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Audit Exam 2

Chapter 19, Chapter 20

QuestionAnswer
Which of the following agencies/organizations govern the independence rules for audits of public companies? Public Company Accounting Oversight Board.
A CPA is aware that a sole proprietor client has "skimmed" unrecorded cash receipts and thus not reported them to the Internal Revenue Service. If the CPA signs the entity's tax return as a CPA after preparing the return, he/she would be violating which A Rule 1.100—Integrity and Objectivity
A CPA, while performing an audit, strives to achieve independence in appearance in order to Maintain public confidence in the profession.
The SEC and the Sarbanes-Oxley Act of 2002 prohibit public accounting firms from providing certain services to audit clients that are public companies. Which of the following services is not prohibited? Tax preparation services.
Which of the following statements is false concerning PCAOB and AICPA inspections of public accounting firms? The AICPA peer review process is conducted more frequently and in more depth in comparison with new PCAOB guidelines.
In order to maintain independence from a public company audit client, the partner on the engagement must rotate off from the client Every 5 years.
Which of the following is not part of the AICPA’s auditor objectivity and independence principle? A member should not enter into contingent fee arrangements.
For which of the following services is a practitioner not required to be independent? A compilation of financial statements.
Which of the following is not a covered member according to Interpretation 101-1? A firm staff member in the office servicing the audit client, but who doesn't participate in the client's audit.
Each of the following pairings includes a category of rules and a specific rule which may or may not pertain to that category. Choose the pairing which is correctly matched. General standards; Due professional care.
Which of the following statements best explains why public accounting, as a profession, promulgates ethical standards and establishes means for ensuring their observance? Ethical standards are established so that users of accounting services know what to expect and accounting professionals know what behaviors are acceptable, and so that discipline can be applied when necessary.
All of the following nonaudit services are identified by the SEC as generally impairing an auditor’s independence with respect to an audited entity except: some specific tax services.
Under the SEC’s rules regarding independence, which of the following must an entity disclose? fees for the external audit, audit-related fees, tax fees, and fees for other nonaudit services performed by the audit firm
The AICPA Code of Professional Conduct contains both general ethical principles that are aspirational in character and a: set of specific, mandatory rules describing minimum levels of conduct a CPA must maintain.
In which of the following situations would a CPA’s independence be considered impaired according to the Code of Professional Conduct? The CPA has a car loan from a bank that is an audit entity. The loan was made under the same terms available to all cu 2 and 3
An audited company has not paid its 2021 audit fees. According to the AICPA Code of Professional Conduct, for the auditor to be considered independent with respect to the 2022 audit, the 2021 audit fees must be paid before the: 2022 report is issued.
Which of the following legal situations would be considered to impair the auditor’s independence? Actual litigation by the auditor against the present management, alleging management fraud or deceit.
A violation of the profession’s ethical standards is least likely to occur when a CPA: purchases another CPA’s accounting practice and bases the price on a percentage of the fees accruing from entities over a three-year period.
Rick, an independent CPA, must make an ethical judgment related to the audit of an entity. If he primarily focuses on whether his decision might yield unfair advantages for some at the expense of others, he is using: a justice-based perspective.
During the audit of Moon Company, the auditor disagrees with management’s estimation of collectible accounts receivable. The possible misstatement amount is material. Which of the statements below should weigh most heavily for the auditor in this instance Requiring an adjustment to the allowance for doubtful accounts would give stockholders access to fair and adequate information.
Without the consent of the entity, a CPA should not disclose confidential entity information contained in working papers to a(n): successor CPA firm that has been engaged to audit the former audit entity.
One of a CPA firm’s basic objectives is to provide professional services that conform with professional standards. Reasonable assurance of achieving this basic objective is provided through: a system of quality management.
In connection with the element of engagement performance, a CPA firm’s system of quality management should ordinarily include procedures covering all of the following except: financial considerations are not allowed to unduly influence client acceptance decisions.
Cable Corporation orally engaged Drake & Company, CPAs, to audit its financial statements. Though the financial statements Drake audited included a materially overstated accounts receivable balance, Drake issued an unqualified opinion. Cable used the fina violate generally accepted auditing standards in performing the audit.
Which of the following best describes whether a CPA has met the required standard of care in auditing an entity’s financial statements? whether the CPA conducted the audit with the same skill and care expected of an ordinarily prudent CPA under the circumstances
Jenna Corporation approved a merger plan with Cord Corporation. One of the determining factors in approving the merger was the financial statements of Cord, which had been audited by Frank & Company, CPAs. Jenna had engaged Frank to audit Cord’s financial failed to exercise due care.
Which of the following is not a provision of the Sarbanes-Oxley Act? The statute of limitations for actions under Section 10(b) and Rule 10b-5 was reduced to one year from the discovery of fraud and five years after the fraud occurred.
Which of the following is a provision of the Foreign Corrupt Practices Act? Every publicly held company must devise, document, and maintain a system of internal accounting controls sufficient to provide reasonable assurance that internal control objectives are met.
Which of the following statements is correct in most jurisdictions regarding the liability of a CPA who negligently expresses an opinion on an audit of financial statements? The CPA is liable to anyone in a class of third parties who the CPA knows will rely on the opinion.
When a company registers a public security offering in accordance with the provisions of the Securities Act of 1933, the law provides the investor with Audited financial information about the company.
All of the following are provisions of the Sarbanes-Oxley Act of 2002 except: Elimination of the Auditing Standard Board's authority to set standards for the audit of non-public companies.
Rule 10(b)-5 relates to The Securities Act of 1934.
When performing an audit, a CPA: must exercise the level of care, skill, and judgment expected of a reasonably prudent CPA under the circumstances.
A CPA's duty of due care to a client most likely will be breached when a CPA: fails to follow generally accepted auditing standards.
The Securities Exchange Act of 1934: regulates ongoing reporting of securities listed and traded on exchanges.
The Sarbanes-Oxley Act enhances prosecutorial tools available in major fraud cases by: all of these are true.
A CPA who fraudulently performs an audit of a corporation's financial statements will: probably be liable to any person who suffered a loss as a result of the fraud.
Under the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934, a CPA may be liable if the CPA acted: without good faith.
Created by: 20kohelmck
 

 



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