Question 1

What is an engagement to attest on internal control over financial reporting?

Accepted Answer

The answer of What is an engagement to attest on...

Question 2

To perform an audit, it is necessary for the information to be in a verifiable form and there must be some criteria by which the auditor can evaluate the information.Detail the information and criteria that would be used when:
(A)an independent CPA firm audits a company's historical financial statements.
(B)an Internal Revenue Service auditor audits that same company's tax return.
(C)an internal auditor performs an operational audit to evaluate whether the company's computerized payroll processing system is operating efficiently and effectively.

Accepted Answer

The answer of To perform an audit, it is necessary...

Question 3

The Sarbanes-Oxley Act prohibits a CPA firm that audits a public company from providing which of the following types of services to that company?
A)Reviews of quarterly financial statements
B)Preparation of corporate tax returns
C)Most consulting services
D)Tax services

Accepted Answer

The Sarbanes-Oxley Act prohibits a CPA firm that audits a public company from providing most consulting services to that company. This includes services related to financial systems design and implementation, internal audit outsourcing, and management functions or human resources. The act also restricts certain non-audit services, such as bookkeeping and financial information systems design and implementation. However, the firm can still provide reviews of quarterly financial statements and tax services, including the preparation of corporate tax returns, as long as they are not involved in determining or recommending the tax treatment of any item on the financial statements.

Question 4

An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n):
A)audit of financial statements.
B)compliance audit.
C)operational audit.
D)production audit.

Accepted Answer

A compliance audit is specifically designed to assess whether an entity is following specific procedures or rules set down by some higher authority, such as laws, regulations, contracts, or internal policies. The other choices, financial statement audit, operational audit, and production audit, are different types of audits that focus on different aspects of an organization's operations.

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 indeed requires public companies to have an external auditor attest to their internal control over financial reporting.

Question 6

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

Accepted Answer

CPA firms are allowed to provide bookkeeping services for clients as long as they do not also perform audit, review, or compilation services for that same client. Providing both bookkeeping and attest services for the same client can create a conflict of interest and impair the independence of the CPA firm.

Question 7

One objective of an operational audit is to:
A)determine whether the financial statements fairly present the entity's operations.
B)determine if the auditee is in compliance with GAAP.
C)make recommendations for improving performance.
D)report on the entity's relative success in attaining profit maximization.

Accepted Answer

The primary objective of an operational audit is to review and evaluate the efficiency and effectiveness of an entity's operations and to identify areas of improvement. The audit may include recommendations for enhancing operational procedures, reducing costs, improving productivity, and increasing revenue. The other choices are not objectives of an operational audit. Compliance with GAAP is usually checked in a financial audit, and profit maximization is a management objective, not an audit objective.

Question 8

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 9

The primary purpose of a compliance audit is to determine whether the financial statements are prepared in compliance with generally accepted accounting principles.

Accepted Answer

The primary purpose of a compliance audit is to determine whether an entity is following rules, regulations, policies, and procedures that apply to their operations. This includes checking for compliance with legal requirements, contractual agreements, and internal policies, among other things. While a compliance audit may review financial statements as part of its scope, its primary focus is on compliance in other areas. The purpose of a financial statement audit is to determine if the financial statements are prepared in accordance with generally accepted accounting principles.

Question 10

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, along with other important information, on its EDGAR database. These filings include annual reports (Form 10-K), quarterly reports (Form 10-Q), and other relevant disclosures. These documents are audited by independent registered public accounting firms and are made available to the public for free on the SEC's website.

Question 11

Attestation services on information technology include WebTrust services and SysTrust services.Which of the following statements most accurately describes SysTrust services?
A)SysTrust services provide assurance on business processes, transaction integrity and information processes.
B)SysTrust services provide assurance on system reliability in critical areas such as security and data integrity.
C)SysTrust services provide assurance on internal control over financial reporting.
D)SysTrust services provide assurance as to whether accounting personnel are following procedures prescribed by the company controller.

Accepted Answer

SysTrust services provide assurance on system reliability in critical areas such as security and data integrity. These services focus on evaluating the effectiveness and reliability of an organization's IT systems and processes. They are specifically designed to address the concerns of IT and security professionals, and provide assurance that systems are operating as intended and can be trusted to support business operations.

Question 12

An examination of part of an organization's procedures and methods for the purpose of evaluating efficiency and effectiveness is what type of audit?
A)Operational audit
B)Compliance audit
C)Financial statement audit
D)Production audit

Accepted Answer

An operational audit is specifically performed to assess the efficiency and effectiveness of an organization's procedures and methods. It evaluates how well the organization is meeting its goals and objectives, and identifies any areas where improvements can be made. Compliance audits, financial statement audits, and production audits focus on different aspects of an organization's operations, but do not specifically evaluate efficiency and effectiveness.

Question 13

Which of the following services provides the lowest level of assurance on a financial statement?
A)A review
B)An 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 limited assurance on a financial statement, while an audit provides a higher level of assurance. Therefore, A review provides the lowest level of assurance.

Question 14

What is a WebTrust engagement?
 What is a SysTrust engagement?
 How do they differ?

Accepted Answer

The answer of What is a WebTrust engagement?
 What is...

Question 15

Which of the following is not a SysTrust Services principle as defined by the AICPA?
A)Online privacy
B)Availability
C)Processing integrity
D)Operational integrity

Accepted Answer

The SysTrust Services principles as defined by the AICPA are security, availability, processing integrity, confidentiality, and privacy. Operational integrity is not included in the list.

Question 16

Which of the following audits can be regarded as generally being a compliance audit?
A)IRS agents' examinations of taxpayer returns
B)GAO auditor's evaluation of the computer operations of governmental units
C)An internal auditor's review of a company's payroll authorization procedures
D)A CPA firm's audit of a public company

Accepted Answer

Compliance audits are designed to determine whether entities are following specific rules, regulations, or laws. IRS agents' examinations of taxpayer returns are compliance audits because they check if taxpayers are complying with tax laws.

Question 17

Discuss the similarities and differences between financial statement audits, operational audits, and compliance audits.Give an example of each type.

Accepted Answer

The answer of Discuss the similarities and differences between financial...

Question 18

Which of the following are required to have a written report regarding the assertion of another party?
A) 
B) 
C) 
D)

Accepted Answer

According to the International Standards on Auditing (ISA), when a party other than the auditors provides financial information, the auditors must obtain written representations from the responsible party and, in some cases, a written assertion about the accuracy and completeness of the information. The auditors must also prepare a written report regarding the assertion of that party. Option B is the only option that contains the required reference code (TB2673) for this requirement.

Question 19

What are the five categories of attestation services?

Accepted Answer

The answer of What are the five categories of attestation...

Question 20

Which one of the following is more difficult to evaluate objectively?
A)Presentation of financial statements in accordance with generally accepted accounting principles
B)Compliance with government regulations
C)Efficiency and effectiveness of operations
D)All three of the above are equally difficult.

Accepted Answer

While all three options require some level of subjective judgment, evaluating the efficiency and effectiveness of operations involves a greater degree of subjectivity as it may involve individual opinions and interpretations of what is considered efficient and effective. Compliance with government regulations can be measured more objectively through audits and documentation, while the presentation of financial statements in accordance with generally accepted accounting principles is governed by specific guidelines and rules.

Quiz 1: The Demand for Audit and Other Assurance Services

What is an engagement to attest on internal control over financial reporting?

The Sarbanes-Oxley Act prohibits a CPA firm that audits a public company from providing which of the following types of services to that company?

An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as 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.

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

One objective of an operational audit is to:

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?

The primary purpose of a compliance audit is to determine whether the financial statements are prepared in compliance with generally accepted accounting principles.

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

Attestation services on information technology include WebTrust services and SysTrust services.Which of the following statements most accurately describes SysTrust services?

An examination of part of an organization's procedures and methods for the purpose of evaluating efficiency and effectiveness is what type of audit?

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

What is a WebTrust engagement? What is a SysTrust engagement? How do they differ?

Which of the following is not a SysTrust Services principle as defined by the AICPA?

Which of the following audits can be regarded as generally being a compliance audit?

Discuss the similarities and differences between financial statement audits, operational audits, and compliance audits.Give an example of each type.

Which of the following are required to have a written report regarding the assertion of another party?

What are the five categories of attestation services?

Which one of the following is more difficult to evaluate objectively?