ACC 562 Auditing and Professional Conduct: A Comprehensive Assessment

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ACC 562 Auditing and Professional Conduct: A Comprehensive AssessmentACC 562 MIDTERM EXAM LATEST 2015Question 1AnswerIndependent professional services that are provided on financial or other information thatimprove the quality of decisionmaking are known asAnswerinternal auditing.financial auditing.assurance services.attestation services.Question 2The objective of an operational audit is toAnswerevaluate whether laws have been broken by management.evaluate fairness of presentation of financial statements.evaluate compliances with company rules and regulations.evaluate the effectiveness and efficiency with which resources are employed.Question 3The AICPA remains a valuable organization because of its continuing involvement inAnswerthe audit standard setting process.regulation and enforcement of the audit profession.education and administration of the CPA exam.promulgation of accounting standards.Question 4The auditor of financial statements must make very difficult interpretations regardingauthoritative literature. Additionally, the auditor mustAnswerconsider whether the application of a generally accepted accounting principle best portrays theeconomic activity of the company.force management to make certain decisions regarding their financial statements.disregard independence in order to find the underlying truth of the evidence.establish new criteria by which financial statements may be compared.Question 5CPAs are licensed by theAnswerPCAOB.AICPA.state's board of accountancy.state's society of CPAs.Question 6The criteria against which the auditor measures the fairness of financial statement presentationare known as

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Answerauditing standards.generally accepted accounting principles.generallyaccepted accounting standards.governmental accounting principles.Question 7The audit committee of the board of directors of a company is responsible forAnswerhiring the auditor.preparing the financial statements.the audit workpapers.independence and obtaining evidence.Question 8What is the criteria used in an operational audit?AnswerGAAP.effectiveness and efficiency.rules and regulations.company policies.Question 9As it relates to an audit, materiality isAnswernot taken into consideration.related only to the sufficiency of procedures performed.based upon audit fees.determined based upon the importance to a user of the financial statements.Question 10Auditing is important in a free market society becauseAnswerthe public requires CPAs functioning as divisions of regulatory bodies.auditors detect all errors and fraud made by company employees.it provides reliable information based upon which to judge economic performance.the auditor is an amiable insurance policy for investors.Question 11Section 304 of the Sarbanes-Oxley Act requires executives to forfeit any bonus or incentive-based pay or profits (including stock options) from the sale of stock received in the twelvemonths prior to an earnings restatement. This is often referred to as:Answerclaw back provisiongive back provisionrestatement provisionfraud provisionQuestion 12The AICPA is an organization that isAnswerhistorically self-regulated.

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regulated by the federal government.regulated the state governments.a new organization established by an act of congress in 2002.Question 13A proper system of corporate governance is one that demandsAnswerdecision making by auditors in place of management.accountability back through the system to the shareholders.internal audit representation on the board of directors.audit planning to obtain competent and sufficient audit evidence.Question 14The organization that will continue to set auditing standards for firms auditing private companiesis theAnswerFASBGAOSECAICPAQuestion 15Which of the following are the CEO and CFO of a public company prohibited from performingunder the Sarbanes-Oxley Act of 2002?AnswerCertification of financial statementsDisclosure of off-balance sheet transactionsReporting on internal control over financial reportingSelecting the external auditorsQuestion 16The responsibility for operating an enterprise is delegated to the:Answerauditor.audit committee.management.board of directors.Question 17According to the Sarbanes-Oxley Act of 2002, how often must audit managers and partnersrotate off an engagement of a public company?AnswerEach busy seasonWhen independence is in questionEvery five yearsManagers and partners are not required to rotate off of public client engagementsQuestion 18The audit client of the CPA firm is:Answermanagement.the SEC.

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the audit committee.the stockholders.Question 19The Sarbanes-Oxley Act of 2002 requires which of the following?AnswerOnly the largest four accounting firms may audit publiccompanies.Smaller public companies that cannot afford to become compliant with the act must delist andbecome pink sheet companies.All publicly held companies will provide a report on internal control over financial reporting.Chief financial officers of public companies must be CPAs.Question 20Which one of the following will provide auditing standards of public companies?AnswerGAOAICPAGAAPPCAOBQuestion 21Information about a client that cannot be subpoenaed by a court of law is referred to as what typeof information?Answerconfidential information.privileged communication.contingent information.audit communicationQuestion 22An auditor that has an attitude that includes a questioning mind and a critical assessment of auditevidence is considered which of the following?AnswerProfessionally Skeptical.Professionally Independent.Professionally Competent.Professionally Efficient.Question 23A CPA firm is considered independent when it performs which of the following services for apublicly traded audit client?AnswerServing as a member of the client’s board of directors.Determining which accounting policies will be adopted by the client as approved by the board ofdirectors.Accounting information system design and implementation as approved by the board ofdirectors.Tax return preparation as approved by the board of directors.Question 24The AICPA Principles of Professional Conduct include which of the following?Answer

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public interest, objectivity and independence.due professional care and supervision.scope and nature of services and adequate training.integrity and confidentialityQuestion 25Which of the following is included in the AICPA Code of Professional Conduct?AnswerPrinciples, Rules of Conduct and Ethics Rulings.Rules of Conduct, Interpretations and Principles.Principles, Rules of Conduct and Ethics Rulings.Principles, Rules of Conduct, Interpretations and Ethics Rulings.Question 26In determining the types of activities, engagements and interactions an auditor should have witha client, the CPA and the audit firm must do which of the following?Answeronly assess the relationships of clients that pay audit fees that are material to their firm.assess all of their relationships with every client to ensure that independence is intact.focus on client satisfaction above all other considerations.realize that ethics are only guidelines and a matter of personal judgment.Question 27Mark Pulley is an auditor at Pulley and Hurst, LLC. If Pulley's five-year-old daughter ownsshares of stock in McBurgers Corporation, then Pulley is considered to have what type of interestin McBurgers Corporation?Answerimmaterial indirect interest in McBurgers Corporation.material indirect interest in the McBurgers Corporation.a loophole for claiming independence from McBurgers Corporation.direct interest in McBurgers Corporation.Question 28Independence is not required for which of the following types of services?Answeraudits.reviews.consulting.attestation.Question 29Which one of the following is an example of a conflict of interest for a CPA?Answerperforming tax services and a compilation engagement for a clientserving as legal counsel and an auditor for a clientproviding an audit on internal financial controls and financial statements for a clientbeing employed as a chief financial officer while serving as a member of the board of directorsfor the same companyQuestion 30William Tyler, CPA, may not accept a commission for recommending a product or service towhich type of client?

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Answera tax client.an attestation client.a financial-planning client.a management-services client.

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