Instant Download with all chapters and Answers
Sample Chapters
*you will get test bank in PDF in best viewable format after buy*
Chapter 2 The Public Accounting Profession and Audit Quality
2.1 Describe the public accounting industry
1) One of the main advantages of a “big” public accounting firm is
A) their lower professional fees due to economies of scale.
B) their ability to share with the client knowledge and experience from similar companies they
have audited.
C) their ability to audit nearly all the largest companies worldwide.
D) the increased reliability of their audit reports.
Answer: C
Diff: 2 Type: MC Page Ref: 27
Learning Obj.: 2-1 Describe the public accounting industry
2) National accounting firms in 2013 were those with
A) offices in most major cities and revenues over $100 million.
B) international representation in most cities around the world.
C) offices in all major cities in Canada and revenues over $75 million.
D) national and international affiliations providing services in all major centres.
Answer: A
Diff: 3 Type: MC Page Ref: 27
Learning Obj.: 2-1 Describe the public accounting industry
3) Approximately how many public accounting firms in Canada have more than 50 professional
staff?
A) 25
B) 50
C) 75
D) 100
Answer: B
Diff: 3 Type: MC Page Ref: 28
Learning Obj.: 2-1 Describe the public accounting industry
4) What is the size of most public accounting firms in Canada?
A) fewer than 25 employees
B) between 25 and 49 employees
C) between 50 and 75 employees
D) more than 75 employees
Answer: A
Diff: 3 Type: MC Page Ref: 28
Learning Obj.: 2-1 Describe the public accounting industry
Test Item File for Arens, Auditing, 13CE 2-2
Copyright © 2016 Pearson Education, Inc.
5) The most common organizational form used by public accounting firms is
A) sole proprietorship or partnership.
B) professional corporation.
C) corporation.
D) co-operative.
Answer: A
Diff: 1 Type: MC Page Ref: 28
Learning Obj.: 2-1 Describe the public accounting industry
6) Large accounting firm are often limited liability partnerships (LLPs) because of their audits
are conducted in accordance with GAAS,
A) partners not on the engagement would not be liable on their personal assets.
B) improved quality control practices can be initiated using technical personnel.
C) more formal requirements are in place when reporting to federal tax authorities.
D) partners are liable for only a limited portion of their personal assets when sued.
Answer: A
Diff: 3 Type: MC Page Ref: 28-29
Learning Obj.: 2-1 Describe the public accounting industry
7) Most international and national accounting firms in Canada are comprised of professional
accountants with the designation
A) CIA.
B) CPA.
C) CFE.
D) CISA.
Answer: B
Diff: 2 Type: MC Page Ref: 29
Learning Obj.: 2-1 Describe the public accounting industry
8) What are the staff levels and responsibilities at Public Accounting firms?
Answer:
1. Partner – Leads the engagement, reviews the overall audit work, and is involved in
significant
audit decisions. A partner has the ultimate responsibility for conducting the audit and
maintaining client relations.
2. Senior manager – Leads the engagement and reviews the team”s work. Works directly with
the partner and assists in client relationship.
3. Manager – Helps the in-charge plan and manage the audit, reviews the in-charges work, and
manages relations with the client. A manager may be responsible for more than one
engagement at the same time.
4. Senior or in-charge auditor – Coordinates and is responsible for the audit field work,
including supervising and reviewing staff work.
5. Staff accountant – Performs most of the detailed audit work.
Diff: 2 Type: ES Page Ref: 28
Learning Obj.: 2-1 Describe the public accounting industry
Test Item File for Arens, Auditing, 13CE 2-3
Copyright © 2016 Pearson Education, Inc.
9) What are the different business organization structures that an accountant may use? What are
the advantages of these structures?
Answer: Accountants may establish a sole proprietorship, a partnership, a limited liability
partnership, or a limited liability corporation. The latter two structures are permitted only in
certain provinces, based upon provincial legislation.
Advantages:
A sole proprietorship is the only choice if there is only one PA. It is a simple business structure.
A partnership is used to allocate income to all partners and helps ensure that all partners are
responsible for the actions of the organization.
A limited liability partnership (or limited liability corporation) is used to limit liability to only
those partners who worked on or supervised a particular engagement. This helps protect the
personal assets of partners.
Diff: 2 Type: ES Page Ref: 28-29
Learning Obj.: 2-1 Describe the public accounting industry
2.2 Identify the organizations that affect the public accounting profession and their role
1) The Canada Business Corporation Act gave authority to Canadian accounting and auditing
standard-setters by stating that financial statements
A) must be compiled in accordance with International Financial Reporting Standards.
B) should be prepared in accordance with the standards in the CPA Canada Handbook.
C) must be audited by accountants that reside in Canada.
D) should be prepared in accordance with local financial reporting standards.
Answer: B
Diff: 2 Type: MC Page Ref: 30-31
Learning Obj.: 2-2 Identify the organizations that affect the public accounting profession and
their role
2) When the criteria to be used in the financial statement audit is established, the auditor’s
responsibility is to
A) evaluate the reporting framework used.
B) select the acceptable financial reporting framework.
C) make a recommendation to management for selecting the framework.
D) create and document the framework used.
Answer: A
Diff: 2 Type: MC Page Ref: 35
Learning Obj.: 2-2 Identify the organizations that affect the public accounting profession and
their role
Test Item File for Arens, Auditing, 13CE 2-4
Copyright © 2016 Pearson Education, Inc.
3) The reason for adopting the CASs is to
A) comply with requirements in the Canada Business Corporations Act.
B) respond to the increased litigation risks faced by auditors.
C) be consistent with the international standards of auditing.
D) simplify the auditing process.
Answer: C
Diff: 2 Type: MC Page Ref: 34-35
Learning Obj.: 2-2 Identify the organizations that affect the public accounting profession and
their role
4) The implementation of the Sarbanes-Oxley requirements in the U.S. resulted in the creation
of the PCAOB to oversee listed companies’ auditors and develop audit standards. The impact of
this requirement in Canada was
A) the creation of new auditing standards to ensure better quality control for audits.
B) revision to the rules of professional conduct for CPAs.
C) additional training requirements for becoming an auditor.
D) the creation of the CPAB to oversee Canadian audit professionals.
Answer: D
Diff: 3 Type: MC Page Ref: 31
Learning Obj.: 2-2 Identify the organizations that affect the public accounting profession and
their role
5) The implementation of the Sarbanes-Oxley requirements in the U.S. resulted in increased
independence requirements for auditors. The impact of this requirement in Canada was
A) the creation of the CPAB to oversee Canadian audit professionals.
B) revisions to the rules of professional conduct for CPAs.
C) additional training requirements for becoming an auditor.
D) modification
