Auditing and Assurance Services, 17e (Arens/Elder/Beasley)

Chapter 2 The CPA Profession

2.1 Learning Objective 2-1

1) The legal right to perform audits is granted to a CPA firm by regulation of

A) each state.
B) the Financial Accounting Standards Board (FASB).
C) the American Institute of Certified Public Accountants (AICPA).
D) the Auditing Standards Board.

2) Which of the following is not a characteristic of a small local CPA firm?

A) Most small firms have fewer than 25 professionals.
B) Small firms perform audits on small and not-for-profit businesses.
C) Tax services are more important than auditing services to the small firm.
D) Small firms are prohibited by the SEC from auditing publicly traded companies.

3) Sarbanes-Oxley and the Securities and Exchange Commission restrict auditors from providing
many consulting services to their publicly traded audit clients. Which of the following is true for
auditors of publicly traded companies?
I. They are restricted from providing consulting services to privately held companies.
II. There is no restriction on providing consulting services to non-audit clients.
A) I only
B) II only
C) I and II
D) Neither I nor II

4) Which of the following does not describe a size category for a CPA firm?
A) Big Four national firms
B) Big Four international firms
C) local firms
D) national and regional firms

5) ________ is one of the Big Four international CPA firms.

A) Deloitte
B) KPMG
C) Ernst & Young
D) All of the above are classified as Big Four international CPA firms.

6) In which type of service does the CPA assemble the financial statements but provide no
assurance to third parties? CPA thực hiện dịch vụ nào để lập báo cáo tài chính nhưng không cung
cấp bảo đảm cho bên thứ ba?
A) audit
B) compilation
C) review
D) bookkeeping

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### Explanation:
- **Compilation: (biên soạn bctc)** In a compilation service, the CPA assists in assembling the
financial statements based on information provided by the client. However, the CPA does not
provide any assurance regarding the accuracy or completeness of the financial statements. This
means that no assurance is given to third parties about the reliability of the financial statements.

- **Audit:** In an audit, the CPA provides a high level of assurance by expressing an opinion
on whether the financial statements are presented fairly, in all material respects, in accordance
with the applicable financial reporting framework.

- **Review:** In a review, the CPA provides limited assurance that no material modifications
need to be made to the financial statements for them to be in accordance with the applicable
financial reporting framework.

- **Bookkeeping:** Bookkeeping involves recording the financial transactions of a business. It

is an accounting function but does not involve assembling financial statements or providing any
assurance.

### Giải thích:

- **Compilation (biên soạn báo cáo tài chính):** Trong dịch vụ biên soạn, CPA (Kế toán viên
công chứng) hỗ trợ lập báo cáo tài chính dựa trên thông tin do khách hàng cung cấp. Tuy nhiên,
CPA không đưa ra bất kỳ sự bảo đảm nào về tính chính xác hoặc hoàn thiện của báo cáo tài
chính. Điều này có nghĩa là không có sự bảo đảm nào được cung cấp cho bên thứ ba về độ tin
cậy của báo cáo tài chính.

- **Audit (kiểm toán):** Trong kiểm toán, CPA cung cấp một mức độ bảo đảm cao bằng cách
đưa ra ý kiến về việc liệu báo cáo tài chính có được trình bày một cách trung thực và hợp lý, phù
hợp với các chuẩn mực báo cáo tài chính hiện hành hay không.

- **Review (soát xét):** Trong soát xét, CPA cung cấp một mức độ bảo đảm hạn chế rằng
không có sự điều chỉnh quan trọng nào cần phải được thực hiện để báo cáo tài chính phù hợp
với các chuẩn mực báo cáo tài chính hiện hành.

- **Bookkeeping (ghi sổ kế toán):** Ghi sổ kế toán liên quan đến việc ghi lại các giao dịch tài
chính của doanh nghiệp. Đây là một chức năng kế toán nhưng không bao gồm việc lập báo cáo
tài chính hoặc cung cấp bất kỳ sự bảo đảm nào.

7) ________ is not one of the National/Regional CPA Firms.

A) PwC
B) BDO USA
C) Grant Thornton
D) RSM US.

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8) Which of the following is not an accurate definition or description of a local CPA firm?
A) Some local CPA firms have several offices.
B) Local CPA firms do not compete for clients with the Big Four CPA firms.
C) Some local CPA firms are affiliated with other CPA firms to share resources.
D) Many local CPA firms provide primarily accounting and tax services to their clients only.

9) Many small, local accounting firms perform audits as their primary service to their clients.
False => Many small, local accounting firms perform accounting and tax services as their
primary service to their clients.

10) Sarbanes-Oxley and the Securities and Exchange Commission restrict auditors from
providing many consulting services to their publicly traded audit clients. Trúe

11) Small local CPA Firms are allowed under Sarbanes-Oxley and the Securities and Exchange
Commission a special exemption to perform audits of publicly listed firms.
False => ko có ngoại lệ về size firm

12) In addition to attestation and assurance services, CPA firms provide other services to their
clients. List three of these services.
Accounting and bookkeeping services
Tax services
Management consulting and risk advisory services

2.2 Learning Objective 2-2

1) Which of the following statements is true as it relates to limited liability partnerships?

A) Only senior partners are liable for the partnership's debts. (all partners)
B) Partners have no liability in a limited liability partnership arrangement. (have liability)
C) Partners are personally liable for the acts of those under their supervision.
D) All partners must be AICPA members. (ko có)

2) Which staff level in a CPA firm performs most of the detailed audit work?
A) partner
B) staff assistant
C) senior auditor
D) senior manager

3) Which staff level in a CPA firm manages the overall relationship with the client and manages
the audit, in general?
A) the audit partner
B) the audit staff assistant
C) the senior or in-charge auditor with 2-5 years' experience
D) the audit manager
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4) All of the Big Four accounting firms and many of the smaller CPA firms now operate as
limited liability partnerships. True vì partner phải chịu trách nhiệm vô hạn nhưng có limited vào
nên giới hạn lại đc

5) Limited liability companies are structured and taxed like a general partnership, but their
owners have limited personal liability similar to that of a general corporation.
False => Limited liability companies are structured and taxed like a general partnership, but their
owners have limited personal liability less than that of a general corporation.

6) In a CPA firm, the audit partner coordinates the performance of audit procedures.
False => Senior or in charge auditor (2-5 yrs) coordinates the performance of audit procedures.

7) In a CPA firm, the audit senior or the in-charge auditor performs most of the detailed audit
work.
False => Staff assistant (0-2 yrs) does

8) List and describe the three factors that influence the organizational structure of all CPA firms.
What are the most common forms of CPA firm organization?
-Page 27
+ The need for independent from clients
+ The importance of a structure to encourage competence
+ The increased litigation risk faced by auditors
-LLC or LLP

9) List and describe the six organizational structures available to CPA firms.
P
GP
GC
PC
LLC
LLP

2.3 Learning Objective 2-3

1) The organization that is responsible for providing oversight for auditors of public companies
is called the
A) Auditing Standards Board.
B) American Institute of Certified Public Accountants.
C) Public Oversight Board.
D) Public Company Accounting Oversight Board.

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2) Members of the Public Company Accounting Oversight Board are appointed and overseen by
the
A) U.S. Congress.
B) American Institute of Certified Public Accountants.
C) Auditing Standards Board.
D) Securities and Exchange Commission.

3) The Public Company Accounting Oversight Board

A) performs inspections of the quality controls of firms that audit public companies.
B) establishes auditing standards that must be followed by CPAs on all audits.
C) oversees auditors of private companies. (just public comps)
D) performs all of the above functions.

With (B) Establishes auditing standards that must be followed by CPAs on all audits.
This statement is partially correct but also partially misleading:
 The PCAOB does establish auditing standards, but these standards apply specifically to
audits of public companies, brokers, and dealers registered with the Securities and
Exchange Commission (SEC).
 However, the statement "must be followed by CPAs on all audits" is incorrect because
PCAOB standards are not required for audits of private companies, non-profit
organizations, or other non-public entities. These types of audits are generally governed
by standards set by the American Institute of Certified Public Accountants (AICPA).

4) Assume the Public Company Accounting Oversight Board (PCAOB) identifies a violation
during its inspection of a registered (public) accounting firm (xác định được hành vi vi phạm
trong quá trình thanh tra một công ty kế toán đã đăng ký). The PCAOB
A)
can enforce disciplinary action report the matter to the Securities suspend the license to practice
against the accounting firm (có and Exchange Commission (báo of the CPA guilty of the
thể thực thi hành động kỷ luật cáo vấn đề này cho Ủy ban violation (đình chỉ giấy phép
đối với công ty kế toán) Chứng khoán và Giao dịch) hành nghề của CPA có hành vi
vi phạm)
Yes Yes Yes

B)
can enforce report the matter to suspend the license to
disciplinary action the Securities and practice of the CPA
against the Exchange guilty of the violation
accounting firm Commission
Yes Yes No

C)
can enforce report the matter to suspend the license to
disciplinary action the Securities and practice of the CPA
against the Exchange guilty of the violation
accounting firm Commission
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 Yes No No

D)
can enforce report the matter to suspend the license to
disciplinary action the Securities and practice of the CPA
against the Exchange guilty of the violation
accounting firm Commission
No No No

To Suspend the license to practice of the CPA guilty of the violation: The PCAOB does not
have the authority to directly suspend the license of individual CPAs; that authority typically
rests with state boards of accountancy. However, the PCAOB can recommend such action or
take measures such as revoking the firm’s registration, which indirectly affects the individual
CPAs involved.

5) Has audit quality improved since the passage of Sarbanes-Oxley Act (sự thông qua của SOX)
(SOX)? Which of the following statements is true with regards to audit quality since the passage
of SOX?
A) The frequency of financial statement restatements has increased since SOX. Tần suất điều
chỉnh báo cáo tài chính đã tăng lên kể từ SOX. => increase thay bằng decline
B) PCAOB audit engagement findings continue to document a high level of audit deficiencies.
Các phát hiện về hoạt động kiểm toán của PCAOB tiếp tục ghi nhận mức độ thiếu sót kiểm toán
cao.
C) Finally, the auditing professions agrees on the definition of audit quality. (there is no agree-
upon definition, or measurement , of audit quality)
D) No progress has been made on the definition of what are called "Audit Quality Indicators"-
Chỉ số chất lượng kiểm toán since SOX. (CÓ PROGRESS)

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6) The Public Company Accounting Oversight Board (PCAOB) provides oversight to auditors of
publicly traded and private companies.
False=> just publicly traded comps

Terms: Public Company Accounting Oversight Board

Objective: LO 2-3

7) The PCAOB requires annual inspections of accounting firms that audit more than ten public
companies.
False => 10 thay bằng 100

8) The PCAOB requires annual inspections of other registered accounting firms that audit less
than 100 publicly listed companies at least once every 3 years. PCAOB yêu cầu các công ty kế
toán đã đăng ký khác kiểm toán ít hơn 100 công ty niêm yết công khai ít nhất một lần sau mỗi 3
năm.
=> F => more than

9) The Sarbanes-Oxley Act established the Public Company Accounting Oversight Board
(PCAOB). What are the PCAOB's primary functions?
- Provides oversight for auditors of public companies
- Establishes auditing, attestation and quality control standards for public companies audits
- Perform inspections of audit engagement as well as the quality controls at the audit firms
performing those audits

2.4 Learning Objective 2-4

1) The form that must be completed and filed with the Securities and Exchange Commission
whenever a company experiences a significant event that is of interest to public investors is the
A) Form S-1.
B) Form 8-K.
C) Form 10-K.
D) Form 10-Q.

2) The form that must be filed with the Securities and Exchange Commission whenever a
company plans to issue new securities to the public is the
A) Form S-1.
B) Form 8-K.
C) Form 10-K.
D) Form 10-Q.

3) Which of the following is a correct statement regarding the SEC?

A) The Securities Act of 1934 (1933 chứ ko p 1934) requires most companies planning to issue
new securities to the public to submit a registration statement to the SEC for approval.
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B) All public companies must file monthly statements with the SEC. (annual(10-K) or quarterly
(10-Q) not monthly)
C) The Form 10-K must be filed within 30 days after the close of the fiscal year. (60-90 days)
D) The SEC has the power to establish rules for any CPA associated with audited financial
statements submitted to the commission. SEC có thẩm quyền thiết lập các quy tắc cho bất kỳ
CPA nào liên quan đến báo cáo tài chính đã được kiểm toán nộp cho ủy ban.

4) With respect to the SEC,

A) the attitude of the SEC is generally considered in any major change proposed by the FASB.
B) the SEC is the sole agency responsible for setting generally accepted accounting principles.
(just considerable influence in setting GAAP)
C) the SEC requirements of greatest interest to CPAs are set forth in their enforcement
regulations. các yêu cầu của SEC mà CPA quan tâm nhất được nêu trong các quy định thực thi
của họ. (in all the commission’s Regulation S-X, Staff Accounting Bulletins, and accounting and
Auditing Enforcement Releases) Các yêu cầu của SEC mà CPA quan tâm nhất thường là các yêu
cầu liên quan đến báo cáo và công bố tài chính, thay vì chỉ là các quy định thực thi.
D) the SEC has the power to establish rules for all CPAs. (just CPA associated with audited
financial statements submitted to the commission.)

5) Which of the following is not a publication issued by the Securities and Exchange
Commission?
A) Accounting and Auditing Enforcement Actions
B) Accounting Series Releases
C) Regulation S-X
D) State Board of Accountancy Enforcement Actions

D) State Board of Accountancy Enforcement Action is not a publication issued by the

Securities and Exchange Commission (SEC). State Boards of Accountancy are responsible for
licensing and regulating CPAs within their respective states, and they issue their own
enforcement actions, separate from the SEC.
The other options are publications or regulations issued by the SEC:
 A) Accounting and Auditing Enforcement Actions: These are actions taken by the
SEC in response to violations of accounting and auditing standards.
 B) Accounting Series Releases: These are pronouncements issued by the SEC to provide
guidance on accounting issues.
 C) Regulation S-X: This sets forth the specific form and content of financial statements
required to be filed with the SEC.

6) The difference between the Securities Act of 1933 and the Securities Act of 1934 is that only
the 1934 Act requires audited financial statements.
False => Both the Securities Act of 1933 and the Securities Exchange Act of 1934 require
audited financial statements, but they apply to different circumstances:
 The Securities Act of 1933 requires companies to provide audited financial statements
when they issue new securities to the public (such as during an Initial Public Offering, or
IPO).
 The Securities Exchange Act of 1934 requires ongoing reporting for companies with

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 publicly traded securities, including the submission of audited annual financial statements
(Form 10-K).

7) Form 10-K must be filed with the SEC whenever a public company experiences a significant
event.
False. 10-K đổi thành 8-K

8) The overall purpose of the Securities and Exchange Commission is to assist in providing
investors with reliable information upon which to make investment decisions.
TRue

9) Form 10-Q must be filed monthly with the Securities and Exchange Commission by every
publicly held company.
False. Monthly thay bằng quarterly

10) Discuss the purpose of the Securities and Exchange Commission and its influence on setting
generally accepted accounting principles.
Ánh:
- Purpose of the Securities and Exchange Commission is to assist in providing investors with
reliable information upon which to make investment decisions.
- Has considerable influence in setting generally accepted accounting principles.
Chat gpt:
### Purpose of the Securities and Exchange Commission (SEC)
1. **Investor Protection: ** Ensuring that investors have access to reliable information about the
financial health and business practices of public companies.

2. **Enforcement: ** The SEC enforces compliance with securities laws through various means,
including investigations, enforcement actions, and imposing penalties for violations.

3. **Regulation of Securities Markets:** The SEC oversees the key participants in the securities
world, including securities exchanges, brokers, dealers, investment advisers, and mutual funds.

### Influence on Setting Generally Accepted Accounting Principles (GAAP)

The SEC has a significant influence on the establishment and enforcement of generally accepted
accounting principles (GAAP) in the United States. While the Financial Accounting Standards
Board (FASB) is the primary body responsible for developing GAAP, the SEC has the authority
to prescribe accounting principles and standards for public companies.

2.5 Learning Objective 2-5

1) Statements on Standards for Accounting and Review Services (SSARS) are issued by the
A) Accounting and Review Services Committee.
B) Professional Ethics Executive Committee.
C) Securities and Exchange Commission.
D) Financial Accounting Standards Board.

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2) The American Institute of Certified Public Accountants (AICPA)
A) is responsible for issuing licenses to new CPAs.
B) restricts its membership to CPAs who are independent auditors.
C) sets auditing standards for both public and private companies.
D) sets rules of conduct that CPAs are required to meet.

3) In 2017, the American Institute of CPAs joined with which of the following to form the
Association of International Certified Public Accountants?
A) the Chartered Institute of Management Accountants
B) the Securities and Exchange Commission
C) the Public Accounting Oversight Board
D) the Japanese Institute of Certified Public Accountants

4) Membership in the AICPA is restricted to CPAs who are currently practicing as independent
auditors.
F

5) Membership in the AICPA is mandatory for all licensed practicing CPAs. F

6) A CPA must meet continuing education requirements to maintain their license to practice. T

7) The Auditing Standards Board (ASB) of the AICPA is responsible for issuing
pronouncements on auditing matters in the U.S. for the audits of every type of entity. T

8) What are the major functions of the AICPA?

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2.6 Learning Objective 2-6

1) Which of the following are audit standards used in professional practice by audit firms?
A)
International AICPA Auditing PCAOB Auditing
Standards on Standards Standards
Auditing
Yes No No

B)
International AICPA Auditing PCAOB Auditing
Standards on Standards Standards
Auditing
Yes Yes No

C)
International AICPA Auditing PCAOB Auditing
Standards on Standards Standards
Auditing
Yes Yes Yes

D)
International AICPA Auditing PCAOB Auditing
Standards on Standards Standards
Auditing
No Yes Yes

2) Who is responsible for establishing auditing standards for privately held companies?
A) Securities and Exchange Commission
B) Public Company Accounting Oversight Board
C) Auditing Standards Board
D) National Association of Accounting

3) Standards issued by the Public Company Accounting Oversight Board must be followed by
CPAs who audit
A) both private and public companies.
B) public companies only.
C) private companies, public companies, and nonprofit entities.
D) private companies only.

4) The International Standards on Auditing (ISA)

A) are issued by the AICPA.
B) override a country's regulations governing the audit of a company.
C) has many of the same standards as the Auditing Standards Board (ASB).
D) must be followed by companies whose stock is traded in the U.S.
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5) ________ are referred to as U.S. generally accepted auditing standards (GAAS).
A) AICPA auditing standards
B) SEC auditing standards
C) PCAOB auditing standards
D) Sarbanes-Oxley standards

6) Which of the following is a true statement regarding auditing standards?

A) Prior to the passage of Sarbanes-Oxley, the FASB established auditing principles for U.S.
public companies.
B) PCAOB auditing standards are applicable to entities outside the U.S.
C) There are no similarities between PCAOB standards and International Standards on Auditing.
D) The Auditing Standards Board has revised most of its standards to converge with the
international standards.

7) Which of the following is true with regards to the various auditing standards?
A) Statements on Auditing Standards (SASs) are issued by the PCAOB.
B) The ASB Clarity Project was intended to make the U.S. auditing standards easier to read,
understand, and apply.
C) The ASB redrafted existing AICPA auditing standards to align them with respective
International Standards on Auditing (ISA's).
D) Both B and C are correct.

8) Which of the following is not one of the main sets of auditing standards around the world
today?
A) AICPA Auditing Standards
B) International Standards on Auditing
C) PCAOB Auditing Standards
D) Securities and Exchange Commission Auditing Standards

9) The PCAOB considers International Standards on Auditing (ISA) when developing its
standards. T

10) International Standards on Auditing are issued by the International Auditing and Assurance
Standards Board (IAASB). T

11) The ASB has revised its audit standards to converge with international standards. T

12) International Standards on Auditing (ISAs) override => not override a country's regulations
governing the audit of financial or other information. F

2.7 Learning Objective 2-7

1) Historically, auditing standards have been organized into three categories, including
A) standards of field work.
B) purpose of an audit.
C) responsibilities of the auditor.
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D) proper planning and supervision.

2) The "Principles Underlying an Audit in Accordance with Generally Accepted Auditing

Principles" provide a framework to help auditors
A) understand the ten GAAS standards.
B) obtain complete assurance that the financial statements are free from any error.
C) report on the financial statements.
D) prevent fraud.

3) Which of the following is not one of the responsibilities of an auditor under the principles
underlying an audit of financial statements?
A) possess appropriate competence and capabilities
B) comply with relevant ethical requirements
C) plan work and supervise assistants
D) maintain professional skepticism and exercise professional judgment

4) To obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, the auditor must fulfill several performance responsibilities,
including
A) verifying that all audit work is performed by a CPA with a minimum of three years'
experience.
B) obtaining sufficient, appropriate audit evidence.
C) exercising professional judgment.
D) providing an opinion on the financial statements.

5) The Statements on Auditing Standards issued by the Auditing Standards Board

A) are regarded as authoritative literature.
B) mandate the amount of evidence that must be obtained.
C) must be followed in all situations.
D) are optional guidelines which an auditor may choose to follow or not follow when conducting
an audit.

6) An auditor need not abide by a particular auditing standard if the auditor believes that
A) the issue in question is immaterial in amount.
B) more expertise is needed to fulfill the requirement.
C) the requirement of the standard has not been addressed by the PCAOB.
D) fraud is involved.

7) When assessing the risk of material misstatements in the financial statements,

A) inadequate internal control procedures will mitigate client business risk.
B) GAAS specifies in detail how much and what types of evidence the auditor needs to obtain.
C) company management is responsible for determining materiality levels.
D) the auditor must understand the client's business and industry.

8) In order to properly plan and perform an audit, an important fact for both the auditor and the
client to understand is that
A) the internal control policies and procedures are developed by the auditors.
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B) the purpose of an audit is to prevent fraud.
C) management is responsible for the preparation of the financial statements.
D) management can restrict the auditor's access to important information relevant to the financial
statements.

9) The principles underlying an audit

A) contain the procedures that must be followed during an audit.
B) carry the same authority as AICPA auditing standards.
C) only apply to the audits of public companies.
D) provide structure for the clarified Codification.

10) The AICPA principles underlying an audit are organized around four principles. Which of
the following is not one of those principles?
A) fairness
B) responsibilities
C) reporting
D) performance

11) Which of the following statements about Generally Accepted Audit Standards are true?
I. They serve as broad guidelines to auditors for conducting an audit engagement.
II. They are sufficiently specific to provide a meaningful guide to practitioners.
III. They represent a framework upon which the AICPA can provide interpretations.
A) I and II
B) I and III
C) II and III
D) I, II and III

12) The AICPA principles and the auditing standards should be viewed by practitioners as
A) ideals to work towards, but which are not achievable.
B) maximum standards that denote excellent work.
C) minimum standards of performance that must be achieved on each audit engagement.
D) benchmarks to be used on all audits, reviews, and compilations.

13) Which of the following is an accurate statement regarding principles and auditing standards?
A) The principles underlying an audit give specific guidance to an auditor when a problem arises
in an audit.
B) The principles underlying an audit state that the only objective of an audit is to provide
financial statement users with an opinion.
C) All auditing standards issued by the PCAOB are given two classification numbers.
D) The Statement on Auditing Standard (SAS) number identifies the order in which it was issued
in relation to other SASs.

14) ________ is an attitude that includes a questioning mind, being alert to conditions that might
indicate possible misstatements due to fraud or error, and a critical assessment of audit evidence.
A) Reasonableness
B) Diligence
C) Professional skepticism
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D) Competence

15) To obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, the auditor fulfills several performance responsibilities, including
A) complying with the AICPA Code of Professional Conduct.
B) issuing a written report on the financial statements.
C) determining and applying materiality levels.
D) having the appropriate competence to perform the audit.

16) Which of the following is not true regarding the purpose of an audit performed on a set of
financial statements in accordance with generally accepted auditing standards?
A) to provide users of the financial statements with an opinion on the financial statements
B) to provide users of the financial statements with absolute assurance that the financial
statements contain no errors in them
C) to provide financial statement users with an opinion on whether the financial statements are
presented fairly or not
D) to provide financial statement users with an opinion in accordance with the applicable
financial reporting framework

17) In situations in which the CPA or the CPA's assistants are not qualified to perform the audit
work, which of the following is not an option the CPA or the CPA firm has?
A) The CPA and the CPA's assistants have a professional obligation to acquire the required
knowledge and skills.
B) The CPA and the CPA's assistants should simply rely more upon the client's representations
when performing the audit.
C) The CPA should suggest someone else or another CPA firm which is qualified to perform the
work.
D) The CPA should decline the audit engagement.

18) Professional skepticism must be maintained only if the auditor suspects fraud. F

19) Statements on Auditing Standards (SASs) are issued by the Public Company Accounting
Oversight Board. F

20) The AU-C number identifies the order in which it was issued in relation to all other codified
auditing standards.
F
21) Similar to the Financial Accounting Standards Board (FASB) Codification, the AICPA has
codified the Statement of Auditing Standards.
T
22) The PCAOB website includes a reference tool that identifies the analogous AICPA and
IAASB auditing standards for each PCAOB standard.
T
23) An auditor should accept the fact that management of an audit client may restrict access to
persons within the entity from whom the auditor may need to obtain audit evidence due to client
confidentiality. F

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24) List the four principles underlying an audit.
25) Principles related to the auditor's responsibilities in the audit stress three important personal
qualities that the auditor should possess. List and discuss these three qualities.

26) Performance is one of the principles underlying an audit. List three performance
responsibilities.

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2.8 Learning Objective 2-8

1) Quality control for a CPA firm

A) includes the organizational structure of the firm and the procedures it establishes.
B) is tailored to each specific audit engagement.
C) is a guarantee that auditing standards are followed.
D) is required only for firms auditing SEC companies.

2) The method used by a CPA firm to ensure that the firm meets its professional responsibilities
to clients and others is
A) continuing professional education.
B) compliance with generally accepted reporting standards.
C) quality control.
D) peer review.

3) Within the context of quality control, the primary purpose of continuing professional
education and training activities is to enable a CPA firm to provide its personnel with
A) technical training that assures proficiency as a valuation expert.
B) professional education that is required in order to perform with due professional care.
C) knowledge required to fulfill assigned responsibilities.
D) knowledge required to perform a peer review.

4) The purpose of establishing quality control policies and procedures to accept or continue a
client relationship is to
A) provide reasonable assurance that personnel are adequately trained to fulfill their
responsibilities.
B) monitor the risk factors concerning misstatements that arise from the misappropriation of
assets.
C) document objective criteria for the CPA firm's peer review.
D) minimize the likelihood of associating with a client whose management may lack integrity.

5) Which of the following is an element of the CPA's quality control system that should be
considered in establishing its quality control policies and procedures?
A) considering audit risk and materiality
B) using statistical sampling techniques
C) assigning appropriately experienced personnel to engagements
D) complying with laws and regulations

6) Which of the following is not an essential component of quality control?

A) policies and procedures to ensure that firm personnel are actively engaged in marketing
strategies
B) policies and procedures to ensure that the work performed by firm personnel meet applicable
professional standards
C) policies to ensure that personnel maintain their independence in fact and in appearance
D) policies that ensure that monitoring activities are effectively applied

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7) Which one of the following is not true regarding the American Institute of Certified Public
Accountants peer review requirement?
A) A CPA firm must develop and adhere to quality control standards.
B) Peer reviews are mandatory.
C) A CPA firm will lose AICPA eligibility if a peer review is not performed.
D) Firms required to be registered with and inspected by the PCAOB are exempt.

8) How often is the AICPA Peer Review Program performed of an AICPA member CPA firm
administered by a State CPA Society under the overall direction of the AICPA Peer Review
Board?
A) every year
B) every 2 years
C) every 3 years
D) every 5 years

9) Which of the following is not a purpose of the Center for Audit Quality which is affiliated
with the AICPA?
A) to serve the capital markets
B) to serve public company auditors
C) to serve investors
D) to serve the International Accounting Standards Board (IASB)

10) Quality controls are established for the entire CPA firm whereas auditing standards are
applicable to the individual engagement. Kiểm soát chất lượng được thiết lập cho toàn bộ công ty
CPA trong khi các tiêu chuẩn kiểm toán được áp dụng cho từng hoạt động riêng lẻ.
T

11) In order to be eligible Để đủ điều kiện for membership in the AICPA, public accounting
firms must be enrolled in an AICPA-approved practice monitoring program. Members of the
firm can still=> can not be eligible for AICPA membership even if their firms are not enrolled in
an AICPA-approved practice monitoring program. F

12) Discuss the relationship between quality control and generally accepted auditing standards.

13) List and describe the six elements of quality control. Who establishes the standards for
quality control?
14) Listed below are policies or procedures that the Crystal Cove audit firm has in place. For
each identified policy or procedure state if it is an auditing standard or a quality control standard.

Audit firm Policy or Procedure Standards Category

1. Determination on whether to accept or a. auditing standard
reject a new client. B b. quality control standard
2. A client evaluation form. B
3. All personnel participate in continuing
professional education. B
4. Conducting the audit with professional
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skepticism. A
5. Answering an independence
questionnaire. B
6. Determine and apply materiality levels.
A
7. Audit staff workpapers are reviewed by
audit seniors, then managers. B
8. Plan work and supervise assistants. A

15) The following are definitions of terms that are listed on the right. Match the definition with
its associated term. Each term can be used once, more than once or not at all.

Definition Audit Term

1. an organizational structure where professional a. AICPA
services are provided by one or more shareholders b. PCAOB
i c. Securities Exchange Commission
2. the grantor of the right to practice public d. Form 10-K
accounting o e. IAASB
3. a report filed to indicate a significant event n f. Form S-1
4. sets professional standards and rules for g. due professional care
members a h. limited liability partnership
5. oversees accounting firms who audit public i. professional corporation
companies b j. limited liability company
6. an organizational structure where the owners are k. peer review
taxed like a partnership and have limited personal l. 1933 Securities Act
liability j m. 1934 Securities Act
7. a report that is filed when a company wishes to n. Form 8-K
issue new securities f o. state regulation
8. the methods used to ensure the firm meets its p. Code of Professional Conduct
professional responsibilities to clients and others q q. quality control standards
9. assists in providing investors with reliable r. auditing standards
information c
10. requires annual inspections of accounting
firms auditing more than 100 public companies b
11. practice monitoring by a CPA firm for another
CPA firm k
12. fulfilling duties diligently and carefully g
13. requires a registration statement l

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