Question

The Audit Committee consists of…

Question 11 options:

	1) executives of the company.
	2) a subcommittee of the AICPA who establish the SAS.
	3) members of the Board of Directors.
	4) members appointed by the PCAOB.

Question 12 (3 points)

What organization is responsible for setting auditing standards for audits of publicly-traded companies in the U.S.?

Question 12 options:

	1) AICPA
	2) FASB
	3) GASB
	4) PCAOB

Question 13 (3 points)

The auditor must be independent of the auditee unless…

Question 13 options:

	1) the lack of independence does not influence his or her professional judgment.
	2) both parties agree that the independence issue is not a problem.
	3) the lack of independence is insignificant.
	4) None of the above—the auditor cannot lack independence.

Question 14 (3 points)

An audit should be planned and performed with an attitude of…

Question 14 options:

	1) objective cynicism.
	2) independent differentialism.
	3) professional skepticism.
	4) impartial conservatism.

Question 15 (3 points)

Who has ultimate responsibility for the disclosures in the financial statements?

Question 15 options:

	1) partner assigned to the audit engagement
	2) management of the company
	3) the audit engagement team
	4) the Securities and Exchange Commission

Question 16 (3 points)

Which of the following best describes the concept of risk assessment on which auditors can provide independent assurance?

Question 16 options:

	1) the risk that financial statements are misstated because of fraud
	2) the risk that financial statements are misstated because of error or fraud
	3) whether management has systems in place to evaluate and effectively manage the entity's business risks
	4) developing client acceptance and continuance practices that minimize the likelihood of lawsuits against the auditor

Question 17 (3 points)

What are external auditors called “external?”

Question 17 options:

	1) They report to users outside of the audited entity.
	2) They are paid by parties outside of the audited entity.
	3) They are not employees of the entity being audited.
	4) Their offices are not at the entity's place of business.

Question 18 (3 points)

A CPA is most likely to refer to one or more of the three PCAOB general auditing standards in determining…

Question 18 options:

	1) the nature of the CPA's report qualification.
	2) the scope of the CPA's auditing procedures.
	3) requirements for the review of the entity and its environment.
	4) whether the CPA should undertake an audit engagement.

Question 19 (3 points)

Due professional care means auditors must…

Question 19 options:

	1) obtain independent, third party (non-auditee) documentation as evidence for all information presented in the financial statements.
	2) exercise professional skepticism during the audit.
	3) disregard any evidence generated by the auditee during the audit.
	4) find every error contained in the financial statements prepared by management.

Question 20 (3 points)

What describes the role of corporate governance?

Question 20 options:

	1) Management decides which accounting principles are the most appropriate.
	2) Shareholders vote to decide who should be members of the board of directors.
	3) Holding the management team accountable to shareholders and other constituents for the utilization of the entity's resources.
	4) Management often is compensated based on the company's profitability.

Answer 1

11. The Audit Committee consists of…

(3) members of the Board of Directors.

12. What organization is responsible for setting auditing standards for audits of publicly-traded companies in the U.S.?

(4) PCAOB

13. The auditor must be independent of the auditee unless…

( 4 ) None of the above—the auditor cannot lack independence.

14.  An audit should be planned and performed with an attitude of…

(3) professional skepticism.