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auditing international approach

Questions and Answers of Auditing International Approach

Describe the four types of audit opinions.
Describe three fundamental differences between at- testation standards and generally accepted auditing standards.
Answer the following questions about organizations that influence operations of CPA firms.a. What is the purpose of state boards of ac- counting?b. What are state societies of certified public
Answer the following questions.a. Why was the Commission on Auditors' Responsibilities appointed?b. Why was the Treadway Commission established?a. "Due professional care is to be exercised."b.
Which of the following is a correct statement?a. All states require only a CPA certificate to obtain a license to practice public accounting.b. All states require public accounting experience to
Which of the following is a correct statement?a. An audit provides limited assurance by at- testing to the fairness of the client's assertions.b. A review provides positive assurance by at- testing
Which of the following is not a quality control standard?a. Independence in fact and appearance should be maintained at all organizational levels.b. Personnel should be hired who possess the
Which of the following sentences or phrases from the auditor's report is not correctly stated?a. We have audited the accompanying.b. We conducted our audit in accordance with generally accepted
The first general standard of generally accepted auditing standards states thata. An independence in mental attitude is to be maintained.b. Due professional care is to be exercised. The audit is to
When the financial statements contain a material departure from generally accepted accounting principles, the auditor should issue eithera. An unqualified or qualified opinion.b. A qualified opinion
Which of the following is not an attestation standard?a. The engagement shall be performed by a practitioner or practitioners having adequate. knowledge in the subject matter of the assertion.b.
Which of the following is not an attestation standard?a. Sufficient evidence shall be obtained to pro- vide a reasonable basis for the conclusion that is expressed in the report.b. The report shall
Which of the following best describes what is meant by the term generally accepted auditing standards?a. Pronouncements issued by the Auditing Stan- dards Board.b. Rules acknowledged by the
Which of the following is a conceptual difference between the attestation standards and generally accepted auditing standards?a. The attestation standards provide a frame- work for the attest
The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is toa. Enable the CPA firm to attest to the reliability of the client.b.
Snow, CPA, was engaged by Master Co. to examine and report on management's written assertion about the effectiveness of Master's internal control over financial reporting. Snow's report should state
For each description, list the letter or letters of the term or terms that define the description. Each term may be used once, more than once, or not at all. Description 1. Indicates that personnel
You are a supervisor with a midsized regional CPA firm that has offices in several cities throughout the southwestern part of the United States. Your state has two-tier licensing requirements to
A business associate makes the following statements. 1. The auditing standards for your profession are too general and provide no real guidelines. It would be very difficult to tell whether or not an
A graduating senior with a major in accounting is considering the following job offers.a. From a "Big Six" CPA firm.b. From a small local CPA firm.c. From a large corporation with training to become
You have been asked by a client to provide professional assurance regarding the operation of a software package developed by your client. Explain how each of the attestation standards would be of
After completing his auditing course with a grade of D-, a student was so excited about a career in auditing that he opened an office and began to solicit clients, even though he had not yet taken
Several years ago, Prescott Need opened a sporting goods store and invested heavily in a variety of inventory, including fishing rods, golf clubs, and a specialized brand of snow ski. He also secured
The atmosphere was tense as the Board of Directors met in July, 19X8. It was the second meeting since a member of Custom Furniture's original family of owners unexpectedly sold his stock to an
Define the following terms:a. Ethics.b. Ethical commitment.c. Ethical awareness.d. Ethical competency.
Describe the six-step model for making ethical decisions.
Describe three common elements of each profession's code of conduct.
What is the difference between the two following sections of the Code of Professional Conduct?a. Principles of Professional Conduct.b. Rules of Professional Conduct.
What is the difference between the two following sec- tions of the Rules of Professional Conduct?a. Interpretations of the Rules.b. Ethics Rulings.
Answer the following questions for the cited articles of the Principles of Professional Conduct.a. Responsibilities (Article 1). To which three groups do CPAs have responsibilities?b. The Public
Describe the purpose of each of the following Rules of Professional Conduct.a. 101-Independence.b. 102-Integrity and Objectivity.c. 201-General Standards.d. 202-Compliance with Standards.e.
What two types of relationships between auditors and their clients are prohibited by Interpretations and Ethics Rulings relating to the rule on independence?
In each of the three following situations, indicate whether the auditor has (1) a direct financial interest in his or her client or (2) an indirect financial interest in his or her client.a. The
What does the rule on independence state about loans from audit clients?
Under certain conditions, independence may be impaired if an audit client starts or indicates an in- tention to start litigation against the CPA conduct- ing the audit. Two essential features of an
What should auditors do if they seek employment with their client while participating in the audit?
Certain conditions must be met for CPAs to provide their audit clients with accounting services and still maintain their independence. Describe these conditions.
Under what conditions could a CPA perform management consulting services for an audit client and not impair independence?
State the rule on integrity and objectivity.
Describe the four standards that are part of the rule on general standards.
Under limited circumstances, CPAs may express unqualified opinions on financial statements that utilize accounting principles other than those for- mulated by designated bodies. Give two examples of
Describe the dual responsibility borne by CPAs.
What protection is given to professionals who have privileged communications?
What is a contingent fee?
To which types of services does the rule on contingent fees apply? Why?
Describe the advertising of four activities that CPAs might consider to be false, misleading, or deceptive.
Describe the professional services for which the re- ceipt of commissions is prohibited.
Describe one purpose of the rule on form of organization and name.
A violation of the profession's ethical standards most likely would have occurred when a CPAa. Issued an unqualified opinion on the 19X2 financial statements when fees for the 19X1 audit were
Which of the following is not a general common- ality among professions' codes of conduct?a. Members of each profession are usually ex- pected to maintain a higher standard of con- duct than is
All of the following are part of the structure of the Code of Professional Conduct excepta. Principles of Professional Conduct.b. Concepts.c. Rules of Professional Conduct.d. Interpretations of rules
The principles of the AICPA's Code of Professional Conduct emphasize certain responsibilities. Which of the following is an incomplete statement of those responsibilities?a. CPAs must serve their
Ethical behavior requires an individual toa. Act only in accord with the law.b. Perceive the ethical implications of a situation only if it involves the possibility of unlawful conduct.c. Consider a
In using a general model for making ethical decisions, the CPA should do all of the following excepta. Gather or identify all the relevant facts about the situation that raises the ethical issue.b.
According to the profession's ethical standards, a CPA would be considered independent in which of the following instances?a. A client leases part of an office building from the CPA, resulting in a
The issue of audit independence might be raised by the auditor's participation in management consulting engagements. Which of the following statements is most consistent with the profession's
May a CPA hire for the CPA's public accounting firm a non-CPA systems analyst who specializes in developing computer systems?a. Yes, provided the CPA is qualified to perform each of the specialist's
According to the AICPA Code of Professional Con- duct, a CPA who has a financial interest in a partnership that invests in a client is considered to havea. An indirect financial interest in the
A violation of the profession's ethical standards most likely would have occurred when a CPAa. Compiled the financial statements of a client that employed the CPA's spouse as a book- keeper.b.
A CPA discovered irregularities in the tax return of a client and withdrew from the engagement. Which course of action should the CPA take?a. Take the matter to the Internal Revenue Ser- vice.b.
A CPA is an elected legislator in a local government. The city manager is responsible for all administrative functions. Would the CPA's independence be impaired with respect to an audit of the local
A CPA has been asked to audit a municipal authority. The CPA owns some of the authority's outstanding bonds. The amount is immaterial. Would the CPA's independence be impaired with respect to an
For each description, list the letter or letters of the term or terms that define the description. Each term may be used once, more than once, or not at all. Description 1. Does not extend to
Each of the following statements is incorrect. In the spaces provided, write the correct statement and the reason why the original statement is incorrect. [Hint: The chapter material is background
In each of the following cases, indicate whether there is a violation of the rule on independence of the AICPA Code of Professional Conduct. Support your answer.a. A CPA is a director of a charitable
Savage, CPA, has been requested by an audit client to perform a nonrecurring engagement involving the implementation of a computer information and control system. The client requests that in setting
The president of Shambra Products has consulted you in regard to an audit. Shambra, which has never been audited, has been developing a process to convert swamp gas into natural gas. Although
Judy Hanlon, CPA, performed an audit and prepared the federal income tax return for the Guild Corporation for the year ended December 31, 19X2. This was Ms. Hanlon's first engagement for this client.
Meek, CPA, discovers that an audit client has a pending lawsuit against it for a significant sum of money. If the lawsuit is lost, the client's assets will be reduced by a substantial amount. Meek
During the course of an audit, Fred Curious, the senior, noticed that several employees were paid at a rate less than that required for the federal minimum wage law. He checked into this matter and
During the audit of Park Company, a bottler and distributor of "Marshwater" soft drink, your discussion with the financial vice-president reveals that the company is paying rebates to certain of its
Mr. Ambit was employed by Keen & Keen, CPAs, in early June 19X2.a. Prior to employment, Mr. Ambit owned considerable stock in several of Keen & Keen's audit clients. Upon employment, he sold all the
You are a member of the ethics committee of your state society. You are reviewing the work of Mr. Quest, a CPA who practices in your state. In recent years numerous complaints have been made against
For each of the ethical situations listed below, indicate (1) whether or not a rule of profes- sional conduct has been violated and (2) which rule has been violated (if your answer to (1), above, is
Tucei, CPA, is the auditor of LGS, Inc., a midsized diversified public company with several subsidiaries; one of which sells life insurance. The chief executive officer of LGS met with Tucei to
Custom Furniture Company enjoyed reasonably good profits during all of its years. But at the beginning of 19X4, the company's new board of directors decided to expand the line of furniture to capture
Give two reasons why there is an expectation gap.
Name and define four legal relationships between plaintiffs and the auditor.
Name and define four standards of proof.
What is the difference between statutory law and common law?
Describe the ways in which the scope of many audits in the early 1900 s was significantly different from what it is today.
Describe the triangle of relationships shown in Figure 4.2 . FIGURE 4.2 Auditor, Client, and Third-party Relationships is hired by and owes a duty of due care to The Auditor may owe a duty to The
Describe the two auditing implications of the \(U l\) tramares case as shown in Figure 4.3. FIGURE 4.3 Common Law Relationships Established by the Ultramares Case Auditor's Liability under Common Law
What effect did each of these cases have on auditors' ordinary negligence liability to third parties?a. C.I.T. Financial Corporation.b. Rusch Factors, Inc. v. Levin.c. Rosenblum v. Adler.
Describe the three-part test established in the Credit Alliance v. Arthur Andersen \& Co. case.
Describe the two provisions of Section 11 (a) of the Securities Act of 1933 that impose strict standards of responsibility on the auditor.
What was the significance of the Barchris case?
Explain the significant differences between the standards of liability under Section 11 (a) of the Securities Act of 1933 and Section 18 (a) of the Securities Exchange Act of 1934.
In what way did the Hochfelder case put limitations on auditor liability under Section 10 (b) of the Securities Exchange Act of 1934 ?
Describe the four suggestions made by the SEC after an investigation into the McKesson \(\mathcal{O}\) Robbins case.
Why were criminal charges made against the auditors in the Continental Vending case?
What conflict did the ZZZZ Best case cause between the auditor's "public duty" and the Code of Professional Conduct?
What is the relationship between the ESM Government Securities Case and the accounting profession's quality control?
Answer the following questions:a. What is the auditor's liability for ordinary negligence under common law?b. How has the auditor's liability to third parties been widened under statutorv law?
What is the difference between business failures and audit failures?
How have auditors responded to the increasingly litigious environment?
Describe the reforms being addressed by the Coalition to Eliminate Abusive Securities Suits (CEASS).
Describe the phases of the liability cycle
Describe two litigation guidelines.
Which of the following is least likely to be an example of ordinary negligence?a. The auditor misinterprets a transaction because he or she did not read the invoice carefully.b. The auditor reads the

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