Auditing and Assurance Training Professional Standards and Ethics in Auditing

Question 1

The AICPA Code of Professional Conduct requires a CPA to be independent in both fact and appearance primarily because:

Accepted Answer

It enhances the credibility and usefulness of the auditor's report to financial statement users

Answer

Independence — both mental (in fact) and in appearance — is essential for users to trust that the auditor's opinion reflects an unbiased assessment of the financial statements.

Question 2

Under PCAOB Rule 3526, audit firms must communicate to the audit committee regarding independence at:

Accepted Answer

At least annually and before accepting the engagement

Answer

PCAOB Rule 3526 requires firms to communicate all relationships that may reasonably bear on independence to the audit committee both prior to and on an annual basis during the engagement.

Question 3

The Sarbanes-Oxley Act of 2002 established the PCAOB with authority to oversee:

Accepted Answer

Auditors of public companies registered with the SEC

Answer

The PCAOB was created by SOX to register, inspect, and discipline auditors of SEC-registered public companies, addressing the oversight gaps exposed by Enron and other scandals.

Question 4

An auditor who owns even a small financial interest in an audit client has most likely violated which fundamental principle?

Accepted Answer

Independence

Answer

Owning any direct financial interest in an audit client impairs independence under both AICPA and SEC rules, regardless of the size of the investment.

Question 5

Which body sets auditing standards for audits of private (non-public) companies in the United States?

Accepted Answer

AICPA Auditing Standards Board (ASB)

Answer

The AICPA's Auditing Standards Board issues Statements on Auditing Standards (SAS) that govern audits of non-public entities; PCAOB standards apply to public company audits.

Auditing and Assurance Training Practice Test

Auditing and Assurance Training Practice Test

Auditing and Assurance Training Professional Standards and Ethics in Auditing