Question 1

The Sarbanes-Oxley Act requires that publicly traded companies:

Accepted Answer

The Sarbanes-Oxley Act requires publicly traded companies to disclose to the SEC any waivers they grant applying their "conflict of interest" rules in a given situation and to provide the rationale for the decision. This requirement aims to improve transparency and ensure that companies are held accountable for their decisions related to conflicts of interest.

Question 2

Some commentator advocate in favor of audit firm rotation:

Accepted Answer

Audit firm rotation is advocated by some commentators as a safeguard against the familiarity threat, which refers to the risk that an auditor's long-standing relationship with a client may compromise their independence, objectivity, and professional skepticism. By rotating audit firms, clients are less likely to develop close relationships with their auditors, reducing the likelihood of familiarity threats. However, some argue that audit firm rotation may increase costs and reduce audit quality.

Question 3

In accordance with Sarbanes-Oxley Act, employee Codes of Conduct should:

Accepted Answer

B

Question 4

The PCAOB:

Accepted Answer

The answer of The PCAOB:
...

Question 5

Under the Sarbanes-Oxley Act, the establishment of Codes of Conduct by publicly traded companies became:

Accepted Answer

The Sarbanes-Oxley Act led to widespread establishment of Codes of Conduct among publicly traded companies as part of its broader effort to enhance corporate governance and accountability.

Question 6

The best argument against mandatory audit firm rotation is that:

Accepted Answer

The answer of The best argument against mandatory audit firm...

Question 7

The PCAOB is:

Accepted Answer

The Public Company Accounting Oversight Board (PCAOB) is a regulatory body established by Congress through the Sarbanes-Oxley Act of 2002. Its primary role is to oversee the audits of public companies to protect investors and the public interest by promoting informative, accurate, and independent audit reports. It is not a self-regulatory organization, does not share its standard-setting role with the AICPA for audits of publicly traded companies, and its jurisdiction is specifically over audits of public companies, not setting and enforcing ethical standards for all CPAs.

Question 8

After a CPA has served as the lead partner on an audit client for five years, that audit partner may:

Accepted Answer

According to the SEC, after serving as the lead partner on an audit client for five years, the CPA must take a break of at least five years before resuming as the lead partner. Therefore, option B is the correct answer.

Question 9

Which of the following is least likely to arise if the same audit partner repeatedly serves as the lead auditor on a client engagement for multiple years?

Accepted Answer

The adverse interest threat to independence is least likely to arise if the same audit partner repeatedly serves as the lead auditor on a client engagement for multiple years. The adverse interest threat arises when the auditor has a financial or personal interest in the client or a relationship with a third party that may affect the auditor's objectivity. However, this is not likely to occur solely because of the lead auditor's long-term involvement with the client. The other threats mentioned - undue influence, subordination of judgment, and loss of objectivity - may become more likely if the auditor lacks independence due to their long-term relationship with the client.

Question 10

An Audit Committee must:

Accepted Answer

The answer of An Audit Committee must:
...

Question 11

The PCAOB is:

Accepted Answer

The PCAOB (Public Company Accounting Oversight Board) is a non-governmental entity that is overseen by the SEC (Securities and Exchange Commission). It was created by the Sarbanes-Oxley Act of 2002 as a means of regulating public company auditors to protect investors and the public interest.

Question 12

Which the following is a "reportable event," as that term is defined in the Sarbanes-Oxley Act?

Accepted Answer

Under the Sarbanes-Oxley Act, a reportable event is a significant event or occurrence, such as a legal action, that could have an impact on the financial statements of a publicly traded company. Option A is a private matter that does not have an impact on the company's financial statements, and option B is a personal matter that does not relate to the financial reporting. Option C, on the other hand, is related to a former client's audit, which could have a financial impact and is therefore a reportable event.

Question 13

Registration with the PCAOB is required of:

Accepted Answer

Registration with the PCAOB is required for all CPA firms that wish to audit publicly traded companies. The PCAOB was created by the Sarbanes-Oxley Act to oversee the audits of public companies in order to protect investors and the public interest. Registration with the PCAOB is not required for other professional services such as management consulting or information processing system design.

Question 14

Under the Sarbanes-Oxley Act, the use of a concurring audit partner on an audit engagement for a company regulated by this Act is:

Accepted Answer

Under the Sarbanes-Oxley Act, the use of a concurring audit partner on an audit engagement for a company regulated by this Act is mandatory under all circumstances. This requirement is intended to enhance the quality of audits by providing an additional level of review and oversight. The concurring partner must be a partner from the same audit firm who has not been involved in the audit engagement and who is responsible for reviewing the audit work performed by the engagement team.

Question 15

An audit partner has served as the lead audit partner on a client engagement for the past eight years. Which of the following is most likely to arise?

Accepted Answer

Serving as the lead audit partner on a client engagement for a prolonged period may create a familiarity threat, which occurs when an auditor's long and close relationship with the client leads to the auditor's acceptance of the client's views or biases. This may impact auditor objectivity and the ability to exercise professional skepticism during the audit. While the management participation threat and self-review threat may arise in this scenario, the familiarity threat is most likely.

Question 16

Which of the following categories of CPA firm professionals must discontinue providing auditing services to an audit client after serving that client for a five-year consecutive period?

Accepted Answer

The rule requiring rotation applies specifically to the lead audit partner and the concurring audit partner (or reviewing partner) to ensure independence and objectivity in the audit. This is a measure to prevent familiarity threats that could arise from long-term associations with the audit client.

Question 17

Under the Sarbanes-Oxley Act, the decision whether to have a concurring audit partner on an audit engagement, in addition to the lead audit partner, is:

Accepted Answer

The answer of Under the Sarbanes-Oxley Act, the decision whether...

Question 18

Most audit partners at CPA firms are compensated based on the gross billings or net CPA firm profits generated by the audit clients that they serve. As a result, when an audit partner serves a particular client for an extended period of time, which of the following threats is most likely to arise?

Accepted Answer

When an audit partner serves a particular client for an extended period of time, they may become overly focused on maintaining the client and the revenue generated from them. This can create a self-interest threat, which occurs when a financial or other interest in an audit client or its management puts pressure on the auditor's judgment or behavior. This can compromise the audit partner's objectivity, which is a fundamental principle of auditing.

Question 19

Registration with the PCAOB requires CPA firms to:

Accepted Answer

Registration with the PCAOB requires CPA firms to submit annual reports to the PCAOB that identify their audit clients and fee structures. This information helps the PCAOB to monitor potential conflicts of interest in the audit process and to identify any trends or patterns in audit fees or other audit-related expenses. The other choices are incorrect as they do not accurately describe the requirements for PCAOB registration.

Question 20

The concurring auditor who serves as the quality control reviewer on an audit engagement:

Accepted Answer

According to PCAOB standards, the concurring auditor who serves as the quality control reviewer on an audit engagement can be either an audit partner in the CPA firm performing the audit or an experienced CPA associated with another CPA firm. This individual is responsible for reviewing the audit work done by the audit team to ensure that the audit was conducted in accordance with professional standards and the firm's quality control policies and procedures. Therefore, option B is the best choice as it aligns with PCAOB standards.

Quiz 13: Duties of Public-Company Auditors: the Sarbanesoxley Act

The Sarbanes-Oxley Act requires that publicly traded companies:

Some commentator advocate in favor of audit firm rotation:

In accordance with Sarbanes-Oxley Act, employee Codes of Conduct should:

The PCAOB:

Under the Sarbanes-Oxley Act, the establishment of Codes of Conduct by publicly traded companies became:

The best argument against mandatory audit firm rotation is that:

The PCAOB is:

After a CPA has served as the lead partner on an audit client for five years, that audit partner may:

Which of the following is least likely to arise if the same audit partner repeatedly serves as the lead auditor on a client engagement for multiple years?

An Audit Committee must:

The PCAOB is:

Which the following is a "reportable event," as that term is defined in the Sarbanes-Oxley Act?

Registration with the PCAOB is required of:

Under the Sarbanes-Oxley Act, the use of a concurring audit partner on an audit engagement for a company regulated by this Act is:

An audit partner has served as the lead audit partner on a client engagement for the past eight years. Which of the following is most likely to arise?

Which of the following categories of CPA firm professionals must discontinue providing auditing services to an audit client after serving that client for a five-year consecutive period?

Under the Sarbanes-Oxley Act, the decision whether to have a concurring audit partner on an audit engagement, in addition to the lead audit partner, is:

Most audit partners at CPA firms are compensated based on the gross billings or net CPA firm profits generated by the audit clients that they serve. As a result, when an audit partner serves a particular client for an extended period of time, which of the following threats is most likely to arise?

Registration with the PCAOB requires CPA firms to:

The concurring auditor who serves as the quality control reviewer on an audit engagement: