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ACCT Test 1 CPA Questions And Answers 2024
Which of the following is a conceptual difference between the attestation standards and generally accepted auditing standards?
A) The attestation standards provide a framework for the attest function beyond historical financial statements.
B)The requirement that the practitioner be independent in mental attitude is omitted from the attestation standards.
C) The attestation standards do not permit an attest engagement to be part of a business acquisition study or feasibility study.
D) None of the standards of field work are included in the attestation standards. - ANS-โโA) The attestation standards provide a framework for the attest function beyond historical financial statements.
Which of the following statements correctly defines the term reasonable assurance?
A)A substantial level of assurance to allow an auditor to detect a material misstatement.
B)A significant level of assurance to allow an auditor to detect a material misstatement.
C) An absolute level of assurance to allow an auditor to detect a material misstatement.
D) A high, but not absolute, level of assurance to allow an auditor to detect a material misstatement - ANS-โโD) A high, but not absolute, level of assurance to allow an auditor to detect a material misstatement
Who establishes generally accepted auditing standards?
A) Auditing standards Board and the Public Company Accounting Oversight Board
B) Financial Accounting Standards Board and the Governmental Accounting Standards Board.
C) State Boards of Accountancy
D) Securities and Exchange Commission. - ANS-โโA) Auditing standards Board and the Public Company Accounting Oversight Board
Which of the following provides the most authoritative guidance for an audit of an issuer?
A)General guidance provided by the Public Company Accounting Oversight Board Auditing Standards.
B)Specific guidance provided by the Statement on Auditing Standards.
C)An article in the AICPA CPA Letter addressing frequently asked questions on a new auditing standard.
D)Audit disclosure checklists obtained from a continuing professional education class. - ANS-โโ A)General guidance provided by the Public Company Accounting Oversight Board Auditing Standards.
Which of the following terms used within standards indicates a presumptively mandatory requirement?
A) Must
B) Should
C) May
D) Might - ANS-โโB) Should
Which of the following best described what is meant by the term generally accepted auditing standards?
A) Measures of the quality of the auditor's performance
B)Pronouncements issued by the Auditing Standards Board
C) Procedures to be used to gather evidence to support financial statements
D. There are no prohibitions regarding the manner in which CPAs may solicit new business - ANS-โโB. A CPA may advertise in any manner that is not false, misleading, or deceptive
According to the standards of the profession, which of the following circumstances will prevent a CPA performing audit engagements from being independent?
A. Litigation with a client relating to billing for consulting services for which the amount is immaterial.
B. Obtaining a collateralized automobile loan from a financial institution client.
C. Employment of the CPA's spouse as a client's internal auditor.
D. Acting as an honorary trustee for a not-for-profit organization client. - ANS-โโC. Employment of the CPA's spouse as a client's internal auditor.
Burrow & Co., CPAs, have provided annual audit and tax compliance services to Mare Corp. for several years. Mare has been unable to pay Burrow in full for services Burrow rendered 19 months ago. Burrow is ready to begin field work for the current year's audit. Under the ethical standards of the profession, which of the following arrangements will permit Burrow to begin the field work on Mare's audit?
a. Mare sets up a 2-year payment plan with Burrow to settle the unpaid fee balance
b. Mare commits to pay the past due fee in full before the audit report is issued
c. Mare gives Burrow an 18-month note payable for the full amount of the past due fees before Burrow begins the audit
d. Mare engages another firm to perform the field work, and Burrow is limited to reviewing the working papers and issuing the audit report - ANS-โโB) Mare commits to pay the past due fee in full before the audit report is issued
According to the ethical standards of the profession, which of the following acts is generally prohibited?
A. Accepting a contingent fee for representing a client in an examination of the client's federal tax return by an IRS agent.
B. Retaining client records after an engagement is terminated prior to completion and the client has demanded their return.
C. Issuing a modified report explaining a failure to follow a governmental regulatory agency's standards when conducting an attest service for a client.
D. Revealing confidential client information during a quality review of a professional practice by a teamfrom the state CPA society - ANS-โโB. Retaining client records after an engagement is terminated prior to completion and the client has demanded their return.
Under the ethical standards of the profession, which of the following positions would be considered a position of significant influence in an audit client?
A. senior position in the client's human resource division
B. policy-making position in the client's financing division
C. staff position in the client's research and development division
D. marketing position related to the client's primary products - ANS-โโB. policy-making position in the client's financing division
A CPA who is not in public practice is obligated to follow which of the following rules of conduct?
A) Independence
B) Contingent Fees
C) Commissions
D) Integrity and Objectivity - ANS-โโD) Integrity and Objectivity
Under the Code of Professional Conduct of the AICPA, which of the following is required to be independent in fact and appearance when discharging professional responsibilities?
A. A CPA in public practice providing tax and management advisory services.
B. A CPA in public practice providing auditing and other attestation services.
C. A CPA not in public practice.
C. Smith had an account with Hometown Bank 2 years ago.
D. Smith and a Hometown Bank board member belong to the same church. - ANS-โโA. Smith is a director of Hometown Bank.
A CPA audits the financial statements of a client. The CPA has also been asked to perform book keeping functions for the client. Under the AICPA Code of Professional Conduct, which of the following activities would impair the CPA's independence with respect to the client?
A. The CPA posts adjusting journal entries prepared by management to the trial balance.
B. The CPA authorizes client transactions and reports them to management.
C. The CPA prepares financial statements from a trial balance provided by management.
D. The CPA records transactions in accordance with classifications determined by management. - ANS-โ โB. The CPA authorizes client transactions and reports them to management.
An independent auditor must have which of the following?
A) Experience in taxation that is sufficient to comply with GAAS
B) A background in many different disciplines
C) Technical training that is adequate to meet the requirements of a professional
D) A pre-existing and well-informed point of view with respect to the audit - ANS-โโC) Technical training that is adequate to meet the requirements of a professional
According to the AICPA Code of Professional Conduct, what would a covered member most appropriately do upon learnings that another member of an attest engagement team is considering employment with the client?
A) Advise the engagement partner to withdraw the firm from the engagement
B) Disassociate from the engagement
C) Report the situation to the client's Board of Directors
D) Notify an appropriate person in the Accounting Firm - ANS-โโD) Notify an appropriate person in the Accounting Firm
The PCAOB was established by which of the following?
A) The Sarbanes Oxley-Act of 2002
B) The Financial Accounting Standards Board
C) The International Accounting Standards Board
D) The American Institute of Certified Public Accountants - ANS-โโA) The Sarbanes Oxley-Act of 2002
Which of the following statements is incorrect regarding the SEC's partner rotation rules?
A) Small firms may be exempted from the partner rotation requirement
B) All audit partners must rotate off the audit engagement after 5 years
C) The lead and concurring partners are subject to a 5 year time out period
D) Other audit partners are subject to a two year time out period - ANS-โโB) All audit partners must rotate off the audit engagement after 5 years
Rules issued under the Sarbanes-Oxley Act of 2002 restrict former members of an audit engagement team from accepting employment as a chief executive officer (CEO), chief financial officer (CFO), chief accounting officer (CAO), or controller of an audit client that files reports with the Securities and Exchange Commission. How many annual audit period(s) must be completed before such employment can be accepted?
A. 1
B. 2
C. 3
C) Register with the PCAOB
D) Join the SEC Practice Section of the AICPA - ANS-โโC) Register with the PCAOB
According to the PCAOB, which of the following tax services may be provided jointly with the audit of an issuer's financial statements without impairing independence?
A) Planning and issuing an opinion in favor of the tax treatment of an aggressive tax position
B) Preparing tax returns for an individual in a financial oversight reporting role during the audit period
C) Reviewing a proposed transaction and informing the client of the tax consequences
D) Providing consultations under a contingency fee arrangement - ANS-โโC) Reviewing a proposed transaction and informing the client of the tax consequences
Section 404 of the Sarbanes-Oxley Act of 2002 requires each annual report of an issuer to include which of the following?
A) Management's assessment of the effectiveness of internal control over financial reporting
B) Management's representations that the company's external auditors have examined its internal control over compliance with laws and regulations
C) Reasonable assurances that fraud will be identified before the issuance of the company's annual report
D) Representations from the company's external auditors that the company has effective internal control over operations - ANS-โโA) Management's assessment of the effectiveness of internal control over financial reporting
The PCAOB consists of:
A) Up to 5 CPA's
B) All CPA's
C) Exactly 2 CPA's
D) At least 1 CPA - ANS-โโC) Exactly 2 CPA's
According to the ethical standards of the profession, a CPA's independence would most likely be impaired if the CPA:
A) Contacted with a client to supervise the client's office personnel
B) Served, with a client bank, as a co-fiduciary of an estate or trust
C) Accepted any gift from a client
D) Became a member of a trade association that is a client - ANS-โโA) Contacted with a client to supervise the client's office personnel
Which of the following areas of professional responsibility should be observed by a CPA not in Public Practice?
A) Objectivity, but not Independence
B) Independence, but not Objectivity
C) Both Objectivity and Independence
D) Neither Objectivity or Inependence - ANS-โโA) Objectivity, but not Independence
Which of the following best described the effect of a contingent fee arrangement on the auditor's independence?
A) The contingent fee arrangement impairs independence
B) The contingent fee arrangement impairs independence unless approved by the client's audit committee
C) The contingent fee arrangement does not impair independence unless more than half of the fee is subject to contingencies
