Question 1

CPA firms are never allowed to provide bookkeeping services for clients.

Accepted Answer

CPA firms are permitted to offer bookkeeping services to clients, but they must take care to maintain independence and avoid conflicts of interest. However, some CPA firms may choose not to provide these services in order to avoid any appearance of impropriety.

Question 2

What is an audit of internal control over financial reporting?

Accepted Answer

The answer of What is an audit of internal control...

Question 3

Three common types of attestation services are
A)audits of historical financial statements,reviews of historical financial statements,and audits of internal control over financial reporting.
B)audits of historical financial information,verifications of historical financial information,and attestations regarding internal controls.
C)reviews of historical financial information,verifications of future financial information,and attestations regarding internal controls.
D)audits of historical financial information,reviews of controls related to investments,and verifications of historical financial information.

Accepted Answer

The three common types of attestation services are audits of historical financial statements, reviews of historical financial statements, and audits of internal control over financial reporting. These are established by the AICPA and are the most frequently provided attestation engagements.

Question 4

Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n)
A)accounting and bookkeeping service.
B)attestation service.
C)assurance service.
D)tax service.

Accepted Answer

An attestation service is the service that requires a CPA firm to issue a report about the reliability of an assertion made by another party. Accounting and bookkeeping services are focused on the recording and organization of financial data, tax services are focused on taxation compliance and planning, while assurance services broaden the scope of accounting and auditing work beyond financial data to include processes, controls, and systems.

Question 5

Section 404 of the Sarbanes-Oxley Act requires public companies to have an external auditor attest to their internal control over financial reporting.

Accepted Answer

Section 404 of the Sarbanes-Oxley Act explicitly requires external auditors to attest to a company's internal control over financial reporting. This is done to enhance the reliability and accuracy of financial reports and increase transparency in financial reporting.

Question 6

What are the four categories of attestation services?

Accepted Answer

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Question 7

Management is required by GAAP to reduce information risk,even if the costs outweigh the benefits.

Accepted Answer

GAAP requires management to make reasonable efforts to reduce information risk, but not if the costs outweigh the benefits. The cost-benefit principle is a key consideration in GAAP.

Question 8

In the audit of historical financial statements,management asserts that the financial statements are fairly stated in accordance with what standards?
A)regulatory accounting principles
B)applicable international accounting standards
C)applicable U.S.accounting standards
D)B and C

Accepted Answer

In the audit of historical financial statements, management asserts that the financial statements are fairly stated in accordance with applicable international accounting standards and/or applicable U.S. accounting standards. Regulatory accounting principles may also apply, but they are not the primary standards used in the preparation of financial statements. Therefore, choices B and C are both correct options for the assertion made by management.

Question 9

The most common way for users to obtain reliable information is to
A)have an internal audit.
B)have an independent audit.
C)verify all information individually.
D)verify the information with management.

Accepted Answer

Having an independent audit is the most reliable way for users to obtain information as it involves an unbiased third-party evaluation of the organization's financial statements and internal controls. Internal audits may be influenced by management and verifying all information individually can be time-consuming and may not be practical for all users. Verifying information with management may also not be reliable as they may have a conflict of interest in presenting the information in a positive light.

Question 10

Audits
A)are an assurance service,but not an attestation service.
B)are designed to provide absolute assurance that the financial statements are free of material misstatement.
C)are required for publicly traded companies in the United States.
D)do not require the auditor to express their opinion in a written report.

Accepted Answer

Audits are required for publicly traded companies in the United States by the Securities and Exchange Commission (SEC). Options A, B, and D are incorrect; audits are both an assurance and attestation service, provide reasonable assurance, and require the auditor to express their opinion in a written report.

Question 11

Most public companies' audited financial statements are available on the SEC's EDGAR database.

Accepted Answer

The SEC requires public companies to file their financial statements on the EDGAR database, which is publicly accessible.

Question 12

External users of the financial statements
A)value the auditor's report because of the auditor's independence from the client.
B)look to the auditor's report as an indication of the statements' reliability.
C)use the audited information on the assumption that it is reasonably complete,accurate,and unbiased.
D)all of the above.

Accepted Answer

All of the above statements are true. External users, such as investors, creditors, and regulators, value the auditor's report because it provides assurance that the financial statements are reliable, complete, accurate, and unbiased. The auditor's independence from the client is important because it ensures that the auditor can provide an objective and unbiased opinion. External users rely on audited information to make important business decisions, and they look to the auditor's report as an indication of the statements' reliability.

Question 13

A high,but not absolute,level of assurance is called
A)probable assurance.
B)reasonable assurance.
C)limited assurance.
D)incomplete assurance.

Accepted Answer

Reasonable assurance is a high level of assurance but not absolute. Limited assurance is a lower level of assurance, and both probable assurance and incomplete assurance are not commonly used terms in the field of auditing.

Question 14

Which of the following is an accurate statement regarding the various types of other assurance services?
A)Assurance services must be about the reliability of another party's assertion about compliance with specified criteria.
B)Other assurance services must meet the definition of an attestation service.
C)The primary purpose of a management consulting engagement is to improve the quality of information.
D)The market for other forms of assurance services is open to non-CPA competitors.

Accepted Answer

The market for other forms of assurance services, such as sustainability reporting, cybersecurity, and social responsibility reporting, is very competitive and can be performed by non-CPA firms. Therefore, option D is the only accurate statement. Option A is incorrect because not all assurance services are about the reliability of another party's assertion about compliance with specified criteria. Option B is incorrect because other assurance services may not meet the definition of an attestation service. Option C is incorrect because the primary purpose of a management consulting engagement is not always to improve the quality of information, but rather to provide advice and recommendations on operational or strategic improvements.

Question 15

CPA firms perform numerous services that generally fall outside the scope of assurance services.Give three examples of such services.

Accepted Answer

The answer of CPA firms perform numerous services that generally...

Question 16

Explain what is meant by information risk,and list the four causes of this risk.

Accepted Answer

The answer of Explain what is meant by information risk,and...

Question 17

Two types of attestation services provided by CPA firms are audits and reviews.Discuss the similarities and differences between these two types of attestation services.Which type provides the least assurance?

Accepted Answer

The answer of Two types of attestation services provided by...

Question 18

As society becomes more complex,decision makers are more likely to receive reliable information.

Accepted Answer

As society becomes more complex, it becomes harder to gather reliable information due to factors such as increased sources of bias, misinformation, and complexity.

Question 19

Which of the following is an accurate statement regarding assurance services?
A)Assurance services must be performed by a CPA.
B)An attestation service is not a type of assurance service.
C)Assurance services improve the quality of information for decision makers.
D)Assurance services can only be performed on financial data.

Accepted Answer

Assurance services are designed to improve the quality of information for decision makers. While CPAs may perform assurance services, it is not a requirement for the service to be considered an assurance service. Attestation services are a type of assurance service. Assurance services are not limited to financial data and can encompass a broad range of subject matters.

Question 20

Which of the following services provides the lowest level of assurance on a financial statement?
A)review
B)audit
C)Neither service provides assurance on financial statements.
D)Each service provides the same level of assurance on financial statements.

Accepted Answer

A review provides a lower level of assurance than an audit. While a review provides limited assurance that there are no material modifications that should be made to the financial statements, it does not provide the high level of assurance provided by an audit. An audit provides reasonable assurance that the financial statements are free from material misstatement. Therefore, A is the correct answer.

Quiz 1: The Demand for Audit and Other Assurance Services

CPA firms are never allowed to provide bookkeeping services for clients.

What is an audit of internal control over financial reporting?

Three common types of attestation services are

Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n)

Section 404 of the Sarbanes-Oxley Act requires public companies to have an external auditor attest to their internal control over financial reporting.

What are the four categories of attestation services?

Management is required by GAAP to reduce information risk,even if the costs outweigh the benefits.

In the audit of historical financial statements,management asserts that the financial statements are fairly stated in accordance with what standards?

The most common way for users to obtain reliable information is to

Audits

Most public companies' audited financial statements are available on the SEC's EDGAR database.

External users of the financial statements

A high,but not absolute,level of assurance is called

Which of the following is an accurate statement regarding the various types of other assurance services?

CPA firms perform numerous services that generally fall outside the scope of assurance services.Give three examples of such services.

Explain what is meant by information risk,and list the four causes of this risk.

Two types of attestation services provided by CPA firms are audits and reviews.Discuss the similarities and differences between these two types of attestation services.Which type provides the least assurance?

As society becomes more complex,decision makers are more likely to receive reliable information.

Which of the following is an accurate statement regarding assurance services?

Which of the following services provides the lowest level of assurance on a financial statement?