Question 1

Which of the following is not a responsibility of the PCAOB?

Accepted Answer

Converging GAAP standards with IFRS standards is the responsibility of the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), not the PCAOB. The other three options are responsibilities of the PCAOB.

Question 2

Legal privileges are protections against certain types of testimony. Which of the following is not a legal privilege?

Accepted Answer

All of the other options listed are recognized legal privileges, while librarian-patron privilege is not. However, other types of privileges may exist depending on the jurisdiction and circumstances.

Question 3

Which of the following is not a major form of negotiated settlements in a civil trial?

Accepted Answer

Majority jury vote is not a form of negotiated settlement in a civil trial. It is a decision-making process that occurs during trial when a jury is tasked with reaching a verdict based on evidence presented in court. Out-of-court settlements, arbitration, and mediation are all forms of negotiated settlements that can occur before, during, or after a civil trial.

Question 4

PCAOB Auditing Standard No. 3 AS3, Audit Documentation, requires that audit engagement documentation should include a list of all EXCEPT:

Accepted Answer

PCAOB Auditing Standard No. 3 AS3 requires that the audit engagement documentation should include a list of significant fraud risk factors, the auditor's response to those risks, and the results of the auditor's related procedures. However, it does not require a list of internal controls.

Question 5

The Miranda warnings consist of everything but the following:

Accepted Answer

The Miranda warnings do not state that the interviewee's answers may not be used against him. In fact, they explicitly state that anything the interviewee says can and will be used against him in court. The other three choices are all part of the Miranda warnings.

Question 6

Members of the PCAOB are appointed by the:

Accepted Answer

The PCAOB (Public Company Accounting Oversight Board) is a regulatory body established by the Sarbanes-Oxley Act of 2002, and its members are appointed by the SEC (Securities and Exchange Commission). The other options - A) AICPA (American Institute of Certified Public Accountants), C) FASB (Financial Accounting Standards Board), and D) IASB (International Accounting Standards Board) - are other organizations in the accounting industry, but they do not have the authority to appoint members to the PCAOB.

Question 7

In September 2004, the Committee of Sponsoring Organizations COSO of the Treadway Commission released their _______ framework, recognized by the SEC as the critical methodology for Sarbanes-Oxley.

Accepted Answer

The COSO framework released in September 2004 refers to the Enterprise Risk Management (ERM) framework, which was recognized by the SEC as the critical methodology for Sarbanes-Oxley. The other options (IFRS, XBRL, and XML) are not related to this framework.

Question 8

Which of the following statements is not a major financial statement?

Accepted Answer

The sales budget is not a major financial statement. The three major financial statements are the income statement, balance sheet, and statement of cash flows. The sales budget is a forecasting tool used to predict future sales revenue.

Question 9

The AICPA has the authority to set standards and make rules in all the following areas EXCEPT:

Accepted Answer

The authority to set auditing standards for public companies lies with the Public Company Accounting Oversight Board (PCAOB), not the AICPA.

Question 10

Generally, investigators can obtain documentary evidence using all approaches EXCEPT:

Accepted Answer

Theft is not a legal or ethical method for investigators to obtain documentary evidence, whereas voluntary consent, subpoenas, and search warrants are all legitimate approaches.

Question 11

Which of the following is not a major provision in the Sarbanes-Oxley Act of 2002?

Accepted Answer

The Sarbanes-Oxley Act of 2002 does not specifically address the process of establishing new financial accounting standards. Its major provisions include creating an independent regulatory framework for the accounting profession, enhancing the quality and transparency of financial reports, and establishing new protections for corporate whistleblowers.

Question 12

What common law protections do individuals have during interviews?

Accepted Answer

The answer of What common law protections do individuals have...

Question 13

The purview of auditing of nonpublic companies falls under the guidelines of the:

Accepted Answer

The American Institute of Certified Public Accountants (AICPA) is the organization that sets the standards for audits of non-public companies through their auditing standards board. However, it is important to note that the PCAOB (Public Company Accounting Oversight Board) oversees audits of public companies, while the AICPA oversees audits of non-public companies. The FASB (Financial Accounting Standards Board) sets accounting standards, but does not have jurisdiction over audit standards. The GAO (Government Accountability Office) primarily audits government agencies and programs.

Question 14

The basic accounting flow consists of the following events in what sequence?
1) Post to general ledger
2) Business transactions occur
3) Financial statements are prepared
4) Journal entries are recorded

Accepted Answer

The correct sequence for the basic accounting flow is: 2) Business transactions occur first, then 4) Journal entries are recorded to capture these transactions. Following that, 1) these entries are posted to the general ledger to update the account balances. Finally, 3) Financial statements are prepared using the updated information in the general ledger.

Question 15

The normal order of discovery includes the following steps in what sequence?
1) Interrogatories
2) Attorneys take depositions
3) Request to produce documents
4) Requests for admission

Accepted Answer

The normal order of discovery includes attorneys taking depositions first, followed by interrogatories, requests for admission and then requests to produce documents. Therefore, the correct sequence is 2, 1, 4, 3 as stated in option B.

Question 16

The ________ Amendment entitles a person to due process of law and equal protections under the Law.

Accepted Answer

The Fifth Amendment deals with the right to remain silent and protection against self-incrimination, the Fourth Amendment deals with protection against unreasonable searches and seizures, and the Sixth Amendment deals with the right to a fair trial. The Fourteenth Amendment, on the other hand, guarantees due process of law and equal protections under the law to all individuals, including both citizens and non-citizens.

Question 17

The lead audit or coordinating partner and reviewing partner of the registered accounting firm must rotate off of the audit every ________ years.

Accepted Answer

According to the Public Company Accounting Oversight Board (PCAOB), the lead audit or coordinating partner and reviewing partner of the registered accounting firm must rotate off of the audit every five years. This is done to maintain independence and objectivity in the auditing process. While the PCAOB can mandate rotation in certain circumstances, the general rule is every five years.

Question 18

Targets may enter the criminal justice system from all of the routes below except for:

Accepted Answer

Targets can enter the criminal justice system through a warrantless arrest by the police based upon probable cause, a grand jury proceeding that leads to an indictment and a subsequent arrest warrant issued by a judge, and an investigation that leads to the filing of an information. However, they cannot enter the system through a citizen’s arrest, as citizens do not have the authority to arrest someone for a crime unless it is committed in the citizen’s presence and the citizen has probable cause to believe that the person committed the crime.

Question 19

The ______ Amendment provides that an individual has the right to an attorney to defend himself and the right to confront witnesses against him.

Accepted Answer

The right to an attorney and the right to confront witnesses are guaranteed under the Sixth Amendment of the US Constitution. The Fifth Amendment guarantees the right to remain silent and protection against self-incrimination, while the Fourth Amendment protects against unreasonable searches and seizures. The Fourteenth Amendment addresses equal protection under the law.

Question 20

It is advisable that employers document good cause for any termination in the employee's personnel file. Good cause might include the following EXCEPT:

Accepted Answer

Discriminatory termination is not considered good cause and should not be documented in the employee's personnel file.

Quiz 6: Legal, Regulatory, and Professional Environment