1. The AICPA has authority to establish standards andrules in all but which of the following areas?: Auditingstandards applicable to financial statements of private and publiccompanies2. All CPA firms registered with the PCAOB are required toundergo a peer review annually.: False3. All of the Big Four and many of the smaller CPA firmsnow operate as Limited Liability Partnerships: True4. Any public accounting firm can be a member of theAICPA if the firm meets the membership requirements.:True5. Assume the Public Company Accounting OversightBoard (PCAOB) identifies a violation during itsinspection of a registered accounting firm. ThePCAOB:: CAN enforce disciplinary action against theaccounting firm, CAN report the matter to the Securities andExchange Commission, CAN NOT suspend the license topractice of the CPA guilty of the violation6. The Auditing Standards Board of the AICPA hasundertaken a Clarity and Convergence Project whoseaim is to make GAAS easier to read, apply and convergewith International Audit Standards. As a result theGAAS will become "Auditing Principles". The principleswill be consistent with the three categories of GAAS.Accordingly, which of the following is true?I The General Standards will be termed ResponsibilitiesPrinciples.II. The Fieldwork Standards will be termedPerformance Principles.III. The Reporting Standards will be termedCommunication Principles.: I and II7. Auditor Competency: Competency allows auditors to conductaudits and perform services effectively and efficiently.8. An auditor need not abide by a particular auditingstandard if the auditor believes that:: the issue in questionis immaterial in amount.9. Auditors of public companies should, in the absence ofguidance issued by the PCAOB, follow auditingstandards issued by the SEC.: False10. The Audit Standards Board of the AICPA hasundertaken the Clarity & Convergence Project to makeGAAS easier to read understand and apply; as well asconverge GAAS with the International Standards onAuditing (ISAs). Which of the following statementsconcerning the Clarity & Convergence Project is(are)true?I. The "General" standards of GAAS will be termed"Responsibilities".II. The "Fieldwork" standards will be termed"Performance".III. The "Reporting" standards will be termed"Communications".: I, II and III11. A basic objective of a CPA firm is to provide professionalservices to conform to professional standards.Reasonable assurance of achieving this basic objectiveis provided through:: a system of quality control.12. The difference between the Securities Act of 1933 and theSecurities Act of 1934 is that only the 1934 act requiresaudited financial statements.: False13. Form 10-K must be filed with the SEC whenever a publiccompany experiences a significant event.: False14. The form that must be completed and filed with theSecurities and Exchange Commission whenever acompany experiences a significant event that is ofinterest to public investors is the:: Form 8-K15. The form that must be filed with the Securities andExchange Commission whenever a company plans toissue new securities to the public is the:: Form S-116. For privately held companies who of the following isresponsible for establishing auditing standards?:Auditing Standards Board17. The four categories for describing the size of audit firmsinclude: the Big Four international firms; nationalfirms; regional and local firms; and small firms. Whichof the following is not a characteristic of a small firm?:They do not audit publically traded companies18. General corporation.: Unlike a general partnership,shareholders in a general corporation are liable only to theextent of their investment in the corporation.19. Generally Accepted Auditing Standards (GAAS) andStatements on Auditing Standards (SAS) should belooked upon by practitioners as:: minimum standards ofperformance that must be achieved on each audit engagement.20. The generally accepted auditing standard that requires"Adequate technical training and proficiency" isnormally interpreted as requiring the auditor to have::formal education in auditing and accounting.21. General Partnerships: This form is similar to aproprietorship, except that it applies to multiple owners22. General Standards (3): Adequate technical training andproficiency. Independence in mental attitude. Due professional care.23. Hansen Corporation's stock is listed on a national stockexchange and registered with the Securities andExchange Commission. Hansen's management hires aCPA to perform an independent audit of Hansen'sfinancial statements. The primary objective of thisaudit is to provide assurance to the:: investors in HansenCorporation's stock24. If an auditor of a public company cannot find guidanceissued by the PCAOB on a particular audit matter, theauditor should generally seek guidance from which ofthe following sources?: Statements on Auditing StandardsAudit Ch 2Study online at quizlet.com/_ttmpc25. Independence from clients: Independence is important as itallows the auditors to remain unbiased in drawing conclusionson client financial statements.26. International Standards on Auditing are issued by theInternational Auditing Practices Committee.: True27. The legal right to perform audits is granted to a CPAfirm by regulation of:: each state28. Limited liability companies are structured and taxedlike a general partnership, but their owners havelimited personal liability similar to that of a generalcorporation.: True29. Limited liability company: This form combines the mostfavorable attributes of a general corporation and a generalpartnership. LLCs are taxed like a general partnership, but itsowners have limited personal liability like shareholders of ageneral corporation.30. Limited liability partnership.: An LLP is structured andtaxed like a general partnership. However, the personal liabilityprotection of an LLP is less than that of a general corporation oran LLC, but it is greater than a general partnership. Manyaccounting firms now operate as LLPs.31. List the three factors that influence the organizationalstructure of all CPA firms.: Independence from clients,Auditor Competency, and Litigation32. Litigation: The increased litigation risk faced by auditorsincreases audit firm business risk. Certain organizationalstructures allow a degree of personal protection to individual firmmembers33. Many small/local accounting firms do not performaudits as their primary services to their clients includeaccounting and tax.: True34. Membership in the AICPA is mandatory for all licensedpracticing CPAs.: False35. Membership in the AICPA is restricted to CPAs who arecurrently practicing as independent auditors: False36. Members of the Public Company Accounting OversightBoard are appointed and overseen by:: the Securities andExchange Commission37. The organization that is responsible for providingoversight for auditors of public companies is called the:Public Company Accounting Oversight Board38. The overall purpose of the Securities and ExchangeCommission is to assist in providing investors withreliable information upon which to make investmentdecisions.: True39. Professional Corporations: Professional corporations canhave one or more shareholders. Personal liability protection forshareholders in professional corporations varies widely fromstate to state.40. Proprietorship: This form is limited to firms with only oneowner.41. The Public Company Accounting Oversight Board::perform inspections of the quality controls at audit firms thataudit public companies42. The Public Company Accounting Oversight Board(PCAOB) provides oversight to auditors of publicallytraded and private companies.: False43. Quality control strandards: required to have a peer reviewevery 3 to 5 years44. Sarbanes-Oxley and the Securities ExchangeCommission restrict auditors from providing manyconsulting services to their publically traded auditclients.: False45. Sarbanes-Oxley and the Securities ExchangeCommission restrict auditors from providing manyconsulting services to their publically traded auditclients. Which of the following is true for auditors ofpublically traded companies?I. They are restricted from providing consultingservices to privately held companies.II. There is no restriction on providing consultingservices to non-audit clients.: II only46. Securities Act of 1933: requires most companies planning toissue new securities to the public to submit a registrationstatement to the SEC for approval47. Securities Act of 1934: provides additional protection byrequiring public companies and others to file detailed annualreports with the commission; the commission examines thesestatements for completeness and adequacy before permitting thecompany to sell its securities through the securities exchanges48. Standards issued by the Public Company AccountingOversight Board must be followed by CPAs who audit::public companies only.49. Standards of Fieldwork (3): Adequate planning andsupervision. Understand the entity and its environment including internalcontrol. Sufficient appropriate audit evidence.50. Standards of Reporting (4): Whether statements wereprepared in accordance with GAAP. Circumstances when GAAP was not consistently followed. Adequacy of informative disclosures. Expression of opinion on financial statements as a whole.51. Statements on Auditing Standards are consideredauthoritative literature.: True52. Statements on Auditing Standards issued by theAICPA's Auditing Standards Board are:: interpretations ofgenerally accepted auditing standards and departures from suchstatements must be justified.53. The Statements on Auditing Standards issued by theAuditing Standards Board:: interpret generally acceptedauditing standards.54. Statements on Auditing Standards (SASs) areconsidered to be interpretations of the ten generallyaccepted auditing standards.: True55. Statements on Auditing Standards (SASs) are issued bythe Public Company Accounting Oversight Board.: False56. Statements on Standards for Accounting and ReviewServices are issued by the:: Accounting and Review ServicesCommittee.57. The third general standard states that due care is to beexercised in the performance of an audit. This standardis generally interpreted to require:: critical review of workdone at every level of supervision.58. Under GAAS, which of the following reflects a conceptfrom the general group?: The assignment of audit personnelto an engagement where they have no financial interest.59. What are the most common forms of CPA firmorganization?: Common forms of audit firm organizationinclude: Limited Liability Partnerships Limited Liability Companies Professional Corporations General Corporations General Partnerships Sole Proprietorship60. What are the PCAOB's primary functions?: The PCAOBhas responsibility for providing oversight to auditors of publiccompanies, establishing auditing and quality control standardsfor public company audits and performing inspections of thequality controls at audit firms performing those audits(responsibility of the American Institute of Certified PublicAccountants)61. What's the purpose of the Securities and ExchangeCommission: The overall purpose of the SEC is to assist inproviding investors with reliable information upon which tomake investment decisions.62. Which of the following are audit standards used inprofessional practice by audit firms?: InternationalStandards on Auditing, US Generally Accepted AuditingStandards, PCAOB Auditing Standards63. Which of the following is not an essential component ofquality control?: Policies and procedures to ensure that firmpersonnel are actively engaged in marketing strategies.64. Which of the following statements about GenerallyAccepted Audit Standards are true?I. They serve as broad guidelines to auditors forconducting an audit engagement.II. They are sufficiently specific to provide anymeaningful guide to practitioners.III. They represent a framework upon which the AICPAcan provide interpretations.: I and III65. Which of the following statements best describes theprimary purpose of Statements on AuditingStandards?: They are interpretations that are intended toclarify the meaning of "generally accepted auditing standards."66. Which of the following statements is true as it relates tolimited liability partnerships?: Partners are personallyliable for the acts of those under their supervision.67. Which of the following statements most accuratelycaptures the intent of the standards of field work?: Fieldwork standards are primarily directed at the auditor's planning,understanding of internal control, and evidence accumulation.68. Which one of the following is not a Field WorkStandard?: Due professional care69. Which one of the following is not one of the threeGeneral Standards?: Proper planning and supervision