Instant Download with all chapters and Answers
Sample Chapters
*you will get test bank in PDF in best viewable format after buy*
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers
the question.
1) One of the main advantages of a “big” public accounting firm is 1) _______
A) the increased reliance that can be placed on the audit report by
financial statement users.
B) the lower professional fees due to economies of scale.
C) the ability to serve all major international cities as globalization of
businesses increases.
D) the ability to share knowledge and experience of similar
companies they audit with the client.
2) The most common organizational form used by public accounting firms
is
2) _______
A) corporation.
B) sole proprietorship or partnership.
C) co-operative.
D) professional corporation.
3) The professional accounting organization for Canadian Chartered
Accountant is the
3) _______
A) CICA B) ISACA C) SMAC D) CA
4) When the criteria to be used in the financial statement audit is
established, the auditor’s responsibility is to
4) _______
A) evaluate the framework.
B) select the acceptable financial reporting framework.
C) creating and documenting the framework.
D) make a recommendation to management for selecting the
framework.
5) Starting December 15, 2009, audits will be conducted using the CAS.
The reason for adopting the CAS is to
5) _______
A) respond to the increased litigation risks faced by the auditors.
B) to simplify the auditing process.
C) comply with the requirement from the Canada Business
Corporations Act.
D) be consistent with the international standards of auditing.
6) The implementation of the Sarbanes-Oxley requirements in the US
resulted in increased independence requirements for the auditors. The
impact of this requirement in Canada was
6) _______
A) creation of the CPAB to oversee Canadian audit professionals.
B) modification of the type of opinion provided in an assurance
engagement by the auditor.
C) additional training requirements to become an auditor.
D) revisions of the rules of professional conduct for CAs and CGAs.
7) The implementation of the Sarbanes-Oxley requirements in the US
resulted in the creation of the PCAOB to oversee listed companies’
auditors and develop audit standards. The impact of this requirement
in Canada was the
7) _______
A) creation of new auditing standards to ensure better quality control
of the audit.
B) creation of the CPAB to oversee Canadian audit professionals.
C) additional training requirements to become an auditor.
D) revisions of the rules of professional conduct for CAs.
8) ISAs and Canadian auditing standards require that the audit be
conducted using
8) _______
A) a substantive approach. B) an independent approach.
C) a risk assessment approach. D) a standard approach.
9) The first step in the financial statement audit using a risk assessment
approach is to
9) _______
A) gather evidence to assess the likelihood of material misstatement.
B) identify risks of material misstatement.
C) assess the auditor’s independence.
D) evaluate the framework.
10) The codes of professional conduct of the various accounting bodies are
meant to
10) ______
A) provide the rules underlying the audits and related service
activities carried on by the accountants.
B) interpret the assurance recommendations and views of the AASB.
C) establish the norms for quality control of an audit.
D) provide a standard of conduct for members who are in public
practice.
11) The general standard indicated that performance of all aspects of
auditing should be performed with due care. This means that the
auditor must fulfill his duties
11) ______
A) to the satisfaction of the client.
B) carefully and in a timely manner.
C) in accordance with the CAS.
D) diligently and carefully.
12) Adequate technical training and proficiency in auditing is a requirement
of which generally accepted auditing standard?
12) ______
A) Reporting B) Examination
C) Quality D) General
13) Identifying management’s responsibility for the financial statements is a
requirement of which generally accepted auditing standard?
13) ______
A) Reporting B) General
C) Examination D) Quality
14) Adequate planning and execution to reduce risk to an acceptable level is
a requirement of which generally accepted auditing standard?
14) ______
A) Quality B) Examination
C) Reporting D) General
15) Jessica is a summer junior at Branes & Castle, a PA firm. Jessica has
only completed 3 accounting courses in university and has not yet taken
her
aud
iting
class.
A team
of
auditors
from
Branes &
Castle
are
starting
the audit
and
Jessica
was sent
to help
them.
Jessica
15) ___
___
A) can perform work for the audit engagement as long as she is
supervised and proper review of her work is performed.
B) can perform work for the audit engagement on cycles where risk
was assessed as low.
C) should be limited to assisting the audit team with support
functions such as photocopies and file assembly.
D) should not perform any work pertaining to the audit engagement
since she doesn’t have sufficient knowledge.
16) The most authoritative requirements for public accountants performing
financial statement audits in Canada are the
16) ______
A) assurance guildelines.
B) CICA handbook requirements.
C) industry specific standards.
D) standards used by the client.
17) When conducting an audit, the auditor should look at GAAS as 17) ______
A) practical standards of performance.
B) minimum standards of performance.
C) ultimate standards of performance.
D) normal standards of performance.
18) A PA firm has an organizational structure that assures the technical
review of every engagement by a partner who has expertise in the
client’s industry. This is an example of good
18) ______
A) business risk management.
B) entity level controls.
C) adherence to the professional standards.
D) quality controls.
19) Steve is the partner in charge of the quality control review of the audit
file of Xtron. To comply with CSQC-1, Steve should perform the quality
control review
19) ______
A) before the audit opinion is issued.
B) before the financial statements are filed with the securities
commission.
C) at the beginning of the audit.
D) before the end of the field work.
20) CPAB’s purpose is to 20) ______
A) develop auditing standards.
B) clarify and communicate the role of the auditor to the public.
C) improve the public’s confidence in independent auditing.
D) provide training and continuing education to auditors.
21) Gary West is a sole practitioner. He has conducted the audit of Reggie’s
Farm for the past 12 years. In the current year, Reggie’s Farm expanded
by acquiring two other farms, installed a new accounting system and
also started to export to the United States. Gary accepted to perform the
audit of Reggie’s Farm for the upcoming year even if he has no
experience with exportations to the US or companies of the size of
Reggie’s Farm. Which element of quality control is compromised for
Gary’s firm?
21) ______
A) General ethical requirements
B) Extent of professional development
C) Client acceptance or continuance
D) Independence
22) Farah is currently auditing Software Synx, a public company. After a
long day of work, Farah goes for a drink with her friend John who
mentions that he owns shares of Software Synx. Farah indicates that
John should hold on to his shares as they will go up next week when the
financial statements are released and show an increase of 12% for
revenues. Which element of quality control is compromised by Farah?
22) ______
A) Independence
B) General human resource policies
C) General ethical requirements
D) Engagement performance
23) Dimitri works at a large public accounting firm. Dimitri referred one of
his friend for a junior auditor position. Dimitri’s friend was hired
despite the fact that he had a criminal record dating from 3 years ago.
The partner did not perform a background check on Dimitri’s friend
since he was recommended by an employee. Which element of quality
control is compromised?
23) ______
A) Independence
B) Engagement performance
C) General human resource policies
D) General ethical requirements
24) Stafford & Sandiford is a Public Accounting firm with 30 reporting
issuers. Stafford & Sandiford can expect to be inspected by the CPAB
24) ______
A) once every 5 years. B) once per year.
C) randomly. D) once every 3 years.
25) Securities regulations in Canada are ruled by 25) ______
A) national securities commission.
B) office of the auditor general of Canada.
C) the professional accounting organizations.
D) provincial securities commission.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
26) What are the three main factors that influence the organizational structure of all
Public Accounting firms?
27) The CICA is the professional accounting organization for Chartered Accountants
(CAs). Describe the role and responsibilities of the organization in serving its
members.
28) For each of the following situation, explain what element of the profession or society
encourages the public accountant to conduct himself at high level.
A) Marco attended a seminar on the topic of business combinations to ensure he was
up to date with the new standard.
B) Barbara referred to the standard on hedging to ensure that her client had the
appropriate documentation to qualify for hedge accounting.
C) Gretchen refused to perform the audit of her uncle’s restaurant chain.
D) Walid worked overtime all week to ensured that the file was properly
documented and met the quality control requirements.
E) Sarah took the summer off to study for the Uniform Final Examination (UFE) to
ensure that she would pass the entrance exam to become a chartered accountant.
29) The generally accepted auditing standards can be divided in three categories of
standards. List the three categories.
30) GAAS and the Assurance and Related Services Recommendations are the
authoritative auditing pronouncements for members of the profession.
A) It is said that GAAS and Assurance Related Services Recommendation provide
less direction to auditors than might be assumed. Explain what are some of the
areas where direction might not be provided.
B) Explain the positive and negative aspects of having less directed standards and
recommendations.
1) C
2) B
3) A
4) A
5) D
6) D
7) B
8) C
9) B
10) D
11) D
12) D
13) A
14) B
15) A
16) B
17) B
18) D
19) A
20) C
21) C
22) C
23) C
24) D
25) D
26) 1. The need for independence from clients. Independence permits auditors to remain
unbiased in drawing conclusions about their client’s financial statements.
2. The importance of a structure to encourage competence. The ability of the structure to
encourage competence permits auditors to conduct audits and perform other services
efficiently and effectively.
3. The increased litigation risk faced by auditors. In the last decade, firms have
experienced increases in litigation-related costs. Some organizational structures afford a
degree of protection to individual firm members.
27) Research and Publication: The CICA publishes the CA Magazine along with accounting
and auditing research studies. The CICA also coordinates the UFE exam.
Continuing Education: The order provides courses, seminars and on-line material to
update their members on a variety of topics relating to accounting and auditing. The order
also established six specific specializations for their members.
Establishing standards and rules: The order sets accounting and auditing standards that
must be followed by public accountants.
28) A) Continuing Education
B) CICA Handbook
C) Rules of professional conduct
D) CPAB review and quality control
E) Professional examination.
29) 1. General qualifications and conduct
2. Examination performance of the audit
3. Reporting results
30)
A) Some of the areas where direction is not provided include:
– almost no specific audit procedures are required
– there are no specific requirements for auditor’s decisions to
– determine sample size
– select sample items from population
– evaluate the results.
– no clearly defined guidelines for determining the extent of audit evidence to be accumulated.
B) If the standards were more directed, it would eliminate some difficult audit decisions and provide a
line of defence for a public accounting firm charged with conducting an inadequate audit.
However, highly specific requirements could turn auditing into mechanistic evidence gathering without
the auditor’s professional judgement. The audit would be less responsive to the risks identified for a
particular client.
