1â33. Match the following defi nitions (or partial defi nitions) of the various types of services to the
appropriate service. Each service may be used once or not at all.
LO 1-1, 2, 6
Defi nition (or Partial Defi nition) Service
a. An attest engagement in which the CPAs agree to perform
procedures for a specifi ed party and issue a report that is
restricted to use by that party.
b. An engagement designed to express limited assurance
relating to subject matter or an assertion.
c. An engagement in which the CPAs issue an examination,
a review, or an agreed-upon procedures report on subject
matter or an assertion about subject matter that is the
responsibility of another party (e.g., management).
d. An examination designed to provide an opinion that is the
CPAâs highest level of assurance that the fi nancial statements
follow generally accepted accounting principles, or
another acceptable basis of accounting.
e. As required by the Sarbanes-Oxley Act and the Public Company
Accounting Oversight Board, an audit that includes
providing assurance on both the fi nancial statements and
internal control over fi nancial reporting.
f. Professional services that enhance the quality of information,
or its context, for decision makers.
g. An attest engagement designed to provide the highest
level of assurance that CPAs provide on an assertion.
1. Agreed-upon
procedures engagement
2. Assurance services
3. Attest engagement
4. Audit of fi nancial
statements
5. Compliance audit
6. Examination
7. Integrated audit
8. Operational audit
9. Review
1â33. Match the following defi nitions (or partial defi nitions) of the various types of services to the
appropriate service. Each service may be used once or not at all.
LO 1-1, 2, 6
Defi nition (or Partial Defi nition) Service
a. An attest engagement in which the CPAs agree to perform
procedures for a specifi ed party and issue a report that is
restricted to use by that party.
b. An engagement designed to express limited assurance
relating to subject matter or an assertion.
c. An engagement in which the CPAs issue an examination,
a review, or an agreed-upon procedures report on subject
matter or an assertion about subject matter that is the
responsibility of another party (e.g., management).
d. An examination designed to provide an opinion that is the
CPAâs highest level of assurance that the fi nancial statements
follow generally accepted accounting principles, or
another acceptable basis of accounting.
e. As required by the Sarbanes-Oxley Act and the Public Company
Accounting Oversight Board, an audit that includes
providing assurance on both the fi nancial statements and
internal control over fi nancial reporting.
f. Professional services that enhance the quality of information,
or its context, for decision makers.
g. An attest engagement designed to provide the highest
level of assurance that CPAs provide on an assertion.
1. Agreed-upon
procedures engagement
2. Assurance services
3. Attest engagement
4. Audit of fi nancial
statements
5. Compliance audit
6. Examination
7. Integrated audit
8. Operational audit
9. Review
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Related questions
2-30 | 2â30. Multiple Choice Questions | |||||||
Select the best answer for each of the following items and give reasons for your choice. | ||||||||
A | a. Which of the following organizations can revoke the right of an individual to practice as a | |||||||
CPA? | ||||||||
(1) The Public Company Accounting Oversight Board. | ||||||||
(2) The American Institute of Certifi ed Public Accountants. | ||||||||
(3) The Securities and Exchange Commission. | ||||||||
(4) The applicable state board of accountancy. | ||||||||
B | b. The AICPA over time has played an important role in standards setting. Which of the following | |||||||
standards are currently established by the AICPA? | ||||||||
(1) Accounting standards applicable to nonpublic companies. | ||||||||
(2) Auditing standards applicable to audits of nonpublic companies. | ||||||||
(3) Quality control standards applicable to audits of public companies. | ||||||||
(4) Standards for reviews of the interim fi nancial information issued by public companies. | ||||||||
C | c. Which of the following does the FASB consider a source of nonauthoritative guidance for | |||||||
use when there is no authoritative guidance available? | ||||||||
(1) The FASB Codifi cation. | ||||||||
(2) FASB Concepts Statements. | ||||||||
(3) SEC Rules. | ||||||||
(4) SEC Interpretive Releases | ||||||||
D | d. Financial statement audits performed under PCAOB requirements are designed to provide | |||||||
which type(s) of assurance with respect to the detection of material misstatements due to | ||||||||
errors or fraud? | ||||||||
Reasonable | Absolute | |||||||
1 | Yes | Yes | ||||||
2 | Yes | No | ||||||
3 | No | Yes | ||||||
4 | No | No | ||||||
E | e. A basic objective of a CPA fi rm is to provide professional services that conform with professional | |||||||
standards. Reasonable assurance of achieving this basic objective is provided through: | ||||||||
(1) Compliance with generally accepted reporting standards. | ||||||||
(2) A system of quality control. | ||||||||
(3) A system of peer review. | ||||||||
(4) Continuing professional education. | ||||||||
F | f. Which of the following is not explicitly included in a standard report for a nonpublic | |||||||
company? | ||||||||
(1) The CPAâs opinion that the fi nancial statements comply with generally accepted | ||||||||
accounting principles. | ||||||||
(2) That generally accepted auditing standards were followed during the audit. | ||||||||
(3) That internal control of the client was satisfactory. | ||||||||
(4) An identifi cation of the fi nancial statements audited. | ||||||||
G | g. The general group of the 10 PCAOB Auditing Standards requires that: | |||||||
(1) The auditors maintain an independent mental attitude. | ||||||||
(2) The audit be conducted in conformity with generally accepted accounting | ||||||||
principles. | ||||||||
(3) Assistants, if any, be properly supervised. | ||||||||
(4) The auditors obtain an understanding of internal control. | ||||||||
H | h. Which AICPA quality control standard would most likely be satisfi ed when a CPA fi rm | |||||||
maintains records indicating which partners or employees of the fi rm were previously | ||||||||
employed by the CPA fi rmâs clients? | ||||||||
(1) Professional relationship. | ||||||||
(2) Engagement performance. | ||||||||
(3) Relevant ethical requirements. | ||||||||
(4) Monitoring. | ||||||||
I | i. An audit provides reasonable assurance of detecting material: | |||||||
Fraudulent Financial | Misappropriation | |||||||
Reporting | of Assets | |||||||
1 | Yes | Yes | ||||||
2 | Yes | No | ||||||
3 | No | Yes | ||||||
4 | No | No | ||||||
J | j. Which of the following is not included in an integrated audit report on the fi nancial statements | |||||||
of a public company? | ||||||||
(1) The report states that the audit was performed in accordance with AICPA standards. | ||||||||
(2) The report indicates that the fi nancial statements are the responsibility of management. | ||||||||
(3) The report indicates that the auditors have also audited the effectiveness of the companyâs | ||||||||
internal control. | ||||||||
(4) The report is signed in the name of the CPA fi rm. | ||||||||
K | k. Audit fi rms that are subject to inspections by the PCAOB staff include: | |||||||
(1) All audit fi rms. | ||||||||
(2) Audit fi rms that are registered with the SEC. | ||||||||
(3) Audit fi rms that are registered with the PCAOB. | ||||||||
(4) Audit fi rms that are registered with a state board of accountancy. | ||||||||
L | l. Which of the following is not a difference noted when comparing the AICPA audit report | |||||||
to the international audit report? | ||||||||
(1) The international audit report may use the phrase âtrue and fair view.â | ||||||||
(2) The international audit report may be signed using the personal name of the audit | ||||||||
partner, the audit fi rm, or both. | ||||||||
(3) The international audit report requires inclusion of the city of the CPA fi rm offi ce that | ||||||||
performed the audit. | ||||||||
(4) The international audit report includes an opinion on internal control. |