Test Questions on Auditing 
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
B) False
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
B) False
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
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
B) False
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
B) False
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