Auditing and Assurance Services by Alvin a

Arens 15th Edition Test Bank

Contact me here sellertbsm2014@hotmail.com to
download the test bank INSTANTLY!!!
PRICE FOR THE TEST BA!" SO#$TIO %A$A#
A& BOO! P&F'
Test Ba() 20* $S&
Sol+tio( %a(+al 20* $S&
Boo! P&F ,0* $S&

T h i s i s a s a m p l e c h a p t e r
Auditing and Assurance Services, 15e (Arens)
Chapter 1 The Demand for Audit and Other Assurance Services
#ear(i(- Ob.ecti/e 101
11 The Sarba(es0O2le3 Act a44lies to 5hich o6 the 6ollo5i(- com4a(ies7
A1 All com4a(ies
B1 Pri/atel3 hel8 com4a(ies
C1 P+blic com4a(ies
&1 All 4+blic com4a(ies a(8 4ri/atel3 hel8 com4a(ies 5ith assets -reater tha( *900 millio(
A(s5er' C
Terms' Sarba(es0O2le3 Act
&i66' Eas3
Ob.ecti/e' #O 101
AACSB' Re6lecti/e thi()i(- s)ills
To4ic' SO:
21 ;hich o6 the 6ollo5i(- is co(si8ere8 a+8it e/i8e(ce7
A1
Oral stateme(ts
ma8e b3 ma(a-eme(t
;ritte(
Comm+(icatio(s
A+8itor
Obser/atio(
<
B1
Oral stateme(ts
ma8e b3 ma(a-eme(t
;ritte(
Comm+(icatio(s
A+8itor
Obser/atio(
< <
1

C1
Oral stateme(ts
ma8e b3 ma(a-eme(t
;ritte(
Comm+(icatio(s
A+8itor
Obser/atio(
< < <
&1
Oral stateme(ts
ma8e b3 ma(a-eme(t
;ritte(
Comm+(icatio(s
A+8itor
Obser/atio(
<
A(s5er' C
Terms' A+8it e/i8e(ce
&i66' %o8erate
Ob.ecti/e' #O 101
AACSB' Re6lecti/e thi()i(- s)ills
2

,1 E/i8e(ce is 4aramo+(t to a+8it a(8 attestatio( e(-a-eme(ts. #ist the 6o+r basic t34es o6 a+8it
e/i8e(ce.
A(s5er' The 6o+r t34es o6 a+8it a(8 attestatio( e/i8e(ce i(cl+8e'
1. Electro(ic a(8 8oc+me(tar3 8ata abo+t tra(sactio(s
2. ;ritte( a(8 electro(ic comm+(icatio(s 5ith o+tsi8ers
,. Obser/atio(s b3 the a+8itor
4. Oral testimo(3 o6 the a+8itee =clie(t1
Terms' Basic t34es o6 a+8it e/i8e(ce
&i66' Eas3
Ob.ecti/e' #O 101
AACSB' Re6lecti/e thi()i(- s)ills
41 The criteria b3 5hich a( a+8itor e/al+ates the i(6ormatio( +(8er a+8it ma3 /ar3 5ith the
i(6ormatio( bei(- a+8ite8.
A1 Tr+e
B1 False
A(s5er' A
Terms' Criteria 5hich a( a+8itor e/al+ates i(6ormatio(
&i66' Eas3
Ob.ecti/e' #O 101
AACSB' Re6lecti/e thi()i(- s)ills
91 The criteria +se8 b3 a( e2ter(al a+8itor to e/al+ate 4+blishe8 6i(a(cial stateme(ts are )(o5(
as -e(erall3 acce4te8 a+8iti(- sta(8ar8s.
A1 Tr+e
B1 False
A(s5er' B
Terms' Criteria +se8 b3 e2ter(al a+8itor to e/al+ate 4+blishe8 6i(a(cial stateme(ts
&i66' Eas3
Ob.ecti/e' #O 101
AACSB' Re6lecti/e thi()i(- s)ills
>1 The Sarba(es0O2le3 Act establishes sta(8ar8s relate8 to the a+8its o6 4ri/atel3 hel8
com4a(ies.
A1 Tr+e
B1 False
A(s5er' B
Terms' Sarba(es0O2le3 Act
&i66' Eas3
Ob.ecti/e' #O 101
AACSB' Re6lecti/e thi()i(- s)ills
To4ic' SO:
,

?1 The Sarba(es0O2le3 Act is 5i8el3 /ie5e8 as ha/i(- +shere8 i( s5ee4i(- cha(-es to a+8iti(-
a(8 6i(a(cial re4orti(-.
A1 Tr+e
B1 False
A(s5er' A
Terms' Sarba(es0O2le3 Act
&i66' Eas3
Ob.ecti/e' #O 101
AACSB' Re6lecti/e thi()i(- s)ills
To4ic' SO:
@1 A( a+8itor m+st be com4ete(t a(8 ha/e a( i(8e4e(8e(t me(tal attit+8e.
A1 Tr+e
B1 False
A(s5er' A
Terms' Com4ete(ce a(8 i(8e4e(8e(t me(tal attit+8e
&i66' Eas3
Ob.ecti/e' #O 101
AACSB' Re6lecti/e thi()i(- s)ills
#ear(i(- Ob.ecti/e 102
11 Recor8i(-" classi63i(-" a(8 s+mmariAi(- eco(omic e/e(ts i( a lo-ical ma((er 6or the 4+r4ose
o6 4ro/i8i(- 6i(a(cial i(6ormatio( 6or 8ecisio( ma)i(- is commo(l3 calle8'
A1 6i(a(ce.
B1 a+8iti(-.
C1 acco+(ti(-.
&1 eco(omics.
A(s5er' C
Terms' Recor8i(-" classi63i(-" a(8 s+mmariAi(- eco(omic e/e(ts
&i66' Eas3
Ob.ecti/e' #O 102
AACSB' Re6lecti/e thi()i(- s)ills
21 A( acco+(ta(t'
A1 m+st 4ossess e24ertise i( the acc+m+latio( o6 a+8it e/i8e(ce.
B1 m+st 8eci8e the (+mber a(8 t34es o6 items to test.
C1 m+st ha/e a( +(8ersta(8i(- o6 the 4ri(ci4les a(8 r+les that 4ro/i8e the basis 6or 4re4ari(- the
acco+(ti(- i(6ormatio(.
&1 m+st be a CPA.
A(s5er' C
Terms' &isti(-+ishes a+8itors 6rom acco+(ta(ts
&i66' %o8erate
Ob.ecti/e' #O 102
AACSB' Re6lecti/e thi()i(- s)ills
4

,1 I( Ba+8iti(-B 6i(a(cial acco+(ti(- 8ata" the 4rimar3 co(cer( is 5ith'
A1 8etermi(i(- 5hether recor8e8 i(6ormatio( 4ro4erl3 re6lects the eco(omic e/e(ts that
occ+rre8 8+ri(- the acco+(ti(- 4erio8.
B1 8etermi(i(- i6 6ra+8 has occ+rre8.
C1 8etermi(i(- i6 ta2able i(come has bee( calc+late8 correctl3.
&1 a(al3Ai(- the 6i(a(cial i(6ormatio( to be s+re that it com4lies 5ith -o/er(me(t reC+ireme(ts.
A(s5er' A
Terms' A+8iti(- 6i(a(cial acco+(ti(- 8ata 4rimar3 co(cer(
&i66' %o8erate
Ob.ecti/e' #O 102
AACSB' Re6lecti/e thi()i(- s)ills
41 The trait that 8isti(-+ishes a+8itors 6rom acco+(ta(ts is the'
A1 a+8itorDs abilit3 to i(ter4ret acco+(ti(- 4ri(ci4les -e(erall3 acce4te8 i( the $(ite8 States.
B1 a+8itorDs e8+catio( be3o(8 the BachelorDs 8e-ree.
C1 a+8itorDs abilit3 to i(ter4ret FASB Stateme(ts.
&1 a+8itorDs acc+m+latio( a(8 i(ter4retatio( o6 e/i8e(ce relate8 to a com4a(3Ds 6i(a(cial
stateme(ts.
A(s5er' &
Terms' &isti(-+ishes a+8itors 6rom acco+(ta(ts
&i66' Challe(-i(-
Ob.ecti/e' #O 102
AACSB' Re6lecti/e thi()i(- s)ills
91 &isc+ss the 8i66ere(ces a(8 similarities bet5ee( the roles o6 acco+(ta(ts a(8 a+8itors. ;hat
a88itio(al e24ertise m+st a( a+8itor 4ossess be3o(8 that o6 a( acco+(ta(t7
A(s5er' The role o6 acco+(ta(ts is to recor8" classi63" a(8 s+mmariAe eco(omic e/e(ts i( a
lo-ical ma((er 6or the 4+r4ose o6 4ro/i8i(- 6i(a(cial i(6ormatio( 6or 8ecisio( ma)i(-. To
4ro/i8e rele/a(t i(6ormatio(" acco+(ta(ts m+st ha/e a thoro+-h +(8ersta(8i(- o6 the 4ri(ci4les
a(8 r+les that 4ro/i8e the basis 6or 4re4ari(- the acco+(ti(- i(6ormatio(. I( a88itio("
acco+(ta(ts m+st 8e/elo4 a s3stem to e(s+re that the e(tit3Ds eco(omic e/e(ts are 4ro4erl3
recor8e8 o( a timel3 basis a(8 at a reaso(able cost.

The role o6 a+8itors is to 8etermi(e 5hether the recor8e8 i(6ormatio( 4re4are8 b3 acco+(ta(ts
4ro4erl3 re6lects the eco(omic e/e(ts that occ+rre8 8+ri(- the acco+(ti(- 4erio8. Beca+se $.S.
or i(ter(atio(al sta(8ar8s 4ro/i8e the criteria 6or e/al+ati(- 5hether 6i(a(cial i(6ormatio( is
4ro4erl3 recor8e8" a+8itors m+st thoro+-hl3 +(8ersta(8 those acco+(ti(- sta(8ar8s. I( a88itio(
to +(8ersta(8i(- acco+(ti(-" the a+8itor m+st 4ossess e24ertise i( the acc+m+latio( a(8
i(ter4retatio( o6 a+8it e/i8e(ce. It is this e24ertise that 8isti(-+ishes a+8itors 6rom acco+(ta(ts.
&etermi(i(- the 4ro4er a+8it 4roce8+res" 8eci8i(- the (+mber a(8 t34es o6 items to test" a(8
e/al+ati(- the res+lts are +(iC+e to the a+8itor.
Terms' Roles o6 acco+(ta(ts a(8 a+8itors
&i66' %o8erate
Ob.ecti/e' #O 102
AACSB' Re6lecti/e thi()i(- s)ills
9

#ear(i(- Ob.ecti/e 10,
11 EEEEEEEE ris) re6lects the 4ossibilit3 that the i(6ormatio( +4o( 5hich the b+si(ess 8ecisio(
5as ma8e 5as i(acc+rate.
A1 Clie(t acce4ta(ce
B1 I(6ormatio(
C1 B+si(ess
&1 Co(trol
A(s5er' B
Terms' Ris) that re6lects the 4ossibilit3 that i(6ormatio( +4o( 5hich b+si(ess ris) 8ecisio( 5as
ma8e
&i66' %o8erate
Ob.ecti/e' #O 10,
AACSB' Re6lecti/e thi()i(- s)ills
#ear(i(- Ob.ecti/e 104
11 A correct relatio(shi4 amo(- the a+8itor" the clie(t" a(8 the e2ter(al +sers is'
A1 ma(a-eme(t o6 a 4+blic com4a(3 hires the i(8e4e(8e(t a+8itor.
B1 the a+8it committee o6 a 4ri/ate com4a(3 hires the i(8e4e(8e(t a+8itor.
C1 the clie(t 4ro/i8es ca4ital to the e2ter(al +sers.
&1 the e2ter(al +sers ca( rel3 +4o( the a+8itorDs re4ort to re8+ce i(6ormatio( ris).
A(s5er' &
Terms' Relatio(shi4s amo(- a+8itor" clie(t" a(8 e2ter(al +sers
&i66' %o8erate
Ob.ecti/e' #O 104
AACSB' Re6lecti/e thi()i(- s)ills
21 The most commo( 5a3 6or +sers to obtai( reliable i(6ormatio( is to'
A1 ha/e a( i(ter(al a+8it.
B1 ha/e a( i(8e4e(8e(t a+8it.
C1 /eri63 all i(6ormatio( i(8i/i8+all3.
&1 /eri63 the i(6ormatio( 5ith ma(a-eme(t.
A(s5er' B
Terms' Re8+ci(- i(6ormatio( ris)
&i66' %o8erate
Ob.ecti/e' #O 104
AACSB' Re6lecti/e thi()i(- s)ills
>

,1 E24lai( 5hat is mea(t b3 i(6ormatio( ris)" a(8 list the 6o+r ca+ses o6 this ris).
A(s5er' I(6ormatio( ris) re6lects the 4ossibilit3 that the i(6ormatio( +4o( 5hich the b+si(ess
ris) 8ecisio( 5as ma8e 5as i(acc+rate. Fo+r ca+ses o6 i(6ormatio( ris) are'
F remote(ess o6 i(6ormatio("
F biases a(8 moti/es o6 the 4ro/i8er"
F /ol+mi(o+s 8ata" a(8
F com4le2 e2cha(-e tra(sactio(s.
Terms' I(6ormatio( ris) 8e6i(itio( a(8 ca+ses
&i66' Eas3
Ob.ecti/e' #O 10, a(8 #O 104
AACSB' Re6lecti/e thi()i(- s)ills
#ear(i(- Ob.ecti/e 109
11 I( the a+8it o6 historical 6i(a(cial stateme(ts" 5hat acco+(ti(- criteria is most commo(7
A1 Re-+lator3 acco+(ti(- 4ri(ci4les
B1 A44licable i(ter(atio(al acco+(ti(- sta(8ar8s
C1 A44licable $.S. acco+(ti(- sta(8ar8s
&1 B a(8 C
E1 All o6 the abo/e
A(s5er' &
Terms' %ost commo( acco+(ti(- criteria
&i66' Eas3
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
21 A(3 ser/ice that reC+ires a CPA 6irm to iss+e a re4ort abo+t the reliabilit3 o6 a( assertio( that
is ma8e b3 a(other 4art3 is a=(1'
A1 acco+(ti(- a(8 boo))ee4i(- ser/ice.
B1 attestatio( ser/ice.
C1 ass+ra(ce ser/ice.
&1 ta2 ser/ice.
A(s5er' B
Terms' Stre(-the( i(ter(al co(trols o/er acco+(ti(- 6or materials +se8 i( 4ro8+ctio(
&i66' Eas3
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
?

,1 Three commo( t34es o6 attestatio( ser/ices are'
A1 a+8its o6 historical 6i(a(cial stateme(ts" re/ie5s o6 historical 6i(a(cial stateme(ts" a(8 a+8its
o6 i(ter(al co(trol o/er 6i(a(cial re4orti(-.
B1 a+8its o6 historical 6i(a(cial i(6ormatio(" /eri6icatio(s o6 historical 6i(a(cial i(6ormatio(" a(8
attestatio(s re-ar8i(- i(ter(al co(trols.
C1 re/ie5s o6 historical 6i(a(cial i(6ormatio(" /eri6icatio(s o6 6+t+re 6i(a(cial i(6ormatio(" a(8
attestatio(s re-ar8i(- i(ter(al co(trols.
&1 a+8its o6 historical 6i(a(cial i(6ormatio(" re/ie5s o6 co(trols relate8 to i(/estme(ts" a(8
/eri6icatio(s o6 historical 6i(a(cial i(6ormatio(.
A(s5er' A
Terms' T34es o6 attestatio( ser/ices
&i66' Eas3
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
41 ;hich o6 the 6ollo5i(- ser/ices 4ro/i8es the lo5est le/el o6 ass+ra(ce o( a 6i(a(cial
stateme(t7
A1 A re/ie5
B1 A( a+8it
C1 either ser/ice 4ro/i8es ass+ra(ce o( 6i(a(cial stateme(ts.
&1 Each ser/ice 4ro/i8es the same le/el o6 ass+ra(ce o( 6i(a(cial stateme(ts.
A(s5er' A
Terms' Ser/ice 4ro/i8es lo5est le/el o6 ass+ra(ce o( a 6i(a(cial stateme(t
&i66' %o8erate
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
91 ;hich o6 the 6ollo5i(- is not a SysTrust Ser/ices 4ri(ci4le as 8e6i(e8 b3 the AICPA7
A1 O(li(e 4ri/ac3
B1 A/ailabilit3
C1 Processi(- i(te-rit3
&1 O4eratio(al i(te-rit3
A(s5er' &
Terms' S3sTr+st Ser/ices 4ri(ci4les 8e6i(e8 b3 AICPA
&i66' %o8erate
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
@

>1 The Sarba(es0O2le3 Act 4rohibits a CPA 6irm that a+8its a 4+blic com4a(3 6rom 4ro/i8i(-
5hich o6 the 6ollo5i(- t34es o6 ser/ices to that com4a(37
A1 Re/ie5s o6 C+arterl3 6i(a(cial stateme(ts
B1 Pre4aratio( o6 cor4orate ta2 ret+r(s
C1 %ost co(s+lti(- ser/ices
&1 Ta2 ser/ices
A(s5er' C
Terms' Sarba(es0O2le3 Act
&i66' Challe(-i(-
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
To4ic' SO:
?1 Attestatio( ser/ices o( i(6ormatio( tech(olo-3 i(cl+8e WebTrust ser/ices a(8 SysTrust
ser/ices. ;hich o6 the 6ollo5i(- stateme(ts most acc+ratel3 8escribes SysTrust ser/ices7
A1 SysTrust ser/ices 4ro/i8e ass+ra(ce o( b+si(ess 4rocesses" tra(sactio( i(te-rit3 a(8
i(6ormatio( 4rocesses.
B1 SysTrust ser/ices 4ro/i8e ass+ra(ce o( s3stem reliabilit3 i( critical areas s+ch as sec+rit3 a(8
8ata i(te-rit3.
C1 SysTrust ser/ices 4ro/i8e ass+ra(ce o( i(ter(al co(trol o/er 6i(a(cial re4orti(-.
&1 SysTrust ser/ices 4ro/i8e ass+ra(ce as to 5hether acco+(ti(- 4erso((el are 6ollo5i(-
4roce8+res 4rescribe8 b3 the com4a(3 co(troller.
A(s5er' B
Terms' Attestatio( ser/ices o( i(6ormatio( tech(olo-3G ;ebTr+st a(8 S3str+st ser/ices
&i66' Challe(-i(-
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
@1 T5o t34es o6 attestatio( ser/ices 4ro/i8e8 b3 CPA 6irms are a+8its a(8 re/ie5s. &isc+ss the
similarities a(8 8i66ere(ces bet5ee( these t5o t34es o6 attestatio( ser/ices. ;hich t34e 4ro/i8es
the least ass+ra(ce7
A(s5er' I( both the re/ie5 a(8 a+8it o6 the historical 6i(a(cial stateme(ts" ma(a-eme(t asserts
that the stateme(ts are 6airl3 state8 i( accor8a(ce 5ith acco+(ti(- sta(8ar8s. The CPA 4ro/i8es a
lo5er le/el o6 ass+ra(ce 6or re/ie5s o6 6i(a(cial stateme(ts com4are8 to the hi-h le/el 6or a+8its"
there6ore less e/i8e(ce is (ee8e8. A re/ie5 is o6te( a8eC+ate to meet 6i(a(cial stateme(t +sersD
(ee8s. It ca( be 4ro/i8e8 b3 a CPA 6irm at a m+ch lo5er 6ee tha( a( a+8it beca+se less e/i8e(ce
is (ee8e8.
A( a+8it is the most commo( ass+ra(ce ser/ice 4ro/i8e8 b3 CPA 6irms. P+blicl3 tra8e8
com4a(ies i( the $.S. are reC+ire8 to ha/e a+8its +(8er the 6e8eral sec+rities acts. %a(3
(o(4+blic com4a(ies ha/e a re/ie5 to limit a+8itor 6ees.
Terms' Attestatio( ser/icesG A+8its a(8 re/ie5s o6 historical 6i(a(cial stateme(ts
&i66' %o8erate
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
H

H1 ;hat is a( e(-a-eme(t to attest o( i(ter(al co(trol o/er 6i(a(cial re4orti(-7
A(s5er' For a( a+8it o6 i(ter(al co(trol o/er 6i(a(cial re4orti(-" ma(a-eme(t asserts that
i(ter(al co(trols ha/e bee( 8e/elo4e8 a(8 im4leme(te8 6ollo5i(- 5ell establishe8 criteria.
Sectio( 404 o6 the Sarba(es0O2le3 Act reC+ires 4+blic com4a(ies to re4ort ma(a-eme(tDs
assessme(t o6 the e66ecti/e(ess o6 i(ter(al co(trol o/er 6i(a(cial re4orti(-. The Act also reC+ires
a+8itors 6or lar-er 4+blic com4a(ies to attest to the e66ecti/e(ess o6 i(ter(al co(trol o/er
6i(a(cial re4orti(-. This e/al+atio(" 5hich is i(te-rate8 5ith the a+8it o6 6i(a(cial stateme(ts"
i(creases +ser co(6i8e(ce abo+t 6+t+re 6i(a(cial re4orti(-" beca+se e66ecti/e i(ter(al co(trols
re8+ce the li)elihoo8 o6 6+t+re misstateme(ts i( the 6i(a(cial stateme(ts.
Terms' E(-a-eme(t to attest o( i(ter(al co(trol o/er 6i(a(cial re4orti(-
&i66' %o8erate
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
To4ic' SO:
101 ;hat are the 6i/e cate-ories o6 attestatio( ser/ices7
A(s5er' The 6i/e cate-ories o6 attestatio( ser/ices i(cl+8e'
F A+8it o6 historical 6i(a(cial stateme(ts
F A+8it o6 i(ter(al co(trol o/er 6i(a(cial re4orti(-
F Re/ie5 o6 historical 6i(a(cial stateme(ts
F Attestatio( ser/ices o( i(6ormatio( tech(olo-3
F Other attestatio( ser/ices that ma3 be a44lie8 to a broa8 ra(-e o6 s+b.ect matter
Terms' Cate-ories o6 attestatio( ser/ices
&i66' %o8erate
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
111 ;hat is a WebTrust e(-a-eme(t7 ;hat is a SysTrust e(-a-eme(t7 Ho5 8o the3 8i66er7
A(s5er' WebTrust is a ser/ice 4ro/i8e8 b3 a CPA 5here the CPA 4ro/i8es ass+ra(ce that the
;eb Site o5(er has met establishe8 criteria relate8 to b+si(ess 4ractices" tra(sactio( i(te-rit3"
a(8 i(6ormatio( 4rocesses.

SysTrust is a ser/ice 4ro/i8e8 b3 a CPA to e/al+ate a(8 test a s3stem reliabilit3 i( areas s+ch as
sec+rit3 a(8 8ata i(te-rit3. There are 6i/e 4ri(ci4les that m+st be a88resse8 o( a SysTrust
e(-a-eme(t' sec+rit3" a/ailabilit3" 4rocessi(- i(te-rit3" o(li(e 4ri/ac3" a(8 co(6i8e(tialit3.
WebTrust is 4rimaril3 8esi-(e8 to 4ro/i8e ass+ra(ce to thir8 4art3 +sers o6 a ;eb site. SysTrust
4ro/i8es ass+ra(ce to ma(a-eme(t" the boar8 o6 8irectors or thir8 4arties abo+t the reliabilit3 o6
i(6ormatio( s3stems +se8 to -e(erate real0time i(6ormatio(.
Terms' ;ebTr+st a(8 S3sTr+st e(-a-eme(ts
&i66' Challe(-i(-
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
10

121 CPA 6irms are (e/er allo5e8 to 4ro/i8e boo))ee4i(- ser/ices 6or clie(ts.
A1 Tr+e
B1 False
A(s5er' B
Terms' CPA ser/ices 4ro/i8e8 to clie(ts
&i66' %o8erate
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
1,1 Sectio( 404 o6 the Sarba(es0O2le3 Act reC+ires 4+blic com4a(ies to ha/e a( e2ter(al a+8itor
attest to their i(ter(al co(trol o/er 6i(a(cial re4orti(-.
A1 Tr+e
B1 False
A(s5er' A
Terms' Sectio( 404 o6 the Sarba(es0O2le3 Act
&i66' %o8erate
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
To4ic' SO:
141 %ost 4+blic com4a(iesD a+8ite8 6i(a(cial stateme(ts are a/ailable o( the SECDs E&IAR
8atabase.
A1 Tr+e
B1 False
A(s5er' A
Terms' P+blic com4a(iesD a+8ite8 6i(a(cial stateme(ts' SECDs E&IAR 8atabase
&i66' Challe(-i(-
Ob.ecti/e' #O 109
AACSB' Re6lecti/e thi()i(- s)ills
#ear(i(- Ob.ecti/e 10>
11 O(e ob.ecti/e o6 a( o4eratio(al a+8it is to'
A1 8etermi(e 5hether the 6i(a(cial stateme(ts 6airl3 4rese(t the e(tit3Ds o4eratio(s.
B1 8etermi(e i6 the a+8itee is i( com4lia(ce 5ith IAAP.
C1 ma)e recomme(8atio(s 6or im4ro/i(- 4er6orma(ce.
&1 re4ort o( the e(tit3Ds relati/e s+ccess i( attai(i(- 4ro6it ma2imiAatio(.
A(s5er' C
Terms' Ob.ecti/e o6 o4eratio(al a+8it
&i66' %o8erate
Ob.ecti/e' #O 10>
AACSB' Re6lecti/e thi()i(- s)ills
11

21 A( e2ami(atio( o6 4art o6 a( or-a(iAatio(Ds 4roce8+res a(8 metho8s 6or the 4+r4ose o6
e/al+ati(- e66icie(c3 a(8 e66ecti/e(ess is 5hat t34e o6 a+8it7
A1 O4eratio(al a+8it
B1 Com4lia(ce a+8it
C1 Fi(a(cial stateme(t a+8it
&1 Pro8+ctio( a+8it
A(s5er' A
Terms' E2ami(atio( o6 4art o6 a( or-a(iAatio(Ds 4roce8+res a(8 metho8 to e/al+ate e66icie(c3
a(8 e66ecti/e(ess
&i66' %o8erate
Ob.ecti/e' #O 10>
AACSB' Re6lecti/e thi()i(- s)ills
,1 A( a+8it to 8etermi(e 5hether a( e(tit3 is 6ollo5i(- s4eci6ic 4roce8+res or r+les set 8o5( b3
some hi-her a+thorit3 is classi6ie8 as a=(1'
A1 a+8it o6 6i(a(cial stateme(ts.
B1 com4lia(ce a+8it.
C1 o4eratio(al a+8it.
&1 4ro8+ctio( a+8it.
A(s5er' B
Terms' A+8it to 8etermi(e 5hether e(tit3 6ollo5e8 s4eci6ic 4roce8+res or r+les
&i66' %o8erate
Ob.ecti/e' #O 10>
AACSB' Re6lecti/e thi()i(- s)ills
41 ;hich o(e o6 the 6ollo5i(- is more 8i66ic+lt to e/al+ate ob.ecti/el37
A1 Prese(tatio( o6 6i(a(cial stateme(ts i( accor8a(ce 5ith -e(erall3 acce4te8 acco+(ti(-
4ri(ci4les
B1 Com4lia(ce 5ith -o/er(me(t re-+latio(s
C1 E66icie(c3 a(8 e66ecti/e(ess o6 o4eratio(s
&1 All three o6 the abo/e are eC+all3 8i66ic+lt.
A(s5er' C
Terms' %ost 8i66ic+lt to e/al+ate ob.ecti/el3
&i66' Challe(-i(-
Ob.ecti/e' #O 10>
AACSB' Re6lecti/e thi()i(- s)ills
91 ;hich o6 the 6ollo5i(- a+8its ca( be re-ar8e8 as -e(erall3 bei(- a com4lia(ce a+8it7
A1 IRS a-e(tsD e2ami(atio(s o6 ta24a3er ret+r(s
B1 IAO a+8itorDs e/al+atio( o6 the com4+ter o4eratio(s o6 -o/er(me(tal +(its
C1 A( i(ter(al a+8itorDs re/ie5 o6 a com4a(3Ds 4a3roll a+thoriAatio( 4roce8+res
&1 A CPA 6irmDs a+8it o6 a 4+blic com4a(3
A(s5er' A
Terms' Com4lia(ce a+8it
&i66' Challe(-i(-
Ob.ecti/e' #O 10>
AACSB' Re6lecti/e thi()i(- s)ills
12

>1 ;hich o6 the 6ollo5i(- are reC+ire8 to ha/e a 5ritte( re4ort re-ar8i(- the assertio( o6 a(other
4art37
A1
Fi(a(cial
Stateme(t
A+8it
O4eratio(al
A+8it
Com4lia(ce
A+8it
Attestatio(
E(-a-eme(t
Ass+ra(ce
E(-a-eme(t
< < < < <
B1
Fi(a(cial
Stateme(t
A+8it
O4eratio(al
A+8it
Com4lia(ce
A+8it
Attestatio(
E(-a-eme(t
Ass+ra(ce
E(-a-eme(t
< < < <
C1
Fi(a(cial
Stateme(t
A+8it
O4eratio(al
A+8it
Com4lia(ce
A+8it
Attestatio(
E(-a-eme(t
Ass+ra(ce
E(-a-eme(t
< < <
&1
Fi(a(cial
Stateme(t
A+8it
O4eratio(al
A+8it
Com4lia(ce
A+8it
Attestatio(
E(-a-eme(t
Ass+ra(ce
E(-a-eme(t
< <
A(s5er' B
Terms' ReC+ire8 to ha/e a 5ritte( re4ort
&i66' Challe(-i(-
Ob.ecti/e' #O 10>
AACSB' Re6lecti/e thi()i(- s)ills
1,

?1 &isc+ss the similarities a(8 8i66ere(ces bet5ee( 6i(a(cial stateme(t a+8its" o4eratio(al a+8its"
a(8 com4lia(ce a+8its. Ii/e a( e2am4le o6 each t34e.
A(s5er' Fi(a(cial stateme(t a+8its" o4eratio(al a+8its" a(8 com4lia(ce a+8its are similar i( that
each t34e o6 a+8it i(/ol/es acc+m+lati(- a(8 e/al+ati(- e/i8e(ce abo+t i(6ormatio( to ascertai(
a(8 re4ort o( the 8e-ree o6 corres4o(8e(ce bet5ee( the i(6ormatio( a(8 establishe8 criteria
a(8Jor 4roce8+res" r+les" or re-+latio(s. The 8i66ere(ces bet5ee( each t34e o6 a+8it are the
i(6ormatio( bei(- e2ami(e8 a(8 the criteria +se8 to e/al+ate the i(6ormatio(.
A( o4eratio(al a+8it e/al+ates the e66icie(c3 a(8 e66ecti/e(ess o6 a(3 4art o6 a( or-a(iAatio(Ds
o4erati(- 4roce8+res a(8 metho8s. At com4letio( o6 a( o4eratio(al a+8it" ma(a-eme(t (ormall3
e24ects recomme(8atio(s 6or im4ro/i(- o4eratio(s. I( o4eratio(al a+8iti(-" the re/ie5s are (ot
limite8 to acco+(ti(-. It is more 8i66ic+lt to ob.ecti/el3 e/al+ate 5hether the e66icie(c3 a(8
e66ecti/e(ess o6 o4eratio(s meets establishe8 criteria tha( it is 6or com4lia(ce a(8 6i(a(cial
stateme(t a+8its. Also" establishi(- criteria 6or e/al+ati(- the i(6ormatio( i( a( o4eratio(al a+8it
is e2tremel3 s+b.ecti/e. Th+s" o4eratio(al a+8iti(- is more li)e ma(a-eme(t co(s+lti(- tha(
5hat is +s+all3 co(si8ere8 a+8iti(-.
A com4lia(ce a+8it is co(8+cte8 to 8etermi(e 5hether the a+8itee is 6ollo5i(- s4eci6ic
4roce8+res" r+les" or re-+latio(s set b3 some hi-her a+thorit3. Res+lts o6 com4lia(ce a+8its are
t34icall3 re4orte8 to ma(a-eme(t" li)e i( the o4eratio(al a+8its" rather tha( to o+tsi8e +sers as is
8o(e 5ith 6i(a(cial stateme(t a+8its.
A 6i(a(cial stateme(t a+8it is co(8+cte8 to 8etermi(e 5hether 6i(a(cial stateme(ts are state8 i(
accor8a(ce 5ith s4eci6ie8 criteria" (ormall3 the $.S. or i(ter(atio(al sta(8ar8s. A+8itors (ot o(l3
6oc+s o( acco+(ti(- tra(sactio(s" b+t also 6oc+s o( a( i(te-rate8 a44roach i( 5hich both the ris)
o6 misstateme(ts a(8 the o4erati(- co(trols are co(si8ere8. The a+8itor m+st ha/e a thoro+-h
+(8ersta(8i(- o6 the e(tit3 a(8 its e(/iro(me(t.
A( e2am4le o6 a 6i(a(cial stateme(t a+8it 5o+l8 be the a((+al a+8it o6 IB% Cor4oratio(" i(
5hich the e2ter(al a+8itors e2ami(e IB%Ds 6i(a(cial stateme(ts to 8etermi(e the 8e-ree o6
corres4o(8e(ce bet5ee( those 6i(a(cial stateme(ts a(8 -e(erall3 acce4te8 acco+(ti(- 4ri(ci4les.
A( e2am4le o6 a( o4eratio(al a+8it 5o+l8 be a( i(ter(al a+8itorDs e/al+atio( o6 5hether the
com4a(3Ds com4+teriAe8 4a3roll04rocessi(- s3stem is o4erati(- e66icie(tl3 a(8 e66ecti/el3. A(
e2am4le o6 a com4lia(ce a+8it 5o+l8 be a( IRS a+8itorDs e2ami(atio( o6 a( e(tit3Ds 6e8eral ta2
ret+r( to 8etermi(e the 8e-ree o6 com4lia(ce 5ith the I(ter(al Re/e(+e Co8e.
Terms' Fi(a(cial stateme(t a+8its" o4eratio(al a+8its a(8 com4lia(ce a+8its
&i66' Challe(-i(-
Ob.ecti/e' #O 10>
AACSB' A(al3tic s)ills
14

@1 To 4er6orm a( a+8it" it is (ecessar3 6or the i(6ormatio( to be i( a /eri6iable 6orm a(8 there
m+st be some criteria b3 5hich the a+8itor ca( e/al+ate the i(6ormatio(. &etail the i(6ormatio(
a(8 criteria that 5o+l8 be +se8 5he('
=A1 a( i(8e4e(8e(t CPA 6irm a+8its a com4a(3Ds historical 6i(a(cial stateme(ts.
=B1 a( I(ter(al Re/e(+e Ser/ice a+8itor a+8its that same com4a(3Ds ta2 ret+r(.
=C1 a( i(ter(al a+8itor 4er6orms a( o4eratio(al a+8it to e/al+ate 5hether the com4a(3Ds
com4+teriAe8 4a3roll 4rocessi(- s3stem is o4erati(- e66icie(tl3 a(8 e66ecti/el3.
A(s5er'
=A1 The i(6ormatio( +se8 b3 a CPA 6irm i( a 6i(a(cial stateme(t a+8it is the 6i(a(cial
i(6ormatio( i( the com4a(3Ds 6i(a(cial stateme(ts. The most commo(l3 +se8 criteria are
a44licable $.S. -e(erall3 acce4te8 acco+(ti(- sta(8ar8s or I(ter(atio(al Fi(a(cial Re4orti(-
Sta(8ar8s =IFRS1.
=B1 The i(6ormatio( +se8 b3 a( IRS a+8itor is the 6i(a(cial i(6ormatio( i( the com4a(3Ds 6e8eral
ta2 ret+r(. The criteria +se8 are the i(ter(al re/e(+e co8e a(8 i(ter4retatio(s.
=C1 The i(6ormatio( +se8 b3 a( i(ter(al a+8itor 5he( 4er6ormi(- a( o4eratio(al a+8it o6 the
4a3roll s3stem co+l8 i(cl+8e /ario+s items s+ch as the (+mber o6 errors ma8e" costs i(c+rre8 b3
the 4a3roll 8e4artme(t" a(8 (+mber o6 4a3roll recor8s 4rocesse8 each mo(th. The criteria 5o+l8
co(sist o6 com4a(3 sta(8ar8s 6or 8e4artme(tal e66icie(c3 a(8 e66ecti/e(ess.
Terms' I(6ormatio( a(8 criteria +se8 b3 CPA 6irm" I(ter(al Re/e(+e Ser/ice a+8itor" a(8
i(ter(al a+8itor
&i66' Eas3
Ob.ecti/e' #O 101 a(8 #O 10>
AACSB' Re6lecti/e thi()i(- s)ills
H1 The 4rimar3 4+r4ose o6 a com4lia(ce a+8it is to 8etermi(e 5hether the 6i(a(cial stateme(ts
are 4re4are8 i( com4lia(ce 5ith -e(erall3 acce4te8 acco+(ti(- 4ri(ci4les.
A1 Tr+e
B1 False
A(s5er' B
Terms' Com4lia(ce a+8it
&i66' %o8erate
Ob.ecti/e' #O 10>
AACSB' Re6lecti/e thi()i(- s)ills
101 Res+lts o6 com4lia(ce a+8its are t34icall3 re4orte8 to the com4a(3Ds ma(a-eme(t rather tha(
to a broa8 s4ectr+m o6 o+tsi8e +sers.
A1 Tr+e
B1 False
A(s5er' A
Terms' Com4lia(ce a+8it
&i66' %o8erate
Ob.ecti/e' #O 10>
AACSB' Re6lecti/e thi()i(- s)ills
19

#ear(i(- Ob.ecti/e 10?
11 %atch the e(-a-eme(t 8escribe8 to the =A1 t34e o6 a+8it a(8 =B1 a+8itor that 5o+l8 4er6orm
the e(-a-eme(t. Each e(-a-eme(t 5ill ha/e a( a(s5er 6rom #ist0A a(8 #ist0B. A( a(s5er ca(
be +se8 o(ce" more tha( o(ce" or (ot at all.
List A - Type of Audit: List B - Type of Auditor:
a. Fi(a(cial Stateme(t
b. Com4lia(ce
c. O4eratio(al
8. I(ter(al
e. E2ter(al
6. Io/er(me(t
-. IRS
E(-a-eme(t'
1. E/al+ate a com4a(3Ds 4a3roll 4rocessi(- 6or eco(om3.
2. E/al+ateJ8etermi(e i6 ba() co/e(a(ts are bei(- met.
,. E/al+ate 6i(a(cial stateme(ts that are to be s+bmitte8 to a ba().
4. E/al+ate the 4rom4t(ess o6 materials i(s4ectio( i( a ma(+6act+rerDs recei/i(- 8e4artme(t.
9. &etermi(e i6 %e8icare reimb+rseme(ts are i( accor8a(ce 5ith the Healthcare Fi(a(ci(-
A8mi(istratio( =HCFA1.
>. &etermi(e i6 the ta2 ret+r( o6 a m+lti(atio(al cor4oratio( is i( accor8a(ce 5ith the ta2 co8e.
?. &etermi(e i6 a 4+blic school is 4ro4erl3 a44l3i(- their reimb+rseme(t 6or the 4a3me(t0i(0)i(8
4ro-ram.
@. &etermi(e the e66ecti/e(ess o6 a &e4artme(t o6 &e6e(se 4ro.ect.
A(s5er'
1. c" 8
2. b" 8
,. a" e
4. c" 8
9. b" 6
>. b" -
?. b" e
@. c" 6
Terms' Fi(a(cial stateme(t a+8itG Com4lia(ce a+8itG O4eratio(al a+8itG T34es o6 a+8itors
&i66' Challe(-i(-
Ob.ecti/e' #O 10> a(8 #O 10?
AACSB' A(al3tic s)ills
1>

21 &isc+ss the similarities a(8 8i66ere(ces bet5ee( the roles o6 i(8e4e(8e(t a+8itors" IAO
a+8itors" i(ter(al re/e(+e a-e(ts" a(8 i(ter(al a+8itors.
A(s5er' The roles o6 all 6o+r t34es o6 a+8itors are similar i( that the3 i(/ol/e the acc+m+latio(
a(8 e/al+atio( o6 e/i8e(ce abo+t i(6ormatio( to ascertai( a(8 re4ort o( the 8e-ree o6
corres4o(8e(ce bet5ee( the i(6ormatio( a(8 establishe8 criteria. The 8i66ere(ces i( their roles
ce(ter aro+(8 the i(6ormatio( a+8ite8 a(8 the criteria +se8 to e/al+ate that i(6ormatio(.
I(8e4e(8e(t a+8itors 4rimaril3 a+8it com4a(iesD 6i(a(cial stateme(ts. IAO a+8itorsD 4rimar3
res4o(sibilit3 is to 4er6orm the a+8it 6+(ctio( 6or Co(-ress. IRS a+8itors are res4o(sible 6or the
e(6orceme(t o6 6e8eral ta2 la5s. I(ter(al a+8itors 4rimaril3 4er6orm o4eratio(al a(8 com4lia(ce
a+8its 6or their em4lo3i(- com4a(3.
Terms' Roles o6 i(8e4e(8e(t a+8itors" IAO a+8itors" i(ter(al re/e(+e a-e(ts a(8 i(ter(al
a+8itors
&i66' %o8erate
Ob.ecti/e' #O 10?
AACSB' Re6lecti/e thi()i(- s)ills
,1 The 4rimar3 role o6 the $(ite8 States Ie(eral Acco+(ti(- O66ice is the e(6orceme(t o6 the
6e8eral ta2 la5s as 8e6i(e8 b3 Co(-ress a(8 i(ter4rete8 b3 the co+rts.
A1 Tr+e
B1 False
A(s5er' B
Terms' Primar3 role o6 $(ite8 States Ie(eral Acco+(ti(- O66ice
&i66' %o8erate
Ob.ecti/e' #O 10?
AACSB' Re6lecti/e thi()i(- s)ills
#ear(i(- Ob.ecti/e 10@
11 The three reC+ireme(ts 6or becomi(- a CPA i(cl+8e all b+t 5hich o6 the 6ollo5i(-7
A1 $(i6orm CPA e2ami(atio( reC+ireme(t
B1 E8+catio(al reC+ireme(ts
C1 Character reC+ireme(ts
&1 E24erie(ce reC+ireme(t
A(s5er' C
Terms' ReC+ireme(ts 6or becomi(- a CPA
&i66' %o8erate
Ob.ecti/e' #O 10@
AACSB' Re6lecti/e thi()i(- s)ills
1?

21 The +se o6 the Certi6ie8 P+blic Acco+(ta(t title is re-+late8 b3'
A1 the 6e8eral -o/er(me(t.
B1 state la5 thro+-h a lice(si(- 8e4artme(t or a-e(c3 o6 each state.
C1 the America( I(stit+te o6 Certi6ie8 P+blic Acco+(ta(ts thro+-h the lice(si(- 8e4artme(ts o6
the ta2 a(8 a+8iti(- committees.
&1 the Sec+rities a(8 E2cha(-e Commissio(.
A(s5er' B
Terms' Certi6ie8 P+blic Acco+(ta(t title
&i66' %o8erate
Ob.ecti/e' #O 10@
AACSB' Re6lecti/e thi()i(- s)ills
,1 #ist a(8 8isc+ss the three 4rimar3 reC+ireme(ts to become a CPA.
A(s5er' The three 4rimar3 reC+ireme(ts 6or becomi(- a CPA are'
F Educational requirement. A( +(8er-ra8+ate 8e-ree or a -ra8+ate 8e-ree 5ith a ma.or i(
acco+(ti(- is reC+ire8. %ost states (o5 reC+ire 190 semester ho+rs 6or lice(s+re a(8 some states
reC+ire 190 semester ho+rs be6ore ta)i(- the CPA e2am.
F Uniform CPA examination requirement. This is a 6o+r04art" com4+ter0base8 e2ami(atio( 5ith
com4o(e(ts o( a+8iti(- a(8 attestatio(" 6i(a(cial acco+(ti(- a(8 re4orti(-" re-+latio(" a(8
b+si(ess e(/iro(me(t a(8 co(ce4ts. Some states also reC+ire a se4arate ethics reC+ireme(t.
F Experience requirement. The e24erie(ce reC+ireme(t /aries 6rom state to state 5ith some
states reC+iri(- (o e24erie(ce" 5hile other states reC+ire +4 to t5o 3ears o6 a+8it e24erie(ce.
Terms' Primar3 reC+ireme(ts to become CPA
&i66' Eas3
Ob.ecti/e' #O 10@
AACSB' Re6lecti/e thi()i(- s)ills
1@