ACCT 555 Week 1 Homework
2-16 (Objective 2-6)
The following questions deal with auditing standards. Choose the best response.
- International Standards on Auditing are established by the
- Which of the following best describes what is meant by U.S. generally accepted auditing standards?
- The general group of U.S. generally accepted auditing standards includes a requirement that
- What is the general character of the three generally accepted auditing standards classified as standards of field work?
2-17 (Objective 2-7)
The following questions concern quality control standards. Choose the best response.
- A CPA firm is reasonably assured of meeting its responsibility to provide services that conform with professional standards by
- The nature and extent of a CPA firm’s quality control policies and procedures depend on
- Which of the following are elements of a CPA firm’s quality control that should be considered in establishing its quality control policies and procedures?
- One purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to
2-19 (Objective 2-7)
For each of the following procedures taken from the quality control manual of a CPA firm, identify the applicable element of quality control from Table 2-4 on page 38.
- Appropriate accounting and auditing research requires adequate technical reference materials. Each firm professional has online password access through the firm’s Internet Web site to electronic reference………
- Each office of the firm shall be visited at least annually by review persons selected by the director of accounting and auditing…….
- All potential new clients are reviewed before acceptance. The review includes consultation with predecessor auditors, ……..
- Each audit engagement must include a concurring partner review of critical audit decisions.
- Audit engagement team members enter their electronic signatures in the firm’s engagement management software…….
- At all stages of any engagement, an effort is made to involve professional staff at appropriate levels in the accounting and auditing decisions……….
- No employee will have any direct or indirect financial interest, association, or relationship (for example, a close relative serving a client in a decision-making capacity) not otherwise disclosed that might be adverse to the firm’s best interest.
- Individual partners submit the nominations of those persons whom they wish to be considered for partner. To become a partner, an individual must have exhibited a high degree of technical competence; must possess integrity, motivation, and judgment; and must have a desire to help the firm progress through the efficient dispatch of the job responsibilities to which he or she is assigned.
- Through our continuing employee evaluation and counseling program and through the quality control review procedures as established by the firm…………
- The firm’s mission statement indicates its commitment to quality, and this commitment is emphasized in all staff training programs.
2-20 (Objectives 2-2, 2-3, 2-6)
The Howard Mobile Home Manufacturing Company is audited by Olson and Riley, CPAs. Howard Mobile Home has decided to issue stock to the public and wants Olson and Riley to perform all the audit work necessary to satisfy the requirements for filing with the SEC. Olson and Riley has never had a client go public before.
- What factors should Olson and Riley consider before accepting the engagement?
- List additional issues confronting auditors of companies that file with the SEC as compared to dealing with a private company audit client.
3-23 (Objectives 3-1, 3-2, 3-3, 3-4, 3-8)
The following questions concern unqualified audit reports. Choose the best response.
- Which of the following statements about a combined report on the financial statements and internal control over financial reporting is correct?
- The date of the CPA’s opinion on the financial statements of the client should be the date of the
- If a principal auditor decides to refer in his or her report to the audit of another auditor, he or she is required to disclose the
- 3-25(Objectives 3-5, 3-7, 3-8)
The following questions concern audit reports other than unqualified audit reports with standard wording. Choose the best response.
- The annual audit of Midwestern Manufacturing revealed that sales were accidentally being recorded as revenue when the goods were ordered, instead of when they were shipped. Assuming the amount in question is material and the client is unwilling to correct the error, the CPA should issue:
- Under which of the following circumstances would a disclaimer of opinion not be appropriate?
- The opinion paragraph of a CPA’s report states: “In our opinion, except for the effects of not capitalizing certain lease obligations, as discussed in the preceding paragraph, the financial statements present fairly,” in all material respects,… This paragraph expresses a(an)
3-26 (Objectives 3-1)
A careful reading of an unqualified report indicates several important phrases. Explain why each of the following phrases or clauses is used rather than the alternative provided:
- “The financial statements referred to above present fairly in all material respects the financial position” rather than “The financial statements mentioned above are correctly stated.”
- “In conformity with accounting principles generally accepted in the United States of America” rather than “are properly stated to represent the true economic conditions.”
- “In our opinion, the financial statements present fairly” rather than “The financial statements present fairly.”
- “Brown & Phillips, CPAs (firm name),” rather than “James E. Brown, CPA (individual partner’s name).”
- “We conducted our audit in accordance with auditing standards generally accepted in the United States of America” rather than “Our audit was performed to detect material misstatements in the financial statements.”