Compliance and Auditing Ethics and Professional Standards 3

Question 1

Under the Sarbanes-Oxley Act of 2002, which body is responsible for setting auditing standards for audits of public companies in the United States?

Accepted Answer

PCAOB

Answer

AICPA

Answer

FASB

Answer

SEC

Question 2

What is the primary purpose of Generally Accepted Auditing Standards (GAAS)?

Accepted Answer

To provide a framework for measuring the quality and consistency of audit engagements

Answer

To establish financial reporting requirements for publicly traded companies

Answer

To regulate the registration and licensing of audit firms

Answer

To set federal tax compliance requirements for corporations

Question 3

When an external auditor discovers evidence of employee fraud during an audit, the general requirement is to:

Accepted Answer

Report it to the appropriate level of management or those charged with governance

Answer

Immediately report it directly to local law enforcement

Answer

Ignore it if the amounts are not material to the financial statements

Answer

Keep the information confidential as client information and not escalate it

Question 4

The Dodd-Frank Act's whistleblower incentive and protection program for reporting securities law violations is primarily administered by which agency or agencies?

Accepted Answer

CFTC and SEC

Answer

FDIC and Federal Reserve

Answer

FTC and Consumer Financial Protection Bureau

Answer

Department of Justice and FBI

Question 5

Which auditing standard introduced the requirement for external auditors to communicate 'critical audit matters' in their reports on public company financial statements?

Accepted Answer

SAS No. 134 (AU-C Section 701)

Answer

COSO Internal Control Framework

Answer

IFRS 15 Revenue Recognition Standard

Answer

PCAOB Auditing Standard AS 2201

Question 6

Under Section 301 of the Sarbanes-Oxley Act, audit committees are specifically required to establish procedures for:

Accepted Answer

Receiving, retaining, and treating complaints regarding accounting and auditing matters

Answer

Approving and setting executive management compensation packages

Answer

Conducting annual performance reviews of all audit department employees

Answer

Establishing the company's dividend and capital return policies

Question 7

Which of the following best describes 'professional skepticism' as required by auditing standards?

Accepted Answer

A questioning mind and critical assessment of audit evidence without accepting it blindly

Answer

A cynical attitude that assumes management is always attempting to deceive auditors

Answer

A policy of refusing to accept any management representations without third-party confirmation

Answer

Requiring supporting documentation for every single transaction regardless of materiality