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Multiple Choice
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1

Which of the following is not associated with the 2002 Sarbanes-Oxley Act passed by Congress?
A)The creation of the Public Company Accounting Oversight Board.
B)A change in the authority for establishing audit standards for public companies.
C)Restrictions on many types of consulting services for audit clients.
D)The creation of internal audit departments at all public companies.
2

Independent auditing can best be described as:
A)A discipline that attests to the results of accounting and other functional operations and data.
B)A professional activity that measures and communicates financial and business data.
C)A regulatory function that prevents the issuance of improper financial information.
D)A branch of accounting.
3

What role does the auditor play in terms of agency theory?
A)Stewardship.
B)Verifier.
C)Monitor.
D)Principal.
4

Which of the following best represents the term "assurance domain"?
A)Internal and external auditors.
B)Financial statement audits.
C)Areas where auditors can provide services.
D)Professional auditing standards.
5

What is the main difference between audit and attest services?
A)Audits result in a written report whereas attest services do not.
B)Audits examine assertions about subject matter whereas attest services do not.
C)Audits are limited to economic events or actions whereas attest services are not.
D)Audits require the accountant to gather evidence whereas attest services do not.
6

The demand for assurance for financial statement users is similar to that of a potential home buyer that hires a home inspector in that:
A)The buyer [or user] pays directly for this assurance in both situations.
B)There is often information asymmetry and conflicts of interest present.
C)The cost of obtaining information is not relevant.
D)Independence is not necessary in either situation.
7

Which of the following audit phases would generally be conducted last in relation to the others?
A)Auditing business processes and related accounts.
B)Preliminary assessment of materiality and audit risk.
C)Preliminary analytical procedures [e.g. ratio analysis].
D)Consideration of internal control systems.
8

Arthur Anderson, one of the "Big 5" international accounting firms, failed in 2002 primarily as a result of:
A)Poor cash flow management.
B)Admitting too many partners into the firm during the 1990's.
C)Lost reputation and SEC sanctions associated with the Enron collapse.
D)Gross negligence associated with the audit of WorldCom.
9

The fact that errors and/or omissions in certain account balances would not affect an auditor's decision when reporting on the financial statements as a whole relates most closely to which major audit concept:
A)Materiality
B)Audit risk
C)Management assertions
D)Reasonable assurance
10

Since the examination of all of a client's transactions would make an audit cost prohibitive, auditors rely heavily on sampling as a way to obtain evidence. Which of the following would result in a larger sample?
A)An increase in the materiality level.
B)An increase in acceptable audit risk.
C)A decrease in the size of the population.
D)A decrease in the materiality level.





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