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THE Test Bank for Auditing and Assurance Services 16th Edition Arens
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Auditing and Assurance Services, 16e (Arens/Elder/Beasley) Chapter 2 The CPA Profession 2.1 Learning Objective 2-1 1) The legal right to perform audits is granted to a CPA firm by regulation of A) each state. B) the Financial Accounting Standards Board (FASB). C) the American Institute of Cer...

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  • June 22, 2024
  • 129
  • 2023/2024
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  • 1 copyright 2017 pearson education inc auditin

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Arens


Auditing and Assurance Services, 16e (Arens/Elder/Beasley)
Chapter 2 The CPA Profession

2.1 Learning Objective 2-1

1) The legal right to perform audits is granted to a CPA firm by regulation of
A) each state.
B) the Financial Accounting Standards Board (FASB).
C) the American Institute of Certified Public Accountants (AICPA).
D) the Auditing Standards Board.
Answer: A
Terms: Legal rights to perform audits
Diff: Moderate
Objective: LO 2-1
AACSB: Reflective thinking

2) Which of the following is not a characteristic of a small firm?
A) Most small firms have fewer than 25 professionals.
B) Small firms perform audits on small and not-for-profit businesses.
C) Tax services are more important than auditing services to the small firm.
D) Small firms are prohibited by the SEC from auditing publicly traded companies.
Answer: D
Terms: Characteristics of a small firm
Diff: Moderate
Objective: LO 2-1
AACSB: Reflective thinking

3) Sarbanes-Oxley and the Securities and Exchange Commission restrict auditors from providing
many consulting services to their publicly traded audit clients. Which of the following is true for
auditors of publicly traded companies?
I. They are restricted from providing consulting services to privately held companies.
II. There is no restriction on providing consulting services to non-audit clients.
A) I only
B) II only
C) I and II
D) Neither I nor II
Answer: B
Terms: Sarbanes-Oxley and Securities Exchange Commission restrictions
Diff: Moderate
Objective: LO 2-1
AACSB: Reflective thinking
Topic: SOX




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4) Which of the following does not describe a size category for a CPA firm?
A) Big Four national firms
B) Big Four international firms
C) local firms
D) national and regional firms
Answer: A
Terms: Three categories for describing size of audit firms
Diff: Easy
Objective: LO 2-1
AACSB: Reflective thinking

5) ________ is one of the Big Four international CPA firms.
A) Deloitte
B) KPMG
C) Ernst & Young
D) All of the above are classified as Big Four international CPA firms.
Answer: D
Terms: Three categories for describing size of audit firms
Diff: Moderate
Objective: LO 2-1
AACSB: Reflective thinking

6) In which type of service does the CPA assemble the financial statements but provide no
assurance to third parties?
A) audit
B) compilation
C) review
D) bookkeeping
Answer: B
Terms: Compilation
Diff: Moderate
Objective: LO 2-1
AACSB: Reflective thinking

7) In addition to attestation and assurance services, CPA firms provide other services to their
clients. List three of these services.
Answer: Other services performed by a CPA firm include:
• accounting and bookkeeping services
• tax services
• management consulting and risk advisory services.
Terms: Activities of CPA firms
Diff: Moderate
Objective: LO 2-1
AACSB: Reflective thinking




2
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8) Many small, local accounting firms perform audits as their primary service to their clients.
Answer: FALSE
Terms: Small accounting firms do not perform audits
Diff: Easy
Objective: LO 2-1
AACSB: Reflective thinking

9) Sarbanes-Oxley and the Securities and Exchange Commission restrict auditors from providing
many consulting services to their publicly traded audit clients.
Answer: TRUE
Terms: Sarbanes-Oxley and Securities Exchange Commission restrictions
Diff: Easy
Objective: LO 2-1
AACSB: Reflective thinking
Topic: SOX

2.2 Learning Objective 2-2

1) Which of the following statements is true as it relates to limited liability partnerships?
A) Only senior partners are liable for the partnerships debts.
B) Partners have no liability in a limited liability partnership arrangement.
C) Partners are personally liable for the acts of those under their supervision.
D) All partners must be AICPA members.
Answer: C
Terms: Limited liability partnerships
Diff: Challenging
Objective: LO 2-2
AACSB: Reflective thinking

2) Which staff level in a CPA firm performs most of the detailed audit work?
A) partner
B) staff assistant
C) senior auditor
D) senior manager
Answer: B
Terms: Staff levels in CPA firm
Diff: Easy
Objective: LO 2-2
AACSB: Reflective thinking




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