Question 1

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 level of assurance that is high, but not absolute. Limited assurance (C) is a lower level of assurance, while probable (A) and incomplete (D) do not accurately describe a level of assurance.

Question 2

Audits and some types of attestation services are no longer limited by regulation to licensed CPAs.

Accepted Answer

Audits and certain types of attestation services are specifically regulated activities that generally require a licensed CPA (Certified Public Accountant) to perform them. This is to ensure that the individuals performing these services have the necessary education, experience, and ethical understanding to protect the public interest.

Question 3

Evaluating internal controls at third-party service providers, such as cloud computing suppliers, is not an attestation type of service which a CPA is allowed to perform today.

Accepted Answer

CPAs are allowed to perform attestation services that evaluate the effectiveness of internal controls at third-party service providers, including cloud computing suppliers. This is often done through engagements known as SOC (Service Organization Control) reports.

Question 4

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

Accepted Answer

The SEC's EDGAR database is a repository of all public companies' financial reports, including their audited financial statements. These statements are readily available to the public, making EDGAR a valuable resource for investors and other stakeholders.

Question 5

It is increasingly important for companies to ask their third-party service provider of services, including payroll and other types of transaction processing, for attestation reports covering a review of the effectiveness of internal controls in place at the third-party service provider.

Accepted Answer

With the rise of cyber threats and data breaches, it is crucial for companies to understand the level of security and control their third-party service providers have in place. Attestation reports can provide assurance on the effectiveness of internal controls and help mitigate risks.

Question 6

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 according to the Securities and Exchange Commission (SEC). Option A is incorrect as audits are both an assurance and an attestation service. Option B is incorrect as audits provide reasonable assurance, not absolute assurance, that the financial statements are free of material misstatement. Option D is incorrect as the auditor is required to express their opinion in a written report.

Question 7

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

Accepted Answer

CPA firms are allowed to provide bookkeeping services for clients, but they must maintain independence and objectivity when performing audit or review engagements for those clients. However, there are certain restrictions and guidelines that must be followed to ensure compliance with professional standards and regulations.

Question 8

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 objective of an operational audit is to evaluate an organization's operations to identify areas for improvement and make recommendations for enhancing performance. This type of audit focuses on the efficiency and effectiveness of an organization's processes, rather than just its financial reporting. Therefore, options A, B, and D are not the main objectives of an operational audit.

Question 9

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 determine whether an entity is following specific procedures or rules set down by some higher authority, such as laws and regulations, contract terms, or internal policies and procedures. Auditors conducting a compliance audit would assess whether the entity is adhering to the established requirements, and any noncompliance would be reported. The other options are not specifically focused on compliance with standards, regulations, or procedures.

Question 10

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

Evaluating the efficiency and effectiveness of operations is more subjective and varies depending on the specific organization and its goals. Compliance with government regulations and presentation of financial statements in accordance with generally accepted accounting principles have specific standards and guidelines to follow, making them more objective.

Question 11

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 12

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

IRS agents' examinations of taxpayer returns are intended to ensure compliance with tax laws and regulations, making it a type of compliance audit. The other choices involve reviews of different aspects of organizations but do not necessarily focus on regulatory compliance.

Question 13

What is an audit of internal control over financial reporting?

Accepted Answer

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

Question 14

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 external auditor attestation to a company's internal control over financial reporting for public companies.

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

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 and cybersecurity assessments, is not exclusive to CPAs and is open to non-CPA competitors. A and B are incorrect because assurance services can also address concerns such as efficiency and effectiveness, in addition to compliance. C is incorrect because the primary purpose of a management consulting engagement is to provide advice and recommendations to improve the client's business operations, not necessarily the quality of information.

Question 17

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 focuses on the examination of an organization's procedures and methods for the purpose of evaluating efficiency and effectiveness. It covers topics such as how well resources are being utilized, whether or not goals are being met, and how well different departments are working together. This type of audit can help improve the overall functioning of an organization. Compliance audits, financial statement audits, and production audits all focus on different areas of an organization and have different goals.

Question 18

The primary purpose of a management consulting engagement is to generate a recommendation to management.

Accepted Answer

The primary purpose of a management consulting engagement is to provide expert advice and solutions, which in turn generate recommendations to management. The recommendation is a result of the consulting work, but not the primary purpose.

Question 19

What are the four categories of attestation services?

Accepted Answer

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

Question 20

The primary purpose of a management consulting engagement is to generate a recommendation to management.

Accepted Answer

The primary goal of a management consulting engagement is to provide recommendations to management to improve business processes and achieve strategic goals. Consultants work closely with clients to analyze data, identify opportunities for improvement, and provide actionable recommendations that can be implemented by management.

Quiz 1: The Demand for Audit and Other Assurance Services

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

Audits and some types of attestation services are no longer limited by regulation to licensed CPAs.

Evaluating internal controls at third-party service providers, such as cloud computing suppliers, is not an attestation type of service which a CPA is allowed to perform today.

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

It is increasingly important for companies to ask their third-party service provider of services, including payroll and other types of transaction processing, for attestation reports covering a review of the effectiveness of internal controls in place at the third-party service provider.

Audits

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

One objective of an operational audit is to

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

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

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?

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

What is an audit of internal control over financial reporting?

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

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

The primary purpose of a management consulting engagement is to generate a recommendation to management.

What are the four categories of attestation services?

The primary purpose of a management consulting engagement is to generate a recommendation to management.