ACC 403 Midterm Exam Solutions


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ACC 403 Midterm Exam Solutions

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ACC 403 Midterm Exam Solutions

 

Part 1

 

 

• Question 1
Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information for decision making is commonly called:

 

• Question 2
________ risk reflects the possibility that the information upon which the business decision was made was inaccurate.

 

• Question 3
The use of the Certified Public Accountant title is regulated by:

 

• Question 4
The Sarbanes-Oxley Act applies to which of the following companies?

 

• Question 5
Three common types of attestation services are:

 

• Question 6
The three requirements for becoming a CPA include all but which of the following?

 

• Question 7
Members of the Public Company Accounting Oversight Board are appointed and overseen by:

 

• Question 8
Assume the Public Company Accounting Oversight Board (PCAOB) identifies a violation during its inspection of a registered accounting firm. The PCAOB:

 

• Question 9
Hansen Corporation’s stock is listed on a national stock exchange and registered with the Securities and Exchange Commission. Hansen’s management hires a CPA to perform an independent audit of Hansen’s financial statements. The primary objective of this audit is to provide assurance to the:

 

• Question 10
Which of the following are audit standards used in professional practice by audit firms?

 

• Question 11
Statements on Auditing Standards issued by the AICPA’s Auditing Standards Board are:

 

• Question 12
In order to properly plan and perform an audit, an important fact for both the auditor and the client to understand is that:

 

• Question 13
The first step to be followed when deciding the appropriate audit report in a given set of circumstances is to:

 

• Question 14
As a result of management’s refusal to permit the auditor to physically examine inventory, the auditor must depart from the unqualified audit report because:

 

• Question 15
If the phrase “except for” is present in the opinion paragraph of the audit report, the auditor has issued a(n):

 

• Question 16
Under AICPA auditing standards, the primary auditor issuing the opinion on the financial statements is called the:

 

• Question 17
Whenever the client imposes restrictions on the scope of the audit, the auditor should be concerned that management may be trying to prevent discovery of misstatements. In such cases, the auditor will likely issue a:

 

• Question 18
Which of the following is least likely to cause uncertainty about the ability of an entity to continue as a going concern?

 

• Question 19
The members of a client’s “audit committee” should be:

 

• Question 20
Which of the following services are allowed by the SEC whenever a CPA also audits the company?

 

• Question 21
A six-step approach is often used to resolve an ethical dilemma. The first step in this process is to:

 

• Question 22
Under the AICPA independence rules, the auditor:

 

• Question 23
Independence is required of a CPA when performing:

 

• Question 24
When CPAs are able to maintain their actual independence, it is referred to as independence in:

 

• Question 25
The Sarbanes-Oxley Act ________ a CPA firm from doing both bookkeeping and auditing services for the same public company client.

 

 

Part 2

 

 

• Question 1
The principal issue in cases involving alleged negligence is usually:

 

• Question 2
“Absence of reasonable care that can be expected of a person in a set of circumstances” defines:

 

• Question 3
While the Foreign Corrupt Practices Act of 1977 remains in effect, its internal control provisions have been largely superseded by which of the following?

 

• Question 4
The standard of due care to which the auditor is expected to adhere to in the performance of the audit is referred to as the:

 

• Question 5
In the performance of an audit, a CPA:

 

• Question 6
The laws that have been developed through court decisions are called:

 

• Question 7
The auditor’s best defense when material misstatements are not uncovered is to have conducted the audit:

 

• Question 8
The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to:

 

• Question 9
A questioning mindset:

 

• Question 10
The posting and summarization audit objective is the auditor’s counterpart to management’s assertion of:

 

• Question 11
The concept of reasonable assurance indicates that the auditor is:

 

• Question 12
If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the:

 

• Question 13
The evaluations of financial information through analysis of plausible relationships among financial and nonfinancial data is the definition of:

 

• Question 14
Appropriateness of evidence is a measure of the:

 

• Question 15
The auditor must gather sufficient and appropriate evidence during the course of the audit. Sufficient evidence must:

 

• Question 16
When auditors use documentation to support recorded transactions and amounts, the process is usually called:

 

• Question 17
A benefit obtained from using industry averages is that it provides a(n):

 

• Question 18
When the auditor uses tracing as an audit procedure for tests of transactions she is primarily concerned with which audit objective?

 

• Question 19
Calculating the gross margin for the current year under audit as a percent of sales and comparing it with previous years is what type of evidence?

 

• Question 20
Business risk:

 

• Question 21
In making client acceptance decisions, the audit firm will consider:

 

• Question 22
If an auditor is requested to perform nonaudit services for a public company audit client, who is responsible for agreeing to those services with the audit firm?

 

• Question 23
The auditor is likely to accumulate more evidence when the audit is for a company:

 

• Question 24
Most auditors assess inherent risk as high for related parties and related-party transactions because:

 

• Question 25
The two major factors affecting acceptable audit risk are:

 

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