Test Bank After Learning Chapter 1, 6, 8 in Alvrin Book

19) The risk associated with survivability and profitability is referred to as
A) Information risk.
B) Inherent risk.
C) Relative risk.
D) Business risk.
20) The risk that a company will not be able to meet its obligations when they become due is
an aspect of:
A) Information risk.
B) Inherent risk.
C) Relative risk.
D) Business risk.
21) Which of the following attributes is more essential for an auditor than of management?
A) Integrity.
B) Competence.
C) Independence.
D) Keeping informed on current professional developments.
22) The attest function:

A) Is an essential part of every engagement by the CPA, whether performing auditing, tax
work, or other services.
B) Includes the preparation of a report of the CPA's findings.
C) Requires a consideration of internal control.
D) Requires a complete review of all transactions during the period under examination.
23) Attestation risk is limited to a low level in which of the following engagement(s)?
A) Both examinations and reviews.
B) Examinations, but not reviews.
C) Reviews, but not examinations.
D) Neither examinations nor reviews.
24) When compared to an audit performed prior to 1900, an audit today:

A) Is more likely to use sampling.
B) Is less likely to include consideration of the effectiveness of internal control.
C) Has bank loan officers as the primary financial statement user group.
D) Includes a more detailed examination of all individual transactions.
25) Which of the following are issued by the Securities and Exchange Commission?
A) Accounting and Auditing Enforcement Releases.
B) Accounting Trends and Techniques.
C) Industry Audit Guides.
D) Statements of Position.
26) Which of the following is not correct relating to the Sarbanes-Oxley Act?
A) It toughens penalties for corporate fraud.
B) It restricts the types of consulting CPAs may perform for audit clients.
C) It applies to both public and nonpublic audit clients.
D) It eliminates a significant portion of the accounting profession's system of self-regulation.
27) An operational audit differs in many ways from an audit of financial statements. Which of
the following is the best example of one of these differences?
A) The usual audit of financial statements covers the four basic statements, whereas the
operational audit is usually limited to either the balance sheet or the income statement.
B) Operational audits are more subjective and often involve evaluating efficiency and
effectiveness of operations.
C) Operational audits do not ordinarily result in the preparation of a report.
D) The operational audit deals with pre-tax income.
28) The review of a company's financial statements by a CPA firm:

A) Is substantially less in scope of procedures than an audit.
B) Requires detailed analysis of the major accounts.
C) Is of similar scope as an audit and adds similar credibility to the statements.
D) Culminates in issuance of a report expressing the CPA's opinion as to the fairness of the
statements.
29) Which statement is correct with respect to continuing professional education (CPE)
requirements of members of the AICPA?
A) Only members employed by the AICPA are required to take such courses.
B) Only members in public practice are required to take such courses.
C) Members, regardless of whether they are in public practice, are required to meet such
requirements.
D) There is no requirement for members to participate in CPE.
30) The FDIC Improvement Act requires that management of large financial institutions
engage auditors to attest to assertions by management about the effectiveness of the
institution's internal controls over:
A) Broker and dealer relationships.
B) Financial reporting.
C) Effectiveness of operations.
D) Efficiency of operations.
31) Passage of the Sarbanes-Oxley Act led to the establishment of the:

A) Auditing Standards Board.
B) Public Company Accounting Oversight Board.
C) Public Accountancy Review Board.
D) Securities and Exchange Commission.
32) Which of the following professionals has primary responsibility for the performance of an
audit?
A) The managing partner of the firm.
B) The senior assigned to the engagement.
C) The manager assigned to the engagement.
D) The partner in charge of the engagement.
33) Which of the following types of services is generally provided only by CPA firms?
A) Tax audits.
B) Financial statement audits.
C) Compliance audits.
D) Operational audits.
34) The right to practice as a CPA is given by which of the following organizations?
A) State Boards of Accountancy.
B) The AICPA.
C) The SEC.
D) The General Accounting Office.
35) Which of the following terms best describes the audit of a taxpayer's tax return by an IRS
auditor?
A) Operational audit.
B) Internal audit.
C) Compliance audit.
D) Government audit.
36) Inquiries and analytical procedures ordinarily form the basis for which type of
engagement?
A) Agreed-upon procedures.
B) Audit.
C) Examination.
D) Review.
37) Which of the following best describes the reason why independent auditors report on
financial statements?
A) A management fraud may exist and it is more likely to be detected by independent
auditors.
B) An audit provides credibility to the financial statements.
C) A misstatement of account balances may exist and is generally corrected as the result of
the independent auditors' work.
D) Poorly designed internal control may be in existence.
38) Financial accounting standards for cities are developed primarily by the
A) FASB.
B) IFAC.
C) GASB.
D) SEC.
39) Operational auditing is primarily oriented toward:

A) Future improvements to accomplish the goals of management.
B) The accuracy of data reflected in management's financial records.
C) The verification that a company's financial statements are fairly presented.
D) Past protection provided by existing internal control.
40) A typical objective of an operational audit is for the auditor to:
A) Determine whether the financial statements fairly present the entity's operations.
B) Evaluate the feasibility of attaining the entity's operational objectives.
C) Make recommendations for improving performance.
D) Report on the entity's relative success in attaining profit maximization.
41) An integrated audit performed under the Sarbanes-Oxley Act requires that auditors
report on:
Financial Statements Internal Control

A. Yes Yes
B. Yes No
C. No Yes
D. No No
A) Option A
B) Option B
C) Option C
D) Option D

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19) The risk associated with survivability and profitability is referred to as

22) The attest function:

24) When compared to an audit performed prior to 1900, an audit today:

28) The review of a company's financial statements by a CPA firm:

31) Passage of the Sarbanes-Oxley Act led to the establishment of the:

39) Operational auditing is primarily oriented toward:

Financial Statements Internal Control

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