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Questions in this quiz (19)
1Which of the following is not a change that affects consistency and, therefore, does not require an explanatory paragraph?
- AChange in accounting principle, such as a change from LIFO to FIFO.
- BChange in reporting entity, such as the inclusion of an additional company in combined financial statements.
- CChange in an estimate, such as a decrease in the life of an asset for depreciation purposes.
- DCorrection of errors by changing from non-GAAP to GAAP.
2When a disclaimer is issued because the auditor lacks independence:
- Ano report title is included on the report.
- Ba one-paragraph audit report is issued.
- Cthe only reason cited for issuing the disclaimer is the lack of independence
- Dall of the above are correct.
3Society has attached a special meaning to the term “professional.” A professional is:
- Asomeone who has passed a qualifying exam to enter the job market.
- Ba person who is expected to conduct himself or herself at a higher level than the requirements of society’s laws or regulations.
- Cany person who receives pay for the services performed.
- Dsomeone who has both an education in the trade and on-the-job experience received under an experienced supervisor.
4An example of an “indirect ownership interest in a client” would be ownership of a client’s stock by a member’s:
- Adependent child.
- Bspouse.
- Cnon-dependent grandfather.
- DAll of the above are examples of indirect ownership.
5Which one of the following statements is false?
- AThe auditor’s responsibility to follow PCAOB standards is greater than the responsibility for confidentiality.
- BInformation that a CPA obtains from a client is generally not privileged.
- CWhen a CPA firm conducts an AICPA-authorized peer review of the quality controls of another CPA firm, permission of the client is not needed to examine audit documentation.
- DA CPA firm which observes substandard audit documentation of another firm can initiate a complaint of substandard performance with the AICPA Ethics Division trial board notwithstanding the confidentiality rule.
6Four of the six Ethical Principles in the AICPA’s Code of Professional Conduct are equally applicable to all members of the AICPA. Which of the following principles applies only to members in public practice
- AScope and Nature of Services.
- BIntegrity.
- CDue Care
- DThe Public Interest
7Interpretations of rules of conduct in the Code of Professional Conduct are not officially enforceable and practitioners need not justify departure from them.
- ATrue
- BFalse
8Which of the following is required for a firm to designate itself “Member of the American Institute of Certified Public Accountants” on its letterhead?
- AAt least one of the partners must be a member of the AICPA.
- BAll partners must be members of the AICPA.
- CThe partners whose names appear in the firm name must be members of the AICPA.
- DA majority of the partners must be members of the AICPA
9If the board of accountancy in the state in which a CPA firm is licensed has rules that are different than the AICPA’s rules, the CPA firm must follow:
- Awhichever rules are less restrictive.
- Bwhichever rules are more restrictive.
- Cthe rules of the AICPA.
- Dthe rules of the state’s board of accountancy.
10Which of the following statements is correct?
- ANon-audit services that are not prohibited by Sarbanes-Oxley or the SEC rules must be approved by management of the client.
- BNon-audit services that are not prohibited by Sarbanes-Oxley or the SEC rules must be approved by staff of the PCAOB.
- CNon-audit services that are not prohibited by Sarbanes-Oxley or the SEC rules must be approved by staff of the PCAOB and the SEC.
- DNon-audit services that are not prohibited by Sarbanes-Oxley or the SEC rules must be approved by the company’s audit committee.
11The Securities and Exchange Commission has authority to:
- Aprescribe specific auditing procedures to detect fraud concerning inventories and accounts receivable of companies engaged in interstate commerce.
- Bdeny lack of privity as a defense in third-party actions for gross negligence against the auditors of public companies.
- Cdetermine accounting principles for the purpose of financial reporting by companies offering securities to the public.
- Drequire a change of auditors of governmental entities after a given period of years as a means of ensuring auditor independence.
12One of the changes in auditing procedure which was brought about as a result of the 1136 Tenants case was that auditors were encouraged to begin using:
- Aletters of representation
- Bconfirmation letters
- Cengagement letters.
- Dbillet doux letters
13A third-party beneficiary is one which:
- Ahas failed to establish legal standing before the court.
- Bdoes not have privity of contract and is unknown to the contracting parties.
- Cdoes not have privity of contract, but is known to the contracting parties and intended to benefit under the contract.
- Dmay establish legal standing before the court after a contract has been consummated.
14In third-party suits, which of the auditor’s defenses contends lack of privity of contract?
- ALack of duty.
- BNon-negligent performance.
- CContributory negligence.
- DAbsence of causal connections.
15There are a number of things that the AICPA, representing the profession as a whole, can do to reduce the CPA’s exposure to lawsuits. One of them is to:
- Asanction members for improper conduct and performance.
- Bdeal only with clients possessing integrity.
- Chire qualified auditors and train and supervise them.
- Dperform quality audits.
16Which of the following most accurately describes constructive fraud?
- AAbsence of reasonable care.
- BLack of slight care.
- CKnowledge and intent to deceive.
- DExtreme or unusual negligence without the intent to deceive.
17Historically, most major lawsuits against CPA firms have dealt with:
- Adisputes over income tax preparation services.
- Bdisputes arising in the performance of MAS contracts
- Cdisputes over the accuracy of bookkeeping services.
- Daudited and unaudited financial statements.
18A major purpose of federal securities regulations is to:
- Aprovide sufficient reliable information to the investing public who purchases securities in the marketplace.
- Bestablish the qualifications for accountants who are members of the profession.
- Celiminate incompetent attorneys and accountants who participate in the registration of securities to be offered to the public.
- Dprovide a set of uniform standards and tests for accountants, attorneys, and others who practice before the Securities and Exchange Commission.
19In a qualified, adverse, or disclaimer report, the auditor
- Aa. has not performed a satisfactory audit.
- Bb. is not satisfied that the financial statements are presented fairly.
- Cc. either a or b.
- Dd. none of these.
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- Midterm Audit Quiz on Pages 4-6, created by Andrew Knifer on 25/02/2016.
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- Andrew Knifer
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- English
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