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Multiple Choice Questions

1. Financial statements audits: a. Confirm that financial statement assertions are accurate. b. Lend credibility to the financial statements. c. Confirm that financial statements are presented fairly. d. Assure that fraud has been detected. 2. Financial statements audits: a. Reduce the cost of a capital. b. Report on compliance with laws and regulations. c. Assess managements efficiency and effectiveness. d. Overlook information risk. 3. Which of the following best describes why an independent auditor reports on financial statements? a. Independent auditors are likely to detect fraud. b. Competing interests may exist between management and the users of the statements. c. Misstated account balances are generally corrected by an independent audit. d. Ineffective internal controls may exist. (AICPA Adapted) 4. The audited financial statements of a public company are the representations and responsibility of: a. The board of directors. b. Management. c. The independent auditor. d. The Public Company Accounting Oversight Board. 5. The client in an audit of a public companys financial statements is: a. Management. b. Employees. c. Shareholders. d. The public. 6. Financial statements and audit reports posted on the internet pose a risk that readers will: a. Fail to read the statements and reports entirely. b. Misinterpret the responsibilities of management. c. Fail to open hyperlinks. d. Presume incorrectly that the auditors report extends to hyperlinks. 7. Gathering evidence in a scientific experiment is most similar to an audit to: a. Planning an engagement. b. Hypothesizing that financial statements are presented fairly. c. Assessing risk and designing audit procedures.

d. Evaluating whether financial statements are presented fairly. 8. Most public accounting firms are organized as: a. Proprietorships. b. Partnerships. c. Limited liability partnerships. d. Corporations. 9. A manufacturer has engaged a public accounting firm to issue a report on the accuracy of product quality specifications included in trade sales agreements. This is an example of a (an): a. Financial statement audit. b. Attestation service. c. Compliance audit. d. Operational audit. 10. Review engagements are often purchased by: a. Small, owner-managed companies. b. Mid-market public companies. c. Large public companies. d. Government agencies. 11. A public accounting firms primary role in performing nonattest services to: a. Hedge against declines in the firms audit practice. b. Establish the firm as a consultant. c. Provide advice valuable to a clients effectiveness. d. Acclimate staff members to the clients business and industry. 12. Which of the following types of audits is designed to determine whether a government entitys procurement practices are sound? a. A financial statement audit. b. An operational audit. c. A program unit. d. A compliance audit. 13. Which of the following authoritative bodies issues pronouncements relevant to attestation service engagements for nonpublic companies? a. Accounting and Review Services Committee. b. Auditing Standards Board. c. Public Company Accounting Oversight Board. d. AICPA 14. Which of the following authoritative bodies issues pronouncements relevant to audit service engagements for public companies? a. Accounting and Review Services Committee. b. Auditing Standards Board.

c. Public Company Accounting Oversight board. d. Securities and Exchange Commission 15. The role of the Auditing Standards Board is to: a. Define accepted auditing procedures applicable in practice. b. Develop auditing standards for new Statements of Financial (or Governmental) c. Promulgate auditing standards and procedures. d. Lobby Congress on matters related to audit practice. 16. The role of the Public Company Accounting Oversight Board is to: a. Revise pronouncements of the Auditing Standards Board for use by auditors of public companies. b. Monitor operational and compliance audits for public companies. c. Regulate the exchange of securities under federal securities laws. d. Oversee the audits of public companies that are subject to federal securities laws. 17. Statements on Auditing Standards (SASs) differ from Auditing Standards in that: a. Once superseded by the PCAOB, individual SASs no longer apply to the audits of nonpublic entities. b. Until superseded by the PCAOB, individual SASs apply to the audits of public entities. c. SASs apply to operational audits and Auditing Standards apply to compliance audits. d. SASs are issued by the PCAOB and Auditing Standards are issued by the Auditing Standards Board. 18. Unlike consulting services, assurance services: a. Make recommendations to management. b. Report on how to use information. c. Report on the quality of information. d. Are two-party contracts. 19. In the cases of both Waste Management and Enron, the press was critical that auditors: a. Ignored existing audit standards. b. Failed to plan the audit engagements properly. c. Overlooked suspicions of earnings management reported in the press. d. Received significant consulting fees relative to audit fees. 20. The core competencies of certified public accountants include: a. Assurance and information integrity. b. Objectivity. c. Strategic and critical thinking skills. d. Lifelong learning.

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