Multiple Choice Questions Chapter 2

Which of the following best describes what is meant by U.S. auditing standards?

1. (1)Acts to be performed by the auditor

2. (2)Measures of the quality of the auditor’s performance

3. (3)Procedures to be used to gather evidence to support financial statements

4. (4)Audit objectives generally determined on audit engagements

The Responsibilities principle underlying AICPA auditing standards includes a requirement that

1. (1)the audit be adequately planned and supervised.

2. (2)the auditor’s report state whether or not the financial statements conform to generally accepted accounting principles.

3. (3)professional judgment be exercised by the auditor.

4. (4)informative disclosures in the financial statements be reasonably adequate.

Who establishes auditing standards applicable to private companies and other nonpublic entities in the U.S.?

1. (1)The Private Company Audit Standards Board

2. (2)The Financial Accounting Standards Board

3. (3)The Auditing Standards Board of the AICPA

4. (4)The Public Company Accounting Oversight Board

1. The nature and extent of a CPA firm’s quality control policies and procedures depend on

	The CPA Firm’s Size	The Nature of the CPA Firm’s Practice	Cost–Benefit Considerations
(1)	Yes	Yes	Yes
(2)	Yes	Yes	No
(3)	Yes	No	Yes
(4)	No	Yes	Yes

• Which of the following is an element of a CPA firm’s quality control system that should be considered in establishing its quality control policies and procedures?

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1. (1)Complying with laws and regulations

2. (2)Using statistical sampling techniques

3. (3)Managing human resources

4. (4)Considering audit risk and materiality

• One of a CPA firm’s basic objectives is to provide professional services that conform with professional standards. Reasonable assurance of achieving this objective is provided through

• 
  

1. (1)continuing professional education.

2. (2)a system of quality control.

3. (3)a system of peer review.

4. (4)compliance with generally accepted reporting standards.

An auditor of an entity subject to the rules of the SEC must conduct the financial statement audit in accordance with

1. (1)PCAOB standards.

2. (2)Statements on Standards for Accounting and Review Services.

3. (3)International Auditing Standards.

4. (4)Generally Accepted Government Auditing Standards.

Which of the following provides authoritative guidance for the auditor of a nonpublic company?

1. (1)An article in the Journal of Accountancy that discusses new audit requirements

2. (2)Information obtained from continuing professional education programs

3. (3)Publication from state CPA societies that provides questions and answers on frequently asked audit questions

4. (4)Statements on Auditing Standards

The Public Company Accounting Oversight Board (PCAOB) has the duty to

1. (1)select the public accounting firm for the issuer’s annual audit.

2. (2)establish rules related to the preparation of audit reports for nonissuers.

3. (3)conduct investigations concerning registered public accounting firms.

4. (4)conduct disciplinary proceedings for nonpublic accounting firms.