,Principles of Auditing & Other Assurance Services, 21e (Whittington)
Chapter 1 The Role of the Public Accountant in the American Economy
1) Independent audits of today place more emphasis on sampling than did the audits of the 19th
century.
Answer: TRUE
Difficulty: 2 Medium
Topic: Financial Statement Audits
Learning Objective: 01-04 Explain why audits are demanded by society.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
2) The American Institute of Certified Public Accountants creates the CPA Exam, while
individual states issue CPA certificates and permits CPAs to practice.
Answer: TRUE
Difficulty: 2 Medium
Topic: The Public Accounting Profession
Learning Objective: 01-07 Explain the regulatory process for auditors of public companies and
auditors of nonpublic companies.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3) The GAO is limited by statute to performing only compliance audits.
Answer: FALSE
Difficulty: 1 Easy
Topic: Financial Statement Audits
Learning Objective: 01-06 Contrast the various types of audits and types of auditors.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4) The SEC does not pass on the merits of the securities that are registered with the agency.
,5) The American Institute of Certified Public Accountants has the primary authority to establish
accounting standards.
Answer: FALSE
Difficulty: 1 Easy
Topic: The Public Accounting Profession
Learning Objective: 01-07 Explain the regulatory process for auditors of public companies and
auditors of nonpublic companies.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
6) When a CPA firm enrolls in the AICPA Peer Review Program, it agrees to comply with the
AICPA's Quality Control Standards and to have a peer review of its accounting and auditing
practice every seven years.
Answer: FALSE
Difficulty: 2 Medium
Topic: The Public Accounting Profession
Learning Objective: 01-07 Explain the regulatory process for auditors of public companies and
auditors of nonpublic companies.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
7) Despite the high cost, most small companies have their financial statements audited by a CPA
firm, so they can obtain a loan.
Answer: FALSE
Difficulty: 1 Easy
Topic: The Public Accounting Profession
Learning Objective: 01-07 Explain the regulatory process for auditors of public companies and
auditors of nonpublic companies.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
, 8) Senior auditors in CPA firms may be responsible for planning and coordinating audits on
smaller engagements.
Answer: TRUE
Difficulty: 1 Easy
Topic: The Public Accounting Profession
Learning Objective: 01-08 Describe how public accounting firms are typically organized and the
responsibilities of auditors at the various levels in the organization.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
9) The Sarbanes-Oxley Act requires that auditors of certain publicly traded companies in the
United States perform an integrated audit that includes providing assurance on both the financial
statements and on compliance with laws and regulations.
Answer: FALSE
Difficulty: 2 Medium
Topic: Financial Statement Audits
Learning Objective: 01-06 Contrast the various types of audits and types of auditors.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
10) Auditing is frequently only a small part of the practice of local CPA firms.
Answer: TRUE
Difficulty: 2 Medium
Topic: The Public Accounting Profession
Learning Objective: 01-08 Describe how public accounting firms are typically organized and the
responsibilities of auditors at the various levels in the organization.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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