to obtain a license in another state without having to take another exam, provided certain requirements are met.

Question 6

In performing an attestation engagement,a CPA typically

Accepted Answer

In performing an attestation engagement, a CPA expresses a conclusion on an assertion about some type of subject matter. This can include financial statements, internal controls, and other information.

Incorrect options: 
A) This describes litigation support services, which are not part of an attestation engagement. 
B) This describes the assessment of control risk during an audit, which is not the same as an attestation engagement. 
D) This describes management consulting, which is outside the scope of an attestation engagement.

Question 7

Which of the following is not a PCAOB assertion about inventory related to presentation and disclosure?

Accepted Answer

The assertion that inventory is properly stated at its cost on the balance sheet is related to valuation, not presentation and disclosure.

Question 8

The probability that the information circulated by a company will be false or misleading is referred to as

Accepted Answer

Information risk refers to the probability that information being circulated by a company will be false or misleading. Business risk refers to the risk that a company faces in terms of its operations and profitability, while assurance risk and audit risk refer to risks related to the audit and assurance process.

Question 9

Which of the following would be considered an assurance engagement?

Accepted Answer

All the options involve providing an independent opinion or assurance on information provided by a third party, which is the essence of an assurance engagement.

Question 10

Cutoff tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent year provide assurance about the PCAOB assertion of

Accepted Answer

The cutoff tests designed to detect credit sales made before the end of the year that have been recorded in the subsequent year ensure that all sales are recorded in the correct period and provide assurance about the completeness assertion. The presentation assertion relates to the proper classification and disclosure of transactions, rights assertion relates to ownership or legal right to the assets, and existence assertion relates to the physical existence of assets and liabilities.

Question 11

The four basic requirements for becoming a CPA in most states relate to

Accepted Answer

The four basic requirements for becoming a CPA in most states are education (typically a bachelor's degree in accounting or related field), passing the CPA Exam, meeting experience requirements (usually 1-2 years working under a licensed CPA), and obtaining a state license or certificate to practice. Continuing education is also required to maintain a CPA license, but it is not one of the four basic requirements for becoming a CPA. AICPA certificate is also not required, although membership in AICPA (American Institute of Certified Public Accountants) is encouraged for networking and professional development opportunities.

Question 12

The risk that an entity will fail to meet its objectives is referred to as

Accepted Answer

Business risk refers to the possibility that a company will have lower than anticipated profits or experience a loss rather than taking a profit. This risk is associated with the company's ability to achieve its objectives.

Question 13

An attestation engagement is one in which a CPA is engaged to

Accepted Answer

An attestation engagement is one in which a CPA is engaged to issue a report on subject matter or an assertion about the subject matter that is the responsibility of another party. This includes performing procedures on subject matter or assertions that are the responsibility of someone else and reporting on the results of those procedures.

Question 14

The underlying conditions that create demand by users for reliable information include all of the following except

Accepted Answer

Users should have professional skepticism towards the reliability of the information provided to them. This skepticism can help in detecting errors or fraud in the financial information. Therefore, the lack of professional skepticism is not a condition that creates demand for reliable information, but rather one that could hinder the demand.

Question 15

In an attestation engagement,a CPA practitioner is engaged to

Accepted Answer

In an attestation engagement, a CPA practitioner is engaged to issue a written report that expresses a conclusion about the reliability of a management assertion. The report provides assurance to users of the information that the assertion is presented fairly and in accordance with a specified criteria. Choices A, C, and D are not related to attestation engagements.

Question 16

Inquiries of warehouse personnel concerning possible obsolete or slow-moving inventory items provide assurance about the ASB balance assertion of

Accepted Answer

Inquiries about possible obsolete or slow-moving inventory items provide assurance about the ASB balance assertion of valuation, as it helps to identify inventory items that may need to be written down or written off due to a decrease in market value or a decrease in demand, ensuring that inventory is valued at the lower of cost or net realizable value.

Question 17

The study of business operations for the purpose of making recommendations about the efficient use of resources,effective achievement of business objectives,and compliance with company policies is referred to as

Accepted Answer

Operational auditing specifically focuses on analyzing the efficiency and effectiveness of business operations to make recommendations for improvement. Environmental auditing focuses on a company's impact on the environment, financial auditing focuses on financial statements and compliance auditing focuses on ensuring compliance with laws and regulations.

Question 18

Which of the following is not an ASB assertion about inventory related to presentation and disclosure?

Accepted Answer

All of the statements A, B, and C are ASB presentation and disclosure assertions about inventory.

Question 19

It is always a good idea for auditors to begin an audit with the professional skepticism characterized by the assumption that

Accepted Answer

Auditors should maintain professional skepticism, assuming there could be a potential conflict of interest between themselves and management, which helps them remain unbiased and vigilant for any misstatements or fraud.

Question 20

Because of the risk of material misstatement,an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

Accepted Answer

Professional skepticism is necessary in order for the auditor to undertake a critical assessment of evidence provided by management, and to add an overall level of skepticism when it comes to assessing the integrity and authenticity of financial records. Professional skepticism does not mean that the auditor is suspicious or accusatory for the sake of it, but rather that he or she is alert and objective in assessing evidence objectively. This will help to detect any instances of misstatement, fraud or errors that management may have perpetrated or overlooked, and will help preserve the integrity of the accounting records.

Quiz 1: Auditing and Assurance Services