ACC 403/ACC403 Midterm Exam Part I (100% ANSWER) - 88906

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Question 1 Which of the following services provides the lowest level of assurance on a financial statement? Answer A review An audit Neither service provides assurance on financial statements. Each service provides the same level of assurance on financial statements. Question 2 Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called: Answer finance. auditing. accounting. economics. Question 3 Which of the following is not a SysTrust Services principle as defined by the AICPA? Answer Online privacy Availability Processing integrity Operational integrity Question 4 An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n): Answer audit of financial statements. compliance audit. operational audit. production audit Question 5 The three requirements for becoming a CPA include all but which of the following? Answer Uniform CPA examination requirement Educational requirements Character requirements Experience requirement Question 6 A correct relationship among the auditor, the client, and the external users is: Answer management of a public company hires the independent auditor. the audit committee of a private company hires the independent auditor. the client provides capital to the external users. the external users can rely upon the auditor's report to reduce information risk. Question 7 Historically auditing standards have been organized into three categories, including: Answer Standards of field work. Purpose of an audit. Responsibilities of the auditor. Proper planning and supervision Question 8 Statements on Standards for Accounting and Review Services are issued by the: Answer Accounting and Review Services Committee. Professional Ethics Executive Committee. Securities and Exchange Commission. Financial Accounting Standards Board. Question 9 The AICPA has authority to establish standards and rules in all but which of the following areas? Answer Auditing standards applicable to financial statements of private companies Compilation and review standards Professional conduct Auditing standards applicable to financial statements of private and public companies Question 10 The "Principles Underlying an Audit in Accordance with Generally Accepted Auditing Principles" provides a framework to help auditors: Answer understand the ten GAAS standards. obtain complete assurance that the financial statements are free from any error. report on the financial statements. prevent fraud. Question 11 Which of the following are audit standards used in professional practice by audit firms? Answer International Standards on Auditing U.S. Generally Accepted Auditing Standards PCAOB Auditing Standards Yes No No International Standards on Auditing U.S. Generally Accepted Auditing Standards PCAOB Auditing Standards Yes Yes No International Standards on Auditing U.S. Generally Accepted Auditing Standards PCAOB Auditing Standards Yes Yes Yes International Standards on Auditing U.S. Generally Accepted Auditing Standards PCAOB Auditing Standards No Yes Yes Question 12 Within the context of quality control, the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide its personnel with: Answer technical training that assures proficiency as a valuation expert. professional education that is required in order to perform with due professional care. knowledge required to fulfill assigned responsibilities. knowledge required to perform a peer review Question 13 The audit report date on a standard unqualified report indicates: Answer the last day of the fiscal period. the date on which the financial statements were filed with the Securities and Exchange Commission. the last date on which users may institute a lawsuit against either client or auditor. the last day of the auditor's responsibility for the review of significant events that occurred after the date of the financial statements Question 14 After the auditor determines whether any conditions exist which require a departure from a standard unqualified report, the next step in the decision process for audit reports is to: Answer write the report. decide the materiality for each condition. decide the appropriate type of report for the condition. discuss the report with management. Question 15 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: Answer an adverse opinion. a disclaimer of opinion. either a qualified opinion or an adverse opinion. either a qualified opinion or an unqualified opinion with modified wording Question 16 A misstatement in the financial statements can be considered material if knowledge of the misstatement will affect a decision of: Answer the PCAOB. a reasonable user of the financial statements. an accountant. the SEC. Question 17 The term "explanatory paragraph" was replaced in the AICPA auditing standards with: Answer going concern paragraph. emphasis-of-matter paragraph. departure from principles paragraph. consistency paragraph. Question 18 When there is uncertainty about a company's ability to continue as a going concern, the auditor's concern is the possibility that the client may not be able to continue its operations or meet its obligations for a "reasonable period of time." For this purpose, a reasonable period of time is considered not to exceed: Answer six months from the date of the financial statements. one year from the date of the financial statements. six months from the date of the audit report. one year from the date of the audit report Question 19 Interpretations of the rules regarding independence allow an auditor to serve as: Answer a director or officer of an audit client. an underwriter for the sale of a client's securities. a trustee of a client's pension fund. an honorary director for a not-for-profit charitable or religious organization Question 20 A CPA firm may charge a contingent fee for: Answer an audit. consulting services for a client for which they do not perform any attestation services. the preparation of an original tax return for a client for which they do not perform any attestation services. the preparation of an amended tax return. Question 21 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? Answer Spouse Dependent child Relative supported by the CPA Sibling living in the same city as the CPA Question 22 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: Answer subpoena or summons. peer review. complaint filed with the trial board of the Institute. request by a client's largest stockholder. Question 23 Several months after an unqualified audit report was issued, the auditor discovers the financial statements were materially misstated. The client's CEO agrees that there are misstatements, but refuses to correct them. She claims that "confidentiality" prevents the CPA from informing anyone. Which of the following statements is correct? Answer The CEO is correct and the auditor must maintain confidentiality. The CEO is incorrect, but since the audit report has been issued, it is too late to correct the report. The CEO is correct, but to be ethically correct, the auditor should violate the confidentiality rule and disclose the error. The CEO is incorrect, and the auditor has an obligation to issue a revised audit report, even if the CEO will not correct the financial statements Question 24 "Independence" in auditing means: Answer maintaining an indirect financial interest. not being financially dependent on a client. taking an unbiased viewpoint. being an advocate for a client Question 25 Freedom from ________ means the absence of relationships that might interfere with objectivity or integrity. Answer independence. acts discreditable. impartiality. conflicts of interest.
Solution Description

Question 1 
Which of the following services provides the lowest level of assurance on a financial statement?
Answer 
A review
An audit
Neither service provides assurance on financial statements.
Each service provides the same level of assurance on financial statements.
Question 2 
Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:
Answer 
finance.
auditing.
accounting.
economics.
Question 3 
Which of the following is not a SysTrust Services principle as defined by the AICPA?
Answer 
Online privacy
Availability
Processing integrity
Operational integrity
Question 4 
An audit to determine whether an entity is following specific procedures or rules set down by some higher authority is classified as a(n):
Answer 
audit of financial statements.
compliance audit.
operational audit.
production audit
Question 5 
The three requirements for becoming a CPA include all but which of the following?
Answer 
Uniform CPA examination requirement
Educational requirements
Character requirements
Experience requirement
Question 6 
A correct relationship among the auditor, the client, and the external users is:
Answer 
management of a public company hires the independent auditor.
the audit committee of a private company hires the independent auditor.
the client provides capital to the external users.
the external users can rely upon the auditor's report to reduce information risk.
Question 7 
Historically auditing standards have been organized into three categories, including:
Answer

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