24. External auditors should expect the audit committees at their clients to ask them relevant and probing questions. Some of the relevant questions that audit committee members should ask the external auditor include all of the following except: A) How do you assess the competence of company personnel engaged in financial reporting and related processes? B) What are the most significant risks to financial reporting at this company? C) What level of assurance do your procedures provide with respect to the annual financial statements? D) How do you calculate materiality and what is your materiality threshold for the engagement? 25. The Code of Professional Conduct derives its authority from the A) Securities and Exchange Commission.
B) Bylaws of the American Institute of CPAs.
C) Financial Accounting Standards Board.
D) Auditing Standards Board.
26. The chief (internal) audit executive should have direct reporting access to the audit committee, and the committee should oversee the activities and budget of the internal audit function. A) True
27. The AICPA Principles of Professional Conduct include which of the following? A) scope and nature of services and adequate training.
B) integrity and confidentiality
C) due professional care and supervision.
D) public interest, objectivity and independence.
28. The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board (PCAOB) as a replacement for the Financial Accounting Standards Board. A) True
29. Auditing is important in a free market society because
A) auditors detect all errors and fraud made by company employees. B) the public requires CPAs functioning as divisions of regulatory bodies. C) the auditor is an amiable insurance policy for investors. D) it provides reliable information based upon which to judge economic performance. E) all of the above are true.
30. CPA firms performing public financial statement audits must A) register with the Institute of Auditors.
B) register with the U.S. General Accounting Office.
C) register with the Public Company Accounting Oversight Board. D) register with the American Institute of Certified Public Accountants. 31. The Certified Internal Auditor program is administered by the A) AICPA.
B) state's society of CPAs.
D) state's board of accountancy.
32. The SEC is not concerned with situations between an auditor and a public company that allow the auditor to act as management of the client. A) True
33. Which of the following auditor concerns most likely could be so serious that the auditor concludes that a financial statement audit cannot be conducted? A) Management fails to modify prescribed controls for changes in conditions B) The integrity of the entity's management is suspect
C) The entity has no formal written code of conduct.
D) Procedures requiring segregation of duties are subjec to management override. 34. Which one of the following is an example of a conflict of interest for a CPA? A) being employed as a chief financial officer while serving as a member of the board of directors for the same company B) providing an audit on internal financial controls and financial statements for a client C) serving as legal counsel and an auditor for a client
D) performing tax services and a compilation engagement for a client 35. The AICPA is an organization that is
A) a new organization established by an act of congress in 2002. B) regulated by the federal government.
C) regulated the state governments.
D) historically self-regulated.
36. Which of the following services is the broadest and most inclusive? A) Attestation
37. Which one of the following is not a management expectation for independent auditors? A) an outside source of expertise on accounting matters
B) a provider of a written communication
C) a participant in management decision making
D) individuals who perform tests and draw conclusions on...
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