Question 1
2 out of 2 points
Correct
Which of the following is least likely to cause uncertainty about the ability of an entity to continue as a going concern?
A. A clients lawsuit against another company which claims the other company has infringedon its patent.
B. Loss of major customers.
C. Significant recurring operating losses.
D. Working capital deficiencies.
Question 2
2 out of 2 points
Correct
If most or all users’ decisions that are based on the financial statements are likely to be significantly affected the materiality level is:
A) unrestricted.
B) material.
C) pervasive.
D) risky.
Question 3
2 out of 2 points
Correct
The standard unqualified audit report for a non-public entity must:
A) have a report title that includes the word CPA.
B) be addressed to the company’s stockholders and creditors.
C) be dated.
D) include an explanatory paragraph.
Question 4
2 out of 2 points
Correct
The audit report date on a standard unqualified report indicates:
A) the last day of the fiscal period.
B) the date on which the financial statements were filed with the Securities and Exchange Commission.
C) the last date on which users may institute a lawsuit against either client or auditor.
D) the last day of the auditor’s responsibility for the review of significant events that occurred after the date of the financial statements.
Question 5
2 out of 2 points
Correct
The standard unqualified audit report for public entities includes the following three paragraphs:
Answer
A) introductory scope and management’s responsibility.
B) materiality scope and report.
C) introductory scope and opinion.
D) scope fieldwork and conclusion.
Question 6
2 out of 2 points
Correct
The auditor’s responsibility section of the standard unqualified audit report states that the audit is designed to:
A) discover all errors and/or irregularities.
B) discover material errors and/or irregularities.
C) conform to generally accepted accounting principles.
D) obtain reasonable assurance whether the statements are free of material misstatement.
Question 7
2 out of 2 points
Correct
Auditing standards for public companies are established by the:
A) SEC.
B) FASB.
C) PCAOB.
D) IRS.
Question 8
0 out of 2 points
Incorrect
The auditor’s responsibility section of the standard audit report states that the auditor is:
A) the responsibility of the auditor.
B) the responsibility of management.
C) the joint responsibility of management and the auditor.
D) none of the above.
Question 9
2 out of 2 points
Correct
The term explanatory paragraph was replaced in the AICPA auditing standards with:
A) going concern paragraph.
B) emphasis-of-matter paragraph.
C) departure from principles paragraph.
D) consistency paragraph
Question 10
2 out of 2 points
Correct
If the phrase except for is present in the opinion paragraph of the audit report the auditor has issued a(n):
A) adverse opinion.
B) disclaimer of opinion.
C) unqualified opinion.
D) qualified opinion.
Question 11
2 out of 2 points
Correct
The first step to be followed when deciding the appropriate audit report in a given set of circumstances is to:
A) decide the appropriate type of report for the condition.
B) write the report.
C) determine whether any conditions exists requiring a departure from a standardunqualified report.
D) decide the materiality for each condition
Question 12
2 out of 2 points
Correct
Items that materially affect the comparability of financial statements generally require disclosure in the footnotes. If the client refuses to properly disclose the item the auditor will most likely issue:
A) a disclaimer.
B) an unqualified opinion.
C) a qualified opinion.
D) an adverse opinion.
Question 13
2 out of 2 points
Correct
When the auditor determines that the financial statements are fairly stated but there is a nonindependent relationship between the auditor and the client the auditor should issue:
A) an adverse opinion.
B) a disclaimer of opinion.
C) either a qualified opinion or an adverse opinion.
D) either a qualified opinion or an unqualified opinion with modified wording
Question 14
2 out of 2 points
Correct
A misstatement in the financial statements can be considered material if knowledge of the misstatement will affect a decision of:
A) the PCAOB.
B) a reasonable user of the financial statements.
C) an accountant.
D) the SEC
Question 15
2 out of 2 points
Correct
Whenever the client imposes restrictions on the scope of the audit the auditor should be concerned that management may be trying to prevent discovery of misstatements. In such cases the auditor will likely issue a:
A) disclaimer of opinion in all cases.
B) qualification of both scope and opinion in all cases.
C) disclaimer of opinion whenever materiality is in question.
D) qualification of both scope and opinion whenever materiality is in question.
Question 16
2 out of 2 points
Correct
The Sarbanes-Oxley Act ________ a CPA firm from doing both bookkeeping and auditing services for the same public company client.
A) encourages
B) prohibits
C) allows
D) allows on a case-by-case basis
Question 17
2 out of 2 points
Correct
When a member observes the profession’s technical and ethical standards and strives to continually improve her competence and quality of services she is exercising:
A) due care.
B) integrity.
C) independence.
D) objectivity.
Question 18
2 out of 2 points
Correct
The CPA must not subordinate his or her professional judgment to that of others in any:
A) engagement.
B) audit engagement.
C) engagement excluding tax services.
D) engagement where the opinion of a specialist is used.
Question 19
2 out of 2 points
Correct
Interpretations of the rules regarding independence allow an auditor to serve as:
A) a director or officer of an audit client.
B) an underwriter for the sale of a client’s securities.
C) a trustee of a client’s pension fund.
D) an honorary director for a not-for-profit charitable or religious organization.
Question 20
2 out of 2 points
Correct
Rule 301 of the AICPA’s Code of Professional Conduct requires CPAs to maintain the confidentiality of client information. This rule would be violated if a CPA disclosed information without a client’s consent as a result of a:
A) subpoena or summons.
B) peer review.
C) complaint filed with the trial board of the Institute.
D) request by a client’s largest stockholder.
Question 21
2 out of 2 points
Correct
The financial interests of a CPA’s family members can affect the CPA’s independence. Which of the following parties would not be included as a direct financial interest of the CPA?
A) Spouse
B) Dependent child
C) Relative supported by the CPA
D) Sibling living in the same city as the CPA
Question 22
2 out of 2 points
Correct
Ethics are:
A) needed in the professions but is not needed for society in general.
B) a set of moral principles or values.
C) not formed by life experiences.
D) always incorporated in laws.
Question 23
2 out of 2 points
Correct
Which of the following services are allowed by the SEC whenever a CPA also audits the company?
A. Internal audit outsourcing
B. Legal services unrelated to the audit
C. Appraisal or valuation services.
D. Services related to assessing the effectiveness of internal control over financial reporting.
Question 24
2 out of 2 points
Correct
A CPA firm:
A) can sell securities to a client for whom they perform an attestation service.
B) can receive a commission for a client that they are engaged to perform an attestation service for.
C) cannot receive a referral fee for recommending the services of another CPA.
D) can receive a commission from a nonattestation client as long as the situation is disclosed.
Question 25
2 out of 2 points
Correct
The Sarbanes-Oxley Act requires a cooling off period of ________ before a member of an audit team can work for a client in a key management position?
A. Eighteen months.
b.Twelve months.
c.Thirty-six months.
d.It is not specified; instead it is left to the auditors discretion.
Question 26
2 out of 2 points
Correct
Of the four parts of the AICPA’s Code of Professional Conduct which part is enforceable?
A) Principles
B) Rules of Conduct
C) Interpretations
D) Definitions
Question 27
2 out of 2 points
Correct
Freedom from ________ means the absence of relationships that might interfere with objectivity or integrity.
A) independence.
B) acts discreditable.
C) impartiality.
D) conflicts of interest.
Question 28
2 out of 2 points
Correct
Which of the following is required for a firm to designate itself Member of the American Institute of Certified Public Accountants on its letterhead?
A) At least one of the partners must be a member of the AICPA.
B) All partners must be members of the AICPA.
C) The partners whose names appear in the firm name must be members of the AICPA.
D) A majority of the partners must be members of the AICPA.
Question 29
2 out of 2 points
Correct
The AICPA’s Code of Professional Conduct requires independence for all:
A) attestation engagements.
B) services performed by accountants in public practice.
C) accounting and auditing services performed.
D) professional work performed by CPAs.
Question 30
2 out of 2 points
Correct
The members of a client’s audit committee should be:
A) members of management.
B) directors who are not a part of company management.
C) non-directors and non-managers.
D) directors and managers.