Question

Question 1

In recent years, the large CPA firms have performed a highvolume of consulting services for many of their audit clients. Thishas become a highly controversial issue, because it is allegedthat:

	a.	The CPAs are not competent to perform these services.
	b.	The potential of earning large revenues from audit clientsimpairs auditor independence.
	c.	CPA firms are inclined to "cut corners" on the audits becausethey are devoting the bulk of their time to consulting.
	d.	CPA firms are engaged in unfair competition with consultingfirms.

Question 2

An auditor's report states: "...we do not express an opinion."This constitutes what type of opinion?

	a.	Qualified.
	b.	Adverse.
	c.	Unqualified.
	d.	Disclaimer.

Question 3

Which statement is NOT true?

	a.	The FASB is a federal regulatory agency.
	b.	The FASB encourages comments on exposure drafts from interestedthird parties.
	c.	To date, the FASB has issued over 100 authoritativepronouncements.
	d.	Pronouncements of GAAP-establishing bodies preceding the FASBwere widely criticized for lacking a theoretical basis.

Question 4

Third parties are NOT entitled to place any reliance upon a CPAin the case of what type of engagement?

	a.	Compilation.
	b.	Compliance audit.
	c.	Attestation.
	d.	Review.

Question 5

Which statement best reflects the business entity concept?

	a.	It is assumed that the entity will continue in businessindefinitely.
	b.	The financial results of legally separate entities should not becombined.
	c.	The business is viewed as an entity separate from theowners.
	d.	Entities should report their results of operations annually.

Question 6

Which principle determines the fiscal period in which an expenseshould be recorded?

	1.	Realization.
	2.	Matching.
	3.	Fiscal period
	4.	Conservatism.

Question 7

Form 10-Qis used for:

	a.	Annual reporting to the SEC.
	b.	Quarterly reporting to the SEC.
	c.	Reporting of special events to the SEC.
	d.	Determination of standards to be followed in reporting to theSEC.

Question 8

Which of the following attributes is the primary argument forthe historical cost principle?

	a.	Predictive value.
	b.	Relevance.
	c.	Understandability.
	d.	Verifiability.

Question 9

The standard, unqualified audit report of a public company:

	a.	Is addressed to the SEC.
	b.	Covers the financial statements but not the footnotes.
	c.	States that the financial statements are fairly presented inaccordance with GAAP.
	d.	More than one of the above is correct.
	e.	None of the above are correct.

Question 10

The most frequent cause of audit failure in audits of publiccompanies is:

	a.	Incompetence or improper supervision of audit staff.
	b.	Cleverly concealed employee frauds.
	c.	Unwillingness of the partner in charge to compel the client tocorrect misleading financial statements.
	d.	Bribery of key audit personnel by the audit client.

Question 11

In most audits, the greatest concern faced by the auditor is therisk of:

	a.	Clerical errors not detected by the client's system of internalcontrol.
	b.	Incompetence and carelessness of audit staff.
	c.	Management fraud.
	d.	Employee irregularities.