Multiple Choice Question
Select the best answer for each of the following items and give reasons for your choice.
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 Certified Public Accountants.
(3) The Securities and Exchange Commission.
(4) The applicable state board of accountancy.

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 financial information issued by public companies.

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 Codification.
(2) FASB Concepts Statements.
(3) SEC Rules.
(4) SEC Interpretive Releases

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?

e. A basic objective of a CPA firm 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. Which of the following is not explicitly included in a standard report for a nonpublic company?
(1) The CPA€™s opinion that the financial 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 identification of the financial statements audited.

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. Which AICPA quality control standard would most likely be satisfied when a CPA firm maintains records indicating which partners or employees of the firm were previously employed by the CPA firm€™s clients?
(1) Professional relationship.
(2) Engagement performance.
(3) Relevant ethical requirements.
(4) Monitoring.

i. An audit provides reasonable assurance of detecting material:

j. Which of the following is not included in an integrated audit report on the financial 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 financial statements are the responsibility of management.
(3) The report indicates that the auditors have also audited the effectiveness of the company€™s internal control.
(4) The report is signed in the name of the CPA firm.

k. Audit firms that are subject to inspections by the PCAOB staff include:
(1) All audit firms.
(2) Audit firms that are registered with the SEC.
(3) Audit firms that are registered with the PCAOB.
(4) Audit firms that are registered with a state board of accountancy.

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 €œtrue and fair view.€
(2) The international audit report may be signed using the personal name of the audit partner, the audit firm, or both.
(3) The international audit report requires inclusion of the city of the CPA firm office that performed the audit.
(4) The international audit report includes an opinion on internal control.
(AICPA,adapted)

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Reasonable Absolute Yes No Yes No No Fraudulent Financial Reporting Yes Yes No No Misappropriation of Assets Yes No Yes No