Reference no: EM132483651

Question 1. Consider the following statements:

I. The Auditing Standards Board was created as part of the Sarbanes-Oxley Act.

II. The Audit Committee of a company's Board of Directors would include the Chief Financial Officer (CFO) of the company.

a. I is true; II is true

b. I is true; II is false

c. I is false; II is true

d. I is false; II is false

Question 2. Consider the following statements:

I. Financial statements are based on Generally Accepted Accounting Principles.

II. Auditing standards issued by the PCAOB must be followed on audits of a United States company's financial Statements, if the company's common stock is "publically traded".

a. I is true; II is true

b. I is true; II is false

c. I is false; II is true

d. I is false; II is false

Question 3. Who bears ultimate responsibility for the financial statements?

a. Management of the organization, equally with the external auditor that audits the statements.

b. Management of the organization and the American Institute of Certified Public Accountants (AICPA).

c. Management of the organization.

d. Management of the organization, and the Public Company Accounting Oversight Board (PCAOB).

Question 4. The Public Company Accounting Oversight Board can

a. Set auditing standards used in auditing financial statements of publically traded companies located in the United States.

b. Set accounting standards used in creating financial statements of publically traded companies located in the United States.

c. Conduct audits of governmental entities.

d. Conduct audits of public companies.

e. All of the above.

Question 5. The primary purpose of the Sarbanes-Oxley Act is to:

a. remove the impact of the private sector on the development of generally accepted accounting principles.

b. protect investors by improving the accuracy and reliability of the corporate disclosures made pursuant to the securities laws.

c. creat e additional jobs for accountants through additional regulatory requirements for public companies (issuers).

d. increase the cost of registration for public companies.

Question 6. Which of the following accounts would be part of the Revenue Cycle?

a. Accounts Receivable.

b. Accounts payable.

c. Inventory.

d. All would be part of the Revenue Cycle.

e. None would be part of the Revenue Cycle.

Question 7. How did the Sarbanes-Oxley Act strengthen auditing independence?

a. By requiring auditors to provide reports in accordance with the Foreign Corrupt Practices Act.

b. By requiring auditors to report the nature of any auditor-client disagreements to the SEC.

c. By requiring audit committees to appoint the auditors.

d. By requiring a different audit firm from the one that performs the audit to prepare the client's tax return.

Question 8. Which type of audit "... is to detect or deter fraudulent activities ..." ?

a. Compliance audit.

b. Financial audit.

c. Forensic audit.

d. Operational audit.

Question 9. Regarding audit standards issued by the ASB, which of the following words "... indicates a responsibility to comply unless the auditor decides that alternative actions are sufficient...".

a. Mandated.

b. Must.

c. May

d. Should.