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Questions
Q:
The external auditor is required to make a number of important communications to the audit committee during or at the end of the audit engagement.
Q:
The audit committee is directly responsible for the appointment, compensation, and oversight of the work of any accounting firm employed by a public company.
Q:
All companies must have an audit committee.
Q:
If the internal audit function is competent and objective, the auditor may generally rely on the work of an internal audit function in certain areas to reduce the amount of external audit work in these areas.
Q:
In order to properly preplan the audit, the auditor must determine the engagement team requirements and ensure the independence of the audit team and audit firm.
Q:
If the prospective client refuses to allow the predecessor auditor to communicate with the successor auditor, the successor auditor should have reservations about accepting the client.
Q:
The Code of Professional Conduct does not allow an auditor to disclose confidential client information without the client's consent.
Q:
When the prospective client has previously been audited, auditing standards require that the successor auditor make certain inquiries of the predecessor auditor before accepting the engagement.
Q:
The first phase of audit planning is risk assessment.
Q:
Jane Goodperson performed an audit on the Quagmire Corporation and issued an unqualified opinion. Jane performed the audit with due professional care and in accordance with generally accepted auditing standards. Two months after the report is issued, Jane discovers on the news that the CEO of Quagmire, Johnny Best, had been stealing small amounts of inventory. The amount, however, is immaterial compared to the overall inventory of the corporation. Jane soon receives a call from Quagmire's CFO, Mark Beastly. Mark wants Jane to refund her audit fees. Mark thinks Jane did not properly perform the audit, as she did not discover this fraud. Further, he feels that now Quagmire's financial statements are not fairly stated because of Jane. How should Jane respond to this claim?
Q:
What are the three PCAOB auditing standards found within the 10 GAAS (NOT the three main categories of GAAS) and why is each important?
Q:
The principles underlying an audit conducted in accordance with generally accepted auditing standards are grouped into four categories. The second category is that of "personal responsibility of the auditor." Generally explain what is intended by this principle.
Q:
The IAASB and the ASB have collaborated on the principles underlying an audit conducted in accordance with generally accepted auditing standards. These principles are grouped into four categories. What are the four categories?
Q:
The fourth PCAOB reporting standard requires the auditor's report to contain either an expression of opinion regarding the financial statements taken as a whole or an assertion to the effect that an opinion cannot be expressed. The objective of the fourth standard is to prevent
A. An auditor from reporting on one basic financial statement and not the others.
B. An auditor from expressing different opinions on each of the basic financial statements.
C. Management from reducing its final responsibility for the basic financial statements.
D. Misinterpretations regarding the degree of responsibility the auditor is assuming.
Q:
The three PCAOB standards of fieldwork are concerned with
A. Planning and supervision and understanding the auditee's internal control system.
B. Choosing evidence with due professional care.
C. Adequate training to understand the auditee's internal controls system.
D. Ensuring consistency in financial statements for periods presented.
Q:
The fourth PCAOB standard of reporting requires an auditor to render a report whenever an auditor's name is associated with financial statements. The overall purpose of the fourth standard of reporting is to require that reports
A. State that the examination of financial statements has been conducted in accordance with generally accepted auditing standards.
B. Indicate the character of the auditor's examination and the degree of responsibility assumed by the auditor.
C. Imply that the auditor is independent in fact as well as in appearance with respect to the financial statements under examination.
D. Express whether the accounting principles used in preparing the financial statements have been applied consistently in the period under examination.
Q:
Which of the following best describes what is meant by generally accepted auditing standards?
A. Audit assertions generally determined on audit engagements.
B. Acts to be performed by the auditor.
C. Standards of quality for the auditor's performance.
D. Procedures to be used to gather evidence to support financial statements.
Q:
The four PCAOB standards of reporting are concerned with all of the following except
A. The presentation of the financial statements based on GAAS.
B. The presentation of the financial statements based on GAAP.
C. Whether principles are consistently applied, whether all informative disclosures have been made, and the degree of responsibility the auditor is taking.
D. The degree of responsibility the auditor is taking.
Q:
Which of the following best describes the role of corporate governance?
A. Management decides which accounting principles are the most appropriate.
B. Shareholders vote to decide who should be members of the board of directors.
C. Holding the management team accountable to shareholders and other constituents for the utilization of the entity's resources.
D. Management often is compensated based on the company's profitability.
Q:
Due professional care requires
A. Auditors to plan and perform their duties with the skill and care that is commonly expected of accounting professionals.
B. The examination of all available corroborating evidence.
C. The exercise of error-free judgment.
D. A study and review of internal controls that includes tests of controls.
Q:
Which of the following statements regarding the PCAOB is incorrect?
A. It is a public-sector, nonprofit corporation.
B. It is overseen by the SEC.
C. It sets standards for public company audits.
D. It has delegated all of its standard-setting authority to the AICPA.
Q:
Which of the following is not explicitly a part of the IIA's definition of internal auditing?
A. Internal auditing is an objective assurance activity.
B. Internal auditing is a consulting activity.
C. Internal auditing should help an organization accomplish its objectives.
D. Internal auditors should help external auditors complete the annual financial statement audit.
Q:
Which of the following is not included in the broad category of assurance services?
A. Operational audit.
B. Reporting on internal control.
C. Accounting or review services.
D. Evaluation of the auditee's risk management framework.
Q:
An internal auditor is likely to be more concerned with _________________ than the external auditor.
A. Internal administrative procedures
B. Cost accounting procedures
C. The efficiency of operations
D. Internal control
Q:
The objective of the second PCAOB Standard of Reporting is to provide assurance that
A. There are no variations in the format and presentation of financial statements.
B. Substantially different transactions and events are not accounted for on an identical basis.
C. The auditor is consulted before material changes are made in the application of accounting principles.
D. The comparability of financial statements between periods is not materially affected by changes in accounting principles that are not disclosed.
Q:
Due professional care requires auditors to
A. Obtain independent, third party (non-auditee) documentation as evidence for all information presented in the financial statements.
B. Exercise professional skepticism during the audit.
C. Disregard any evidence generated by the auditee during the audit.
D. Find every error contained in the financial statements prepared by management.
Q:
The AICPA's Statements on Auditing Standards can be described as
A. Providing very specific guidance about the specific activities an auditor must perform on each engagement.
B. Similar to financial accounting standards in that they are developed by the government.
C. Defining the minimum standards of performance for an auditor.
D. Providing assurance that an auditor will not issue an incorrect opinion.
Q:
The main difference between SAS and AU is
A. They are the same except that SAS are organized chronologically and the AU are organized by topical area.
B. SAS are issued by the ASB and AU are issued by the PCAOB.
C. SAS are issued by the PCAOB and AU are issued by the ASB.
D. SAS define minimum standards of performance for auditors while AU define financial accounting principles that must be followed according to GAAP.
Q:
The first PCAOB general standard recognizes that regardless of how capable an individual may be in other fields, the individual cannot meet the requirements of the auditing standards without the proper
A. Business and finance courses.
B. Quality control and peer review.
C. Education and experience in auditing.
D. Supervision and review skills.
Q:
The three PCAOB general standards are concerned with
A. Adequate training and proficiency of the auditor, proper planning and supervision, and due professional care.
B. Adequate training and independence.
C. Due professional care.
D. Independence, adequate training and due professional care.
Q:
Who bears ultimate responsibility for the financial statements?
A. Management of the organization, equally with the external auditor that audits the statements.
B. Management and the shareholders of the organization.
C. The external auditor that audits the statements.
D. Management of the organization.
Q:
A CPA is most likely to refer to one or more of the three PCAOB general auditing standards in determining
A. The nature of the CPA's report qualification.
B. The scope of the CPA's auditing procedures.
C. Requirements for the review of the entity and its environment.
D. Whether the CPA should undertake an audit engagement.
Q:
Which of the following is NOT a requirement of the Sarbanes-Oxley Act?
A. Audit firms cannot provide most types of nonaudit services to their public company auditees.
B. Audit firms are required to rotate audit partners off audit engagements every five years for public company audits.
C. Firms that audit public companies are subject to inspection by the PCAOB.
D. A certain number of hours, which is based on the size of the company being audited, must be spent on each audit engagement.
Q:
What is the general character of the work conducted in performing a forensic audit for a company?
A. Providing assurance that the financial statements are not materially misstated.
B. Detecting or deterring fraudulent activity.
C. Offering an opinion on the reliability of the specific assertions made by management.
D. Identifying the causes of an entity's financial difficulties.
Q:
Which is not an attribute of an external auditor?
A. Independence.
B. Auditee advocacy.
C. Objectivity.
D. Concern for the public interest.
Q:
External auditors are referred to as "external" because
A. They report to users outside of the audited entity.
B. They are paid by parties outside of the audited entity.
C. They are not employees of the entity being audited.
D. Their offices are not at the entity's place of business.
Q:
Governmental auditing often extends beyond examinations leading to the expression of an opinion on the fairness of financial presentation and includes audits of efficiency, effectiveness, and
A. Monetary stimulus.
B. Evaluation.
C. Accuracy.
D. Compliance.
Q:
A typical objective of an operational audit is for the auditor to
A. Determine whether the financial statements present fairly the entity's operations.
B. Evaluate the feasibility of attaining the entity's operational objectives.
C. Make recommendations for improving performance.
D. Report on the entity's relative success in attaining profit maximization.
Q:
Forensic audits include all of the following except
A. Criminal investigations.
B. Manufacturers' assertions about product quality.
C. Employee fraud.
D. Management fraud.
Q:
Which of the following best describes the concept of risk assessment on which auditors can provide independent assurance?
A. The risk that financial statements are misstated because of fraud.
B. The risk that financial statements are misstated because of error or fraud.
C. Whether management has systems in place to evaluate and effectively manage the entity's business risks.
D. Developing client acceptance and continuance practices that minimize the likelihood of lawsuits against the auditor.
Q:
An "in-charge" auditor typically holds the rank of
A. Associate.
B. Senior.
C. Manager.
D. Partner.
Q:
Typically, an external auditor first gets supervisory experience at what level of authority?
A. Associate.
B. Senior.
C. Manager.
D. Partner.
Q:
_____ are people who live and work in a country other than their native country.
Q:
_____ is the effects of work and family on one another that generate similarities between the two domains.
Q:
The barriers to upward mobility in organizations are commonly called the _____.
Q:
_____ is being careful not to offend or slight anyone with our behavior.
Q:
_____ is the term often used to refer to discrimination based on a person's sexual orientation.
Q:
The _____ gives equal access to employment, transportation, and buildings to millions of people in the United States with disabilities.
Q:
Employers are required by law to make reasonable accommodations for employees' religious beliefs, without _____ on the employer.
Q:
Equal Employment Opportunity (EEO) laws prohibit job discrimination on the basis of race, color, national origin, and religion unless discrimination stems from a _____.
Q:
_____ is information that does not relate to a bona fide occupational qualification for the job.
Q:
The act called _____ prohibits discrimination based on physical or mental disability.
Q:
Describe the steps in the complaint model.
Q:
State the seven areas of global diversity.
Q:
List some work-life benefits being offered by organizations.
Q:
What is sexism? Explain ways to overcome it.
Q:
Describe sexual harassment as defined by the Equal Employment Opportunity Commission (EEOC).
Q:
List some of the minorities that are legally protected by the Equal Employment Opportunity Commission (EEOC).
Q:
What is a bona fide occupational qualification and what are affirmative action programs? State the major rules of thumb to follow when asking questions during interviews.
Q:
State a few federal employment laws on compensation and benefits.
Q:
Distinguish between prejudice and discrimination. List common areas of employment discrimination.
Q:
Consider the statement, "With the global economy, people around the world are becoming more and more alike, so why be concerned about diversity?" Do you agree? Should organizations conduct diversity training?
Q:
The percentage of married people has declined over the years due to divorce and people living together. Also, male and female roles have changed. Do these trends help or hurt society?
Q:
The traditional family hasn't been the norm for several years. Instead, it is being overtaken by dual-income earners and single parents. Are we better off today, or should we return to the traditional family?
Q:
Consider the statement, "Sexist and racist jokes are just meant to be funny and no one gets hurt anyway." Do you agree?
Q:
Only a small percentage of Fortune 500 companies have female CEOs. One solution to increase the number of women CEOs would be to have co-CEOs, one male and one female. Do you think this would work? Do you have any other ideas on how to break the glass ceiling?
Q:
Do you agree that people who work together can date? How might dating lead to sexual harassment? Should organizations have policies about employee dating? If they have policies, what should the policies include?
Q:
Do you feel comfortable being around people with disabilities? Should organizations make special efforts to hire individuals who are disabled? Are organizations that hire workers with disabilities just being socially responsible, or are the workers productive?
Q:
Some companies and jobs have a mandatory retirement age. Should the government pass a law stating a mandatory retirement age?
Q:
Should religious people be given breaks and a special place to pray during their work time?
Q:
Do we really need laws to get organizations to give equal opportunities to all? Should the current employment laws be changed? How?
Q:
Clearly, women and minorities were held back from employment opportunities in the past. So shouldn't we give them special consideration today (like giving them jobs when they are qualified even though there are better qualified white males)? Should we be increasing or decreasing affirmative action programs?
Q:
Identify a complaint you brought to a supervisor. If you have never complained, interview someone who has. State the complaint and identify the steps in the complaint model the supervisor did and/or did not follow.
Q:
Have you experienced any cultural differences in human relations with others? If so, explain.
Q:
How do you feel about having a female boss? Why?
Q:
What are your views on dating coworkers? Have you dated coworkers, or will you date coworkers in the future?
Q:
How do you feel about the fact that certain groups are legally protected against discrimination?
Q:
Have you, or has anyone you know, been sexually harassed? If so, describe the situation(s) (use language acceptable to everyone).
Q:
How would you feel about working with a person who has AIDS? Why?
Q:
How do you feel about drug testing by employers? Why do you feel this way?