ACC 562 Midterm Exam Latest 2015 (Version I, II, III) 100% Solution - 90656

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Question 1 Answer Independent professional services that are provided on financial or other information that improve the quality of decision making are known as Answer internal auditing. financial auditing. assurance services. attestation services. Question 2 The objective of an operational audit is to Answer evaluate 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 3 The AICPA remains a valuable organization because of its continuing involvement in Answer the audit standard setting process. regulation and enforcement of the audit profession. education and administration of the CPA exam. promulgation of accounting standards. Question 4 The auditor of financial statements must make very difficult interpretations regarding authoritative literature. Additionally, the auditor must Answer consider whether the application of a generally accepted accounting principle best portrays the economic 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 5 CPAs are licensed by the Answer PCAOB. AICPA. state's board of accountancy. state's society of CPAs. Question 6 The criteria against which the auditor measures the fairness of financial statement presentation are known as Answer auditing standards. generally accepted accounting principles. generally accepted accounting standards. governmental accounting principles. Question 7 The audit committee of the board of directors of a company is responsible for Answer hiring the auditor. preparing the financial statements. the audit workpapers. independence and obtaining evidence. Question 8 What is the criteria used in an operational audit? Answer GAAP. effectiveness and efficiency. rules and regulations. company policies. Question 9 As it relates to an audit, materiality is Answer not 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 10 Auditing is important in a free market society because Answer the 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 11 Section 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 twelve months prior to an earnings restatement. This is often referred to as: Answer claw back provision give back provision restatement provision fraud provision Question 12 The AICPA is an organization that is Answer historically self-regulated. regulated by the federal government. regulated the state governments. a new organization established by an act of congress in 2002. Question 13 A proper system of corporate governance is one that demands Answer decision 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 14 The organization that will continue to set auditing standards for firms auditing private companies is the Answer FASB GAO SEC AICPA Question 15 Which of the following are the CEO and CFO of a public company prohibited from performing under the Sarbanes-Oxley Act of 2002? Answer Certification of financial statements Disclosure of off-balance sheet transactions Reporting on internal control over financial reporting Selecting the external auditors Question 16 The responsibility for operating an enterprise is delegated to the: Answer auditor. audit committee. management. board of directors. Question 17 According to the Sarbanes-Oxley Act of 2002, how often must audit managers and partners rotate off an engagement of a public company? Answer Each busy season When independence is in question Every five years Managers and partners are not required to rotate off of public client engagements Question 18 The audit client of the CPA firm is: Answer management. the SEC. the audit committee. the stockholders. Question 19 The Sarbanes-Oxley Act of 2002 requires which of the following? Answer Only the largest four accounting firms may audit public companies. Smaller public companies that cannot afford to become compliant with the act must delist and become 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 20 Which one of the following will provide auditing standards of public companies? Answer GAO AICPA GAAP PCAOB Question 21 Information about a client that cannot be subpoenaed by a court of law is referred to as what type of information? Answer confidential information. privileged communication. contingent information. audit communication Question 22 An auditor that has an attitude that includes a questioning mind and a critical assessment of audit evidence is considered which of the following? Answer Professionally Skeptical. Professionally Independent. Professionally Competent. Professionally Efficient. Question 23 A CPA firm is considered independent when it performs which of the following services for a publicly traded audit client? Answer Serving 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 of directors. Accounting information system design and implementation as approved by the board of directors. Tax return preparation as approved by the board of directors. Question 24 The AICPA Principles of Professional Conduct include which of the following? Answer public interest, objectivity and independence. due professional care and supervision. scope and nature of services and adequate training. integrity and confidentiality Question 25 Which of the following is included in the AICPA Code of Professional Conduct? Answer Principles, 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 26 In determining the types of activities, engagements and interactions an auditor should have with a client, the CPA and the audit firm must do which of the following? Answer only 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 27 Mark Pulley is an auditor at Pulley and Hurst, LLC. If Pulley's five-year-old daughter owns shares of stock in McBurgers Corporation, then Pulley is considered to have what type of interest in McBurgers Corporation? Answer immaterial 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 28 Independence is not required for which of the following types of services? Answer audits. reviews. consulting. attestation. Question 29 Which one of the following is an example of a conflict of interest for a CPA? Answer performing tax services and a compilation engagement for a client serving as legal counsel and an auditor for a client providing an audit on internal financial controls and financial statements for a client being employed as a chief financial officer while serving as a member of the board of directors for the same company Question 30 William Tyler, CPA, may not accept a commission for recommending a product or service to which type of client? Answer a tax client. an attestation client. a financial-planning client. a management-services client. ? VERSION 2 Question 1 Users can reasonably expect audited financial statements to be Answer complete and contain all important financial disclosures, be free from material misstatements and be presented fairly according to GAAS. complete and contain all important financial disclosures, be free from material misstatements and be presented fairly according to GAAP. complete, be accurate and be presented fairly according to GAAP. complete and contain all important financial disclosures, be free from all misstatements and be presented fairly according to the substance of GAAS Question 2 What is the criteria used in an operational audit? Answer GAAP. effectiveness and efficiency. rules and regulations. company policies Question 3 The primary governing board that performs quality reviews on registered CPA firms that audit public companies is the Answer PCAOB GAO AICPA FASB Question 4 Congress authorized which of the following organizations to establish generally accepted accounting principles for public companies? Answer SEC APB AICPA FASB Question 5 As it relates to an audit, materiality is Answer not 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 6 Auditing is important in a free market society because Answer the 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 7 An expectation of the public is that the auditor will recognize that the primary users of audit assurance are Answer the clients. the Public Company Accounting Oversight Board. members of management. third-party users. Question 8 An audit which has as its purpose the evaluation of the economy and efficiency with which resources are employed is known as a(n) Answer financial audit. compliance audit. operational audit. governmental audit Question 9 Independent professional services that are provided on financial or other information that improve the quality of decision making are known as Answer internal auditing. financial auditing. assurance services. attestation services. Question 10 The objective of an operational audit is to Answer evaluate 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 11 An audit committee must be comprised of outside directors and at least one outside financial expert. Which of the following is considered an outside director? Answer A director who is not a member of management and has no other relationship to the organization. A consultant to the organization who works as an honorary member of the board. A director who is also a member of management and has no other relationship to the company. A director who is a CPA and CIO of an affiliated organization Question 12 Which of the following are the CEO and CFO of a public company prohibited from performing under the Sarbanes-Oxley Act of 2002? Answer Certification of financial statements Disclosure of off-balance sheet transactions Reporting on internal control over financial reporting Selecting the external auditors Question 13 The Sarbanes-Oxley Act of 2002 requires which of the following? Answer Only the largest four accounting firms may audit public companies. Smaller public companies that cannot afford to become compliant with the act must delist and become 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 14 Which one of the following will provide auditing standards of public companies? Answer GAO AICPA GAAP PCAOB Question 15 Audit committees are required to have what person in its composition? Answer A CPA A public regulator A financial expert An attorney-at-law Question 16 The audit client of the CPA firm is: Answer management. the SEC. the audit committee. the stockholders Question 17 Section 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 twelve months prior to an earnings restatement. This is often referred to as: Answer claw back provision give back provision restatement provision fraud provision Question 18 The organization that will continue to set auditing standards for firms auditing private companies is the Answer FASB GAO SEC AICPA Question 19 The AICPA is an organization that is Answer historically self-regulated. regulated by the federal government. regulated the state governments. a new organization established by an act of congress in 2002. Question 20 A proper system of corporate governance is one that demands Answer decision 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 21 Independence is not required for which of the following types of services? Answer audits. reviews. consulting. attestation Question 22 The AICPA Principles of Professional Conduct include which of the following? Answer public interest, objectivity and independence. due professional care and supervision. scope and nature of services and adequate training. integrity and confidentiality Question 23 Which of the following describes a situation in which moral duties or obligations conflict and one action is not necessarily the correct action? Answer an ethical dilemma. an ethical problem. an ethical theory. an ethical solution Question 24 Mark Pulley is an auditor at Pulley and Hurst, LLC. If Pulley's five-year-old daughter owns shares of stock in McBurgers Corporation, then Pulley is considered to have what type of interest in McBurgers Corporation? Answer immaterial 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 25 Which of the following describes a situation in which an individual is morally or ethically required to do something that conflicts with his or her immediate self-interest? Answer an ethical dilemma. an ethical problem. an ethical theory. an ethical solution. Question 26 A CPA may only practice public accounting in which of the following forms? Answer a partnership. a professional corporation. a sole proprietorship. an organization permitted by state law or regulation Question 27 Which of the following represents a situation in which an auditor is independent of the client? Answer The auditor is paid by the client organization rather than the SEC. The auditor takes a personal loan from the president of the company. The auditor’s dependent son holds 25 shares of the client’s common stock. The auditor has not received payment for the previous audit services Question 28 William Tyler, CPA, may not accept a commission for recommending a product or service to which type of client? Answer a tax client. an attestation client. a financial-planning client. a management-services client Question 29 An auditor that has an attitude that includes a questioning mind and a critical assessment of audit evidence is considered which of the following? Answer Professionally Skeptical. Professionally Independent. Professionally Competent. Professionally Efficient. Question 30 Which of the following is included in the AICPA Code of Professional Conduct? Answer Principles, 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 VERSION 3 Question 1 Congress authorized which of the following organizations to establish generally accepted accounting principles for public companies? Answer SEC APB AICPA FASB Question 2 The audit agency for the U. S. Congress is the Answer SEC. GAO. IIA. AICPA. Question 3 The primary governing board that performs quality reviews on registered CPA firms that audit public companies is the Answer PCAOB GAO AICPA FASB Question 4 The auditor of financial statements must make very difficult interpretations regarding authoritative literature. Additionally, the auditor must Answer consider whether the application of a generally accepted accounting principle best portrays the economic 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 5 As it relates to an audit, materiality is Answer not 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 6 Which of the following services is the broadest and most inclusive? Answer Audit Attestation Assurance Compliance Question 7 CPAs are licensed by the Answer PCAOB. AICPA. state's board of accountancy. state's society of CPAs. Question 8 CPA firms performing public financial statement audits must Answer register with the American Institute of Certified Public Accountants. register with the Institute of Auditors. register with the U.S. General Accounting Office. register with the Public Company Accounting Oversight Board Question 9 The organization that issued the Internal Control, Integrated Framework which serves as the primary criterion for evaluating the quality of a company’s internal control system is Answer PCAOB COSO AICPA GAO Question 10 Management of a company is responsible for Answer hiring the auditor. preparing the financial statements. the audit workpapers. independence and obtaining evidence Question 11 The Sarbanes-Oxley Act of 2002 requires which of the following? Answer Only the largest four accounting firms may audit public companies. Smaller public companies that cannot afford to become compliant with the act must delist and become 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 12 Which of the following are the CEO and CFO of a public company prohibited from performing under the Sarbanes-Oxley Act of 2002? Answer Certification of financial statements Disclosure of off-balance sheet transactions Reporting on internal control over financial reporting Selecting the external auditors Question 13 The AICPA is an organization that is Answer historically self-regulated. regulated by the federal government. regulated the state governments. a new organization established by an act of congress in 2002 Question 14 The audit client of the CPA firm is: Answer management. the SEC. the audit committee. the stockholders. Question 15 Which one of the following will provide auditing standards of public companies? Answer GAO AICPA GAAP PCAOB Question 16 The organization that will continue to set auditing standards for firms auditing private companies is the Answer FASB GAO SEC AICPA Question 17 According to the Sarbanes-Oxley Act of 2002, how often must audit managers and partners rotate off an engagement of a public company? Answer Each busy season When independence is in question Every five years Managers and partners are not required to rotate off of public client engagements Question 18 Which group is responsible for ensuring that the organization is run according to the organization’s charter and that there is proper accountability? Answer regulatory agencies such as the SEC external auditors board of directors internal auditors Question 19 Section 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 twelve months prior to an earnings restatement. This is often referred to as: Answer claw back provision give back provision restatement provision fraud provision Question 20 A proper system of corporate governance is one that demands Answer decision 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 21 Information about a client that cannot be subpoenaed by a court of law is referred to as what type of information? Answer confidential information. privileged communication. contingent information. audit communication Question 22 Which of the following describes a situation in which moral duties or obligations conflict and one action is not necessarily the correct action? Answer an ethical dilemma. an ethical problem. an ethical theory. an ethical solution Question 23 In determining the types of activities, engagements and interactions an auditor should have with a client, the CPA and the audit firm must do which of the following? Answer only 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 24 Mark Pulley is an auditor at Pulley and Hurst, LLC. If Pulley's five-year-old daughter owns shares of stock in McBurgers Corporation, then Pulley is considered to have what type of interest in McBurgers Corporation? Answer immaterial 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 25 Which of the following represents a situation in which an auditor is independent of the client? Answer The auditor is paid by the client organization rather than the SEC. The auditor takes a personal loan from the president of the company. The auditor’s dependent son holds 25 shares of the client’s common stock. The auditor has not received payment for the previous audit services. Question 26 Independence is not required for which of the following types of services? Answer audits. reviews. consulting. attestation. Question 27 Which of the following describes a situation in which an individual is morally or ethically required to do something that conflicts with his or her immediate self-interest? Answer an ethical dilemma. an ethical problem. an ethical theory. an ethical solution. Question 28 The AICPA Principles of Professional Conduct include which of the following? Answer public interest, objectivity and independence. due professional care and supervision. scope and nature of services and adequate training. integrity and confidentiality Question 29 An auditor that has an attitude that includes a questioning mind and a critical assessment of audit evidence is considered which of the following? Answer Professionally Skeptical. Professionally Independent. Professionally Competent. Professionally Efficient. Question 30 A CPA firm is considered independent when it performs which of the following services for a publicly traded audit client? Answer Serving 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 of directors. Accounting information system design and implementation as approved by the board of directors. Tax return preparation as approved by the board of directors
Solution Description

 

Question 1

Answer
Independent professional services that are provided on financial or other information that improve the quality of decision making are known as
Answer
internal auditing.
financial auditing.
assurance services.
attestation services.

Question 2
The objective of an operational audit is to
Answer
evaluate 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 3
The AICPA remains a valuable organization because of its continuing involvement in
Answer
the audit standard setting process.
regulation and enforcement of the audit profession.
education and administration of the CPA exam.
promulgation of accounting standards.

Question 4
The auditor of financial statements must make very difficult interpretations regarding authoritative literature. Additionally, the auditor must
Answer
consider whether the application of a generally accepted accounting principle best portrays the economic 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 5
CPAs are licensed by the
Answer
PCAOB.
AICPA.
state's board of accountancy.
state's society of CPAs.

Question 6
The criteria against which the auditor measures the fairness of financial statement presentation are known as
Answer
auditing standards.
generally accepted accounting principles.
generally accepted accounting standards.
governmental accounting principles.

Question 7
The audit committee of the board of directors of a company is responsible for
Answer
hiring the auditor.
preparing the financial statements.
the audit workpapers.
independence and obtaining evidence.
Question 8
What is the criteria used in an operational audit?
Answer
GAAP.
effectiveness and efficiency.
rules and regulations.
company policies.
Question 9
As it relates to an audit, materiality is
Answer
not 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 10
Auditing is important in a free market society because
Answer
the 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 11
Section 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 twelve months prior to an earnings restatement. This is often referred to as:
Answer
claw back provision
give back provision
restatement provision
fraud provision
Question 12
The AICPA is an organization that is
Answer
historically self-regulated.
regulated by the federal government.
regulated the state governments.
a new organization established by an act of congress in 2002.
Question 13
A proper system of corporate governance is one that demands
Answer
decision 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 14
The organization that will continue to set auditing standards for firms auditing private companies is the
Answer
FASB
GAO
SEC
AICPA
Question 15
Which of the following are the CEO and CFO of a public company prohibited from performing under the Sarbanes-Oxley Act of 2002?
Answer
Certification of financial statements
Disclosure of off-balance sheet transactions
Reporting on internal control over financial reporting
Selecting the external auditors

Question 16
The responsibility for operating an enterprise is delegated to the:
Answer
auditor.
audit committee.
management.
board of directors.
Question 17
According to the Sarbanes-Oxley Act of 2002, how often must audit managers and partners rotate off an engagement of a public company?
Answer
Each busy season
When independence is in question
Every five years
Managers and partners are not required to rotate off of public client engagements
Question 18
The audit client of the CPA firm is:
Answer
management.
the SEC.
the audit committee.
the stockholders.
Question 19
The Sarbanes-Oxley Act of 2002 requires which of the following?
Answer
Only the largest four accounting firms may audit public companies.
Smaller public companies that cannot afford to become compliant with the act must delist and become pink sheet companies.
All publicly held companies will provide a report on internal control over financial

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