Question 6 (1 point) The largest public accounting firms typically are structure

Question

Question 6 (1 point)

The largest public accounting firms typically are structured as

Question 6 options:

Professional corporations.

Limited liability corporations.

Limited liability partnerships.

Subchapter S corporations.

Question 7 (1 point)

Which of the following is true with respect to the auditor's report?

Question 7 options:

The report indicates that the company's financial statements were audited in accordance with statements issued by the FASB.

The report indicates that the company's financial statements were audited in accordance with applicable auditing standards.

The report indicates that the company's financial statements were audited in accordance with generally accepted accounting standards.

The report indicates that the company's financial statements were audited in accordance with the auditor's best judgment.

Question 8 (1 point)

The Audit Committee consists of

Question 8 options:

A subcommittee of the AICPA who establish the SAS.

Members of management.

Appointed government overseers.

Members of the Board of Directors.

Question 9 (1 point)

Which one of the following statements best describes the concept of materiality?

Question 9 options:

Materiality depends on the nature of an item but not on the dollar amount of the item.

Materiality is determined by reference to specific quantitative guidelines established by the AICPA.

Materiality depends only on the dollar amount of an item relative to other items in the financial statements.

Materiality is largely a matter of professional judgment.

Question 10 (1 point)

For publicly-held companies, which of the following is integrated into the audit of financial statements?

Question 10 options:

Budgetary information audit.

Audit of management forecasts.

The audit of internal controls.

Audit of interim financial statements.

Question 11 (1 point)

The three PCAOB general standards are concerned with

Question 11 options:

Adequate training and independence.

Independence, adequate training and due professional care.

Due professional care.

Adequate training and proficiency of the auditor, proper planning and supervision, and due professional care.

Question 12 (1 point)

Which of the following would best be described as an assurance service?

Question 12 options:

Preparing a report representing a client's position during an IRS audit.

Assisting a company in identifying potential sources of capital for potential acquisitions.

Working with a company to develop a more efficient method of processing financial transactions.

Offering an opinion concerning the accuracy of statements made on an entity's website relating to its online privacy policies.

Question 13 (1 point)

The main difference between SAS and AU is

Question 13 options:

SAS define minimum standards of performance for auditors while AU define financial accounting principles that must be followed according to GAAP.

SAS are issued by the PCAOB and AU are issued by the ASB.

SAS are issued by the ASB and AU are issued by the PCAOB.

They are the same except that SAS are organized chronologically and the AU are organized by topical area.

Question 14 (1 point)

The auditor must be independent of the auditee unless

Question 14 options:

The lack of independence does not influence his or her professional judgment.

Both parties agree that the independence issue is not a problem.

The lack of independence is insignificant.

None of the above—the auditor cannot lack independence.

Question 15 (1 point)

What organization is responsible for setting auditing standards for audits of publicly-traded companies in the U.S.?

Question 15 options:

AICPA.

GASB.

FASB.

PCAOB.

Question 16 (1 point)

During the first phase of an audit, a CPA most likely would

Question 16 options:

Identify specific internal control activities that are likely to prevent fraud.

Evaluate the reasonableness of the company's accounting estimates.

Inquire of the company's attorney as to whether any unrecorded claims are probable or asserted.

Evaluate the integrity of management.

Question 17 (1 point)

An investor is reading the financial statements of the Stankey Corporation and observes that the statements are accompanied by an auditor's unqualified report. From this, the investor may conclude that

Question 17 options:

The auditor is satisfied that Stankey will be highly profitable in the future.

Any disputes over significant accounting issues have been settled to the auditor's satisfaction.

The auditor has determined that Stankey's management is not qualified to lead the company.

The auditor is certain that Stankey's financial statements have been prepared accurately and that all account balances are precisely correct.

Question 18 (1 point)

Evidence is reliable if it

Question 18 options:

Is consistent with management's assertions.

Applies to the period being audited.

Relates to the audit assertion being tested.

Signals the true state of a management assertion.

Question 19 (1 point)

Before accepting an engagement to audit a new entity, an auditor is required to

Question 19 options:

Become a member of the entity's board of directors.

Make inquiries of the predecessor auditor.

Tell the company whether or not the auditor is willing to issue a "clean" opinion.

Prepare a memorandum setting forth the staffing requirements and documenting the preliminary audit plan.

Question 20 (1 point)

Who bears ultimate responsibility for the financial statements?

Question 20 options:

Management of the organization, equally with the external auditor that audits the statements.

Management and the shareholders of the organization.

Management of the organization.

The external auditor that audits the statements.

Question 21 (1 point)

Typically, an external auditor first gets supervisory experience at what level of authority?

Question 21 options:

Senior.

Associate.

Partner.

Manager.

Question 22 (1 point)

Which of the following statements is not true with respect to assurance, attest, and audit services?

Question 22 options:

These services all involve issuing a report.

These services all involve obtaining and evaluating evidence.

These services are applied only to financial statements and financial statement accounts.

These services all involve determining the correspondence of some information to a set of criteria.

Question 23 (1 point)

Which of the following best describes the general character of the three PCAOB generally accepted auditing standards that are classified as standards of fieldwork?

Question 23 options:

The need to maintain independence in mental attitude in all matters relating to the audit.

The competence, independence, and professional care of persons performing the audit.

The criteria of audit planning and evidence-gathering.

Criteria for the content of the auditor's report on financial statements and related footnote disclosures.

Question 24 (1 point)

Due professional care requires

Question 24 options:

The examination of all available corroborating evidence.

A study and review of internal controls that includes tests of controls.

Auditors to plan and perform their duties with the skill and care that is commonly expected of accounting professionals.

The exercise of error-free judgment.

Question 25 (1 point)

The primary responsibility for the adequacy of disclosures in the financial statements of a publicly held company rests with the

Question 25 options:

Management of the company.

Securities and Exchange Commission.

Auditor in charge of the fieldwork.

Partner assigned to the audit engagement

Explanation / Answer

Question 6

The correct answer is "Limited liability partnerships".

Limited liability partnership (LLP) is nothing but the partnership where all partners have limited liability. This includes the characteristics of both a corporation and a partnership. The similar characteristic of LLC and corporation is limited liability and that with partnership is that the taxation is done at the individual owners' level and reduce the effect of double taxation. So, largest accounting firms typically are structured as LLP.

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