Question 1

A nonpublic company auditors' report is most likely to be addressed to the company whose financial statements are being examined or to that company's:

Accepted Answer

The nonpublic company auditors' report is most likely to be addressed to the Audit Committee of the company whose financial statements are being examined because the Audit Committee is responsible for overseeing the financial reporting process and the work of the auditors. Additionally, addressing the report to the Audit Committee ensures that the report is communicated to the appropriate individuals within the company who have responsibility for financial reporting and oversight.

Question 2

An engagement review form of peer review is least likely to include a peer reviewer's detailed analysis of:

Accepted Answer

An engagement review form of peer review focuses on the documentation and outcomes of specific engagements, such as compilation and review reports, rather than a detailed analysis of the firm's overall system of quality control.

Question 3

The Public Company Accounting Oversight Board has authority to establish which of the following relating to public companies? $$\begin{array}{l}

\begin{array} { l cc } 
&\text { Attestation Stardards}&\text {  Independence Stardards }\
\text { A } & \text { Yes } & \text { Yes } \
B . & \text { Yes } & \text { No } \
\text { C. } & \text { No } & \text { Yes } \
\text { D. } & \text { No } & \text { No }
\end{array}
\end{array}$$

Accepted Answer

The Public Company Accounting Oversight Board has the authority to establish both Attestation Standards and Independence Standards relating to public companies. Therefore, option A is the correct choice.

Question 4

Generally accepted auditing standards established by the AICPA through April of 2003:

Accepted Answer

Generally accepted auditing standards established by the AICPA through April of 2003 were accepted as interim standards by the Public Company Accounting Oversight Board.

Question 5

If noncompliance with a law is discovered during the audit of a publicly held company,the auditors should first:

Accepted Answer

The first action of the auditors should be to report the noncompliance act to those in charge of governance within the client's organization. This is in line with the standards of reporting improvements made by the Public Company Accounting Oversight Board (PCAOB). The board requires auditors to communicate noncompliance with laws and regulations discovered during audits to those responsible for governance within the client organization.

Question 6

Which of the following is not a service included in the attestation subject matter standard?

Accepted Answer

Historical financial statement examination is not considered a service under the attestation subject matter standards. Attestation services typically involve providing assurance on subject matter other than historical financial statements, such as compliance, forecasts, projections, and service organization controls. Historical financial statement examinations fall under the purview of audit services, not attestation services.

Question 7

Which of the following is least likely to be directly examined in an inspection performed by the PCAOB?

Accepted Answer

The least likely to be directly examined in an inspection performed by the PCAOB are compilation engagements. This is because PCAOB inspections primarily focus on public accounting firms and their work with audits of public companies. While compilation engagements can be performed by public accounting firms, they are not typically subject to the same level of scrutiny as audit engagements. The PCAOB is more likely to focus on audit engagements and the CPA firm's quality control system, as these are areas where there is a higher risk of material misstatements or audit failures.

Question 8

Which of the following best describes what is meant by generally accepted auditing standards?

Accepted Answer

Measures of the quality of the auditors' performance best describe generally accepted auditing standards. These standards provide a framework for ensuring the auditor's work meets a certain level of quality and reliability.

Question 9

Which of the following is not an element of quality control?

Accepted Answer

The answer of Which of the following is not an...

Question 10

Which of the following is not an element of quality control?

Accepted Answer

Independence is an element of quality assurance, not quality control. Quality control focuses on operational techniques and activities used to fulfill requirements for quality, including monitoring, human resources, and engagement performance, but independence is more about maintaining objectivity and is a principle of quality assurance.

Question 11

A CPA firm establishes quality control policies and procedures for deciding whether to accept a new client or continue to perform services for a current client.The primary purpose for establishing such policies and procedures is:

Accepted Answer

The primary purpose of establishing quality control policies and procedures for client acceptance and continuance is to minimize the likelihood of association with clients whose managements lack integrity. This helps ensure the CPA firm maintains its reputation and reduces the risk of being involved in audits or engagements where there might be ethical or legal issues due to the client's management behavior.

Question 12

Within the context of quality control,the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide personnel within the firm with:

Accepted Answer

Continuing professional education and training activities are designed to equip the personnel of a CPA firm with the knowledge and skills required to carry out their assigned responsibilities effectively and to progress within the firm. This not only enhances the individual's competencies but also strengthens the overall quality control processes and systems of the firm. While technical training and professional education are important, they are not the primary aims of continuing education and training activities within the context of quality control. Similarly, although knowledge related to peer reviews could be useful for some personnel, it is not a core requirement for everyone.

Question 13

Of the following,which are current types of peer reviews? $$\begin{array} { c c } 
&\text { Systern Reviews } & \text { Erigagement Renews } \
A.&\text { Yes } & \text { Yes } \
B.&\text { Yes } & \text { No } \
C.&\text { No } & \text { Yes } \
D.&\text { No } & \text { No }
\end{array}$$

Accepted Answer

Option A is the correct choice as it indicates that both Systematic Reviews and Engagement Reviews are current types of peer reviews. Option B is incorrect because it states that Engagement Reviews are not current types of peer reviews. Option C is also incorrect because it states that Systematic Reviews are not current types of peer reviews. Option D is incorrect because it states that neither Systematic Reviews nor Engagement Reviews are current types of peer reviews.

Question 14

An investor reading the financial statements of The Fairbury Corporation observes that the statements are accompanied by an unmodified auditors' report.From this,the investor may conclude that:

Accepted Answer

An unmodified auditor's report indicates that the financial statements are presented fairly in all material respects, and any significant accounting issues have been resolved to the auditors' satisfaction.

Question 15

Which of the following types of audits are ordinarily performed following generally accepted auditing standards?

$\begin{array} { l c c } 
&\text { Public Company Audit } & \text { Norpublic Comparty Audit } \
\text { A } & \text { Yes } & \text { Yes } \ \text { B. } & \text { Yes } & \text { No } \ \text { C. } & \text { No } & \text { Yes } \ \text { D. } & \text { No } & \text { No } \end{array}$

Accepted Answer

The answer of Which of the following types of audits...

Question 16

Authoritative GAAP Sources include: 
$\begin{array} { lcc } 
&\text { FASB } & \text { FASB } \
&\text { Remediation Statements } & \text { Codification }\
\text { A } & \text { Yes } & \text { Yes } \ \text { B. } & \text { Yes } & \text { No } \ \text { C. } & \text { No } & \text { Yes } \ \text { D. } & \text { No } & \text { No } \end{array}$

Accepted Answer

The FASB Codification is an authoritative source of GAAP, while FASB Remediation Statements are not.

Question 17

The primary responsibility for the adequacy of disclosure in the financial statements of a publicly held company rests with the:

Accepted Answer

The management of the company is primarily responsible for the content and accuracy of the financial statements, including the adequacy of disclosure. The auditor's responsibility is to provide assurance on the financial statements, but not to create them. The SEC also plays a role in overseeing the financial reporting of publicly held companies, but management remains the primary party responsible for the financial statements.

Question 18

Which of the following statements best describes the primary purpose of Statements on Auditing Standards?

Accepted Answer

The primary purpose of Statements on Auditing Standards is to provide authoritative guidance on generally accepted auditing standards (GAAS) for auditors to follow in the performance of their duties. They are enforceable through the Code of Professional Conduct, making choice C the correct answer. Choices A, B, and D are partially correct but do not accurately reflect the primary purpose of Statements on Auditing Standards.

Question 19

In pursuing a CPA firm's quality control objectives,a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm's clients.Which quality control objective would this be most likely to satisfy?

Accepted Answer

Maintaining records of which partners or employees were previously employed by the firm's clients helps ensure compliance with relevant ethical requirements, such as independence and conflict of interest standards. This practice helps prevent situations where the objectivity and impartiality of the audit could be compromised.

Question 20

A peer review in which the peer reviewers study and appraise a CPA firm's system of quality control to perform accounting and auditing work is referred to as a(n):

Accepted Answer

A system review is specifically designed to assess a CPA firm's system of quality control to ensure compliance with the professional standards for accounting and auditing. The other options listed are different types of peer reviews, but not focused on the evaluation of the firm's quality control system. An engagement review evaluates the specific engagements for compliance with professional standards. An inspection review assesses compliance with the Sarbanes-Oxley Act and PCAOB standards. A supervision review assesses the adequacy of supervision by an AICPA supervisory entity of the reviewed firm's engagements.

Quiz 2: Professional Standards

A nonpublic company auditors' report is most likely to be addressed to the company whose financial statements are being examined or to that company's:

An engagement review form of peer review is least likely to include a peer reviewer's detailed analysis of:

Generally accepted auditing standards established by the AICPA through April of 2003:

If noncompliance with a law is discovered during the audit of a publicly held company,the auditors should first:

Which of the following is not a service included in the attestation subject matter standard?

Which of the following is least likely to be directly examined in an inspection performed by the PCAOB?

Which of the following best describes what is meant by generally accepted auditing standards?

Which of the following is not an element of quality control?

Which of the following is not an element of quality control?

A CPA firm establishes quality control policies and procedures for deciding whether to accept a new client or continue to perform services for a current client.The primary purpose for establishing such policies and procedures is:

Within the context of quality control,the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide personnel within the firm with:

Of the following,which are current types of peer reviews? $\begin{array} { c c } &\text { Systern Reviews } & \text { Erigagement Renews } \\A.&\text { Yes } & \text { Yes } \\B.&\text { Yes } & \text { No } \\C.&\text { No } & \text { Yes } \\D.&\text { No } & \text { No }\end{array}$

An investor reading the financial statements of The Fairbury Corporation observes that the statements are accompanied by an unmodified auditors' report.From this,the investor may conclude that:

The primary responsibility for the adequacy of disclosure in the financial statements of a publicly held company rests with the:

Which of the following statements best describes the primary purpose of Statements on Auditing Standards?

In pursuing a CPA firm's quality control objectives,a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm's clients.Which quality control objective would this be most likely to satisfy?

A peer review in which the peer reviewers study and appraise a CPA firm's system of quality control to perform accounting and auditing work is referred to as a(n) :