Arens--Auditing and Assurance Services 15e

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Learning Objective 1-1 1) The Sarbanes-Oxley Act applies to which of the following companies? A) All companies ) !rivately hel" companies #) !$blic companies %) All p$blic companies an" privately hel" companies with assets greater than &'(( million Answer # Terms Sarbanes-Oxle Sarban es-Oxley y Act %iff *asy Objective LO 1-1 AA#S +eflective thin,ing thin,ing s,ills s,ills Topic SO .) /hich of the following is consi"ere" a$"it evi"ence? A) Oral statements /ritten A$"itor ma"e by management #omm$nications Observation 0   ) Oral statements ma"e by management 

/ritten #omm$nications 0

A$"itor Observation 0

/ritten #omm$nications 0


/ritten #omm$nications 


#) Oral statements ma"e by management 0 %) Oral statements ma"e by management 

Answer # Terms A$"it evi"ence %iff 2o"erate Objective LO 1-1 AA#S +eflective thin,ing thin,ing s,ills s,ills

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5) *vi"ence is paramo$nt to a$"it an" attestation engagements4 List the fo$r basic types of a$"it evi"ence4 Answer The fo$r types of a$"it an" attestation evi"ence incl$"e 14 *lectronic an" "oc$mentary "ata abo$t transactions .4 /ritten an" electronic comm$nications with o$tsi"ers 54 Observations by the a$"itor 64 Oral testimony of the a$"itee 7client) Terms asic types of a$"it evi"ence %iff *asy Objective LO 1-1 AA#S +eflective thin,ing s,ills 6) The criteria by which an a$"itor eval$ates the information $n"er a$"it may vary with the information being a$"ite"4 A) Tr$e ) 8alse Answer A Terms #riteria which an a$"itor eval$ates information %iff *asy Objective LO 1-1 AA#S +eflective thin,ing s,ills ') The criteria $se" by an external a$"itor to eval$ate p$blishe" financial statements are ,nown as generally accepte" a$"iting stan"ar"s4 A) Tr$e ) 8alse Answer  Terms #riteria $se" by external a$"itor to eval$ate p$blishe" financial statements %iff *asy Objective LO 1-1 AA#S +eflective thin,ing s,ills 9) The Sarbanes-Oxley Act establishes stan"ar"s relate" to the a$"its of privately hel" companies4 A) Tr$e ) 8alse Answer  Terms Sarbanes-Oxley Act %iff *asy Objective LO 1-1 AA#S +eflective thin,ing s,ills Topic SO

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:) The Sarbanes-Oxley Act is wi"ely viewe" as having $shere" in sweeping changes to a$"iting an" financial reporting4 A) Tr$e ) 8alse Answer A Terms Sarbanes-Oxley Act %iff *asy Objective LO 1-1 AA#S +eflective thin,ing s,ills Topic SO ;) An a$"itor m$st be competent an" have an in"epen"ent mental attit$"e4 A) Tr$e ) 8alse Answer A Terms #ompetence an" in"epen"ent mental attit$"e %iff *asy Objective LO 1-1 AA#S +eflective thin,ing s,ills Learning Objective 1-. 1) +ecor"ing< classifying< an" s$mmari=ing economic events in a logical manner for the p$rpose of provi"ing financial information for "ecision ma,ing is commonly calle" A) finance4 ) a$"iting4 #) acco$nting4 %) economics4 Answer # Terms +ecor"ing< classifying< an" s$mmari=ing economic events %iff *asy Objective LO 1-. AA#S +eflective thin,ing s,ills .) An acco$ntant A) m$st possess expertise in the acc$m$lation of a$"it evi"ence4 ) m$st "eci"e the n$mber an" types of items to test4 #) m$st have an $n"erstan"ing of the principles an" r$les that provi"e the basis for preparing the acco$nting information4 %) m$st be a #!A4 Answer # Terms %isting$ishes a$"itors from acco$ntants %iff 2o"erate Objective LO 1-. AA#S +eflective thin,ing s,ills



5) >n a$"iting financial acco$nting "ata< the primary concern is with A) "etermining whether recor"e" information properly reflects the economic even ts that occ$rre" "$ring the acco$nting perio"4 ) "etermining if fra$" has occ$rre"4 #) "etermining if taxable income has been calc$late" correctly4 %) analy=ing the financial information to be s$re that it complies with government re@$irements4 Answer A Terms A$"iting financial acco$nting "ata primary concern %iff 2o"erate Objective LO 1-. AA#S +eflective thin,ing s,ills 6) The trait that "isting$ishes a$"itors from acco$ntants is the A) a$"itors ability to interpret acco$nting principles generally accepte" in the Bnite" States4 ) a$"itors e"$cation beyon" the achelors "egree4 #) a$"itors ability to interpret 8AS Statements4 %) a$"itors acc$m$lation an" interpretation of evi"ence relate" to a companys financial statements4 Answer % Terms %isting$ishes a$"itors from acco$ntants %iff #hallenging Objective LO 1-. AA#S +eflective thin,ing s,ills ') %isc$ss the "ifferences an" similarities between the roles of acco$ntants an" a$"itors4 /hat a""itional expertise m$st an a$"itor possess beyon" that of an acco$ntant? Answer The role of acco$ntants is to recor"< classify< an" s$mmari=e economic events in a logical manner for the p$rpose of provi"ing financial information for "ecision ma,ing4 To provi"e relevant information< acco$ntants m$st have a thoro$gh $n"erstan"ing of the principles an" r$les that provi"e the basis for preparing the acco$nting information4 >n a""ition< acco$ntants m$st "evelop a system to ens$re that the entitys economic events are properly recor"e" on a timely basis an" at a reasonable cost4 The role of a$"itors is to "etermine whether the recor"e" information prepare" by acco$ntants properly reflects the economic events that occ$rre" "$ring the acco$nting perio"4 eca$se B4S4 or international stan"ar"s provi"e the criteria for eval$ating whether financial information is properly recor"e"< a$"itors m$st thoro$ghly $n"erstan" those acco$nting stan"ar"s4 >n a""ition to $n"erstan"ing acco$nting< the a$"itor m$st possess expertise in the acc$m$lation an" interpretation of a$"it evi"ence4 >t is this expertise that "isting$ishes a$"itors from acco$ntants4 %etermining the proper a$"it proce"$res< "eci"ing the n$mber an" types of items to test< an" eval$ating the res$lts are $ni@$e to the a$"itor4 Terms +oles of acco$ntants an" a$"itors %iff 2o"erate Objective LO 1-. AA#S +eflective thin,ing s,ills



Learning Objective 1-5 1) CCCCCCCC ris, reflects the possibility that the information $pon which the b$siness "ecision was ma"e was inacc$rate4 A) #lient acceptance ) >nformation #) $siness %) #ontrol Answer  Terms +is, that reflects the possibility that information $pon which b$siness ris, "ecision was ma"e %iff 2o"erate Objective LO 1-5 AA#S +eflective thin,ing s,ills Learning Objective 1-6 1) A correct relationship among the a$"itor< the client< an" the external $sers is A) management of a p$blic company hires the in"epen"ent a$"itor4 ) the a$"it committee of a private company hires the in"epen"ent a$"itor4 #) the client provi"es capital to the external $sers4 %) the external $sers can rely $pon the a$"itors report to re"$ce information ris,4 Answer % Terms +elationships among a$"itor< client< an" external $sers %iff 2o"erate Objective LO 1-6 AA#S +eflective thin,ing s,ills .) The most common way for $sers to obtain reliable information is to A) have an internal a$"it4 ) have an in"epen"ent a$"it4 #) verify all information in"ivi"$ally4 %) verify the information with management4 Answer  Terms +e"$cing information ris, %iff 2o"erate Objective LO 1-6 AA#S +eflective thin,ing s,ills



5) *xplain what is meant by information ris,< an" list the fo$r ca$ses of this ris,4 Answer >nformation ris, reflects the possibility that the information $pon which the b$siness ris, "ecision was ma"e was inacc$rate4 8o$r ca$ses of information ris, are D remoteness of information< D biases an" motives of the provi"er< D vol$mino$s "ata< an" D complex exchange transactions4 Terms >nformation ris, "efinition an" ca$ses %iff *asy Objective LO 1-5 an" LO 1-6 AA#S +eflective thin,ing s,ills Learning Objective 1-' 1) >n the a$"it of historical financial statements< what acco$nting criteria is most common? A) +eg$latory acco$nting principles ) Applicable international acco$nting stan"ar"s #) Applicable B4S4 acco$nting stan"ar"s %)  an" # *) All of the above Answer % Terms 2ost common acco$nting criteria %iff *asy Objective LO 1-' AA#S +eflective thin,ing s,ills .) Any service that re@$ires a #!A firm to iss$e a report abo$t the reliability of an assertion that is ma"e by another party is a7n) A) acco$nting an" boo,,eeping service4 ) attestation service4 #) ass$rance service4 %) tax service4 Answer  Terms Strengthen internal controls over acco$nting for materials $se" in pro"$ction %iff *asy Objective LO 1-' AA#S +eflective thin,ing s,ills



5) Three common types of attestation services are A) a$"its of historical financial statements< reviews of historical financial statements< an" a$"its of internal control over financial reporting4 ) a$"its of historical financial information< verifications of historical financial information< an" attestations regar"ing internal controls4 #) reviews of historical financial information< verifications of f$t$re financial information< an" attestations regar"ing internal controls4 %) a$"its of historical financial information< reviews of controls relate" to investments< an" verifications of historical financial information4 Answer A Terms Types of attestation services %iff *asy Objective LO 1-' AA#S +eflective thin,ing s,ills 6) /hich of the following services provi"es the lowest level of ass$rance on a financial statement? A) A review ) An a$"it #) either service provi"es ass$rance on financial statements4 %) *ach service provi"es the same level of ass$rance on financial statements4 Answer A Terms Service provi"es lowest level of ass$rance on a financial statement %iff 2o"erate Objective LO 1-' AA#S +eflective thin,ing s,ills ') /hich of the following is not a SysTrust Services principle as "efine" by the A>#!A? A) Online privacy ) Availability #) !rocessing integrity %) Operational integrity Answer % Terms SysTr$st Services principles "efine" by A>#!A %iff 2o"erate Objective LO 1-' AA#S +eflective thin,ing s,ills



9) The Sarbanes-Oxley Act prohibits a #!A firm that a$"its a p$blic company from provi"ing which of the following types of services to that company? A) +eviews of @$arterly financial statements ) !reparation of corporate tax ret$rns #) 2ost cons$lting services %) Tax services Answer # Terms Sarbanes-Oxley Act %iff #hallenging Objective LO 1-' AA#S +eflective thin,ing s,ills Topic SO :) Attestation services on information technology incl$"e WebTrust services an" SysTrust services4 /hich of the following statements most acc$rately "escribes SysTrust services? A) SysTrust services provi"e ass$rance on b$siness processes< transaction integrity an" information processes4 ) SysTrust services provi"e ass$rance on system reliability in critical areas s$ch as sec$rity an" "ata integrity4 #) SysTrust services provi"e ass$rance on internal control over financial reporting4 %) SysTrust services provi"e ass$rance as to whether acco$nting personnel are following proce"$res prescribe" by the company controller4 Answer  Terms Attestation services on information technologyE /ebTr$st an" Systr$st services %iff #hallenging Objective LO 1-' AA#S +eflective thin,ing s,ills ;) Two types of attestation services provi"e" by #!A firms are a$"its an" reviews4 %isc$ss the similarities an" "ifferences between these two types of attestation services4 /hich type provi"es the least ass$rance? Answer >n both the review an" a$"it of the historical financial statements< management asserts that the statements are fairly state" in accor"ance with acco$nting stan"ar"s4 The #!A provi"es a lower level of ass$rance for reviews of financial statements compare" to the high level for a$"its< therefore less evi"ence is nee"e"4 A review is often a"e@$ate to meet financial statement $sers nee"s4 >t can be provi"e" by a #!A firm at a m$ch lower fee than an a$"it beca$se less evi"ence is nee"e"4 An a$"it is the most common ass$rance service provi"e" by #!A firms4 !$blicly tra"e" companies in the B4S4 are re@$ire" to have a$"its $n"er the fe"eral sec$rities acts4 2any nonp$blic companies have a review to limit a$"itor fees4 Terms Attestation servicesE A$"its an" reviews of historical financial statements %iff 2o"erate Objective LO 1-' AA#S +eflective thin,ing s,ills



F) /hat is an engagement to attest on internal control over financial reporting? Answer 8or an a$"it of internal control over financial reporting< management asserts that internal controls have been "evelope" an" implemente" following well establishe" criteria4 Section 6(6 of the Sarbanes-Oxley Act re@$ires p$blic companies to report managements assessment of the effectiveness of internal control over financial reporting4 The Act also re@$ires a$"itors for larger p$blic companies to attest to the effectiveness of internal control over financial reporting4 This eval$ation< which is integrate" with the a$"it of financial statements< increases $ser confi"ence abo$t f$t$re financial reporting< beca$se effective internal controls re"$ce the li,elihoo" of f$t$re misstatements in the financial statements4 Terms *ngagement to attest on internal control over financial reporting %iff 2o"erate Objective LO 1-' AA#S +eflective thin,ing s,ills Topic SO 1() /hat are the five categories of attestation services? Answer The five categories of attestation services incl$"e D A$"it of historical financial statements D A$"it of internal control over financial reporting D +eview of historical financial statements D Attestation services on information technology D Other attestation services that may be applie" to a broa" range of s$bject matter Terms #ategories of attestation services %iff 2o"erate Objective LO 1-' AA#S +eflective thin,ing s,ills 11) /hat is a WebTrust engagement? /hat is a SysTrust engagement? Gow "o they "iffer? Answer WebTrust is a service provi"e" by a #!A where the #!A provi"es ass$rance that the /eb Site owner has met establishe" criteria relate" to b$siness practices< transaction integrity< an" information processes4 SysTrust is a service provi"e" by a #!A to eval$ate an" test a system reliability in areas s$ch as sec$rity an" "ata integrity4 There are five principles that m$st be a""resse" on a SysTrust engagement sec$rity< availability< processing integrity< online privacy< an" confi"entiality4 WebTrust is primarily "esigne" to provi"e ass$rance to thir" party $sers of a /eb site4 SysTrust provi"es ass$rance to management< the boar" of "irectors or thir" parties abo$t the reliability of information systems $se" to generate real-time information4 Terms /ebTr$st an" SysTr$st engagements %iff #hallenging Objective LO 1-' AA#S +eflective thin,ing s,ills



1.) #!A firms are never allowe" to provi"e boo,,eeping services for clients4 A) Tr$e ) 8alse Answer  Terms #!A services provi"e" to clients %iff 2o"erate Objective LO 1-' AA#S +eflective thin,ing s,ills 15) Section 6(6 of the Sarbanes-Oxley Act re@$ires p$blic companies to have an external a$"itor attest to their internal control over financial reporting4 A) Tr$e ) 8alse Answer A Terms Section 6(6 of the Sarbanes-Oxley Act %iff 2o"erate Objective LO 1-' AA#S +eflective thin,ing s,ills Topic SO 16) 2ost p$blic companies a$"ite" financial statements are available on the S*#s *%HA+ "atabase4 A) Tr$e ) 8alse Answer A Terms !$blic companies a$"ite" financial statements S*#s *%HA+ "atabase %iff #hallenging Objective LO 1-' AA#S +eflective thin,ing s,ills Learning Objective 1-9 1) One objective of an operational a$"it is to A) "etermine whether the financial statements fairly present the entitys operations4 ) "etermine if the a$"itee is in compliance with HAA!4 #) ma,e recommen"ations for improving performance4 %) report on the entitys relative s$ccess in attaining profit maximi=ation4 Answer # Terms Objective of operational a$"it %iff 2o"erate Objective LO 1-9 AA#S +eflective thin,ing s,ills



.) An examination of part of an organi=ations proce"$res an" metho"s for the p$ rpose of eval$ating efficiency an" effectiveness is what type of a$"it? A) Operational a$"it ) #ompliance a$"it #) 8inancial statement a$"it %) !ro"$ction a$"it Answer A Terms *xamination of part of an organi=ations proce"$res an" metho" to eval$ate efficiency an" effectiveness %iff 2o"erate Objective LO 1-9 AA#S +eflective thin,ing s,ills 5) An a$"it to "etermine whether an entity is following specific proce"$res or r$les set "own by some higher a$thority is classifie" as a7n) A) a$"it of financial statements4 ) compliance a$"it4 #) operational a$"it4 %) pro"$ction a$"it4 Answer  Terms A$"it to "etermine whether entity followe" specific proce"$res or r$les %iff 2o"erate Objective LO 1-9 AA#S +eflective thin,ing s,ills 6) /hich one of the following is more "iffic$lt to eval$ate objectively? A) !resentation of financial statements in accor"ance with generally accepte" acco$nting principles ) #ompliance with government reg$lations #) *fficiency an" effectiveness of operations %) All three of the above are e@$ally "iffic$lt4 Answer # Terms 2ost "iffic$lt to eval$ate objectively %iff #hallenging Objective LO 1-9 AA#S +eflective thin,ing s,ills ') /hich of the following a$"its can be regar"e" as generally being a compliance a$"it? A) >+S agents examinations of taxpayer ret$rns ) HAO a$"itors eval$ation of the comp$ter operations of governmental $nits #) An internal a$"itors review of a companys payroll a$thori=ation proce"$res %) A #!A firms a$"it of a p$blic company Answer A Terms #ompliance a$"it %iff #hallenging Objective LO 1-9 AA#S +eflective thin,ing s,ills 0o$ can b$y the complete file from http33testban,express4com


9) /hich of the following are re@$ire" to have a written report regar"ing the assertion of another party? A) 8inancial Statement Operational #ompliance Attestation Ass$rance A$"it A$"it A$"it *ngagement *ngagement 0 0 0 0 0 ) 8inancial Statement A$"it 0

Operational A$"it 0

#ompliance A$"it 0

Attestation *ngagement 0

Ass$rance *ngagement 

Operational A$"it 0

#ompliance A$"it 0

Attestation *ngagement 

Ass$rance *ngagement 

Operational A$"it 

#ompliance A$"it 

Attestation *ngagement 0

Ass$rance *ngagement 0

#) 8inancial Statement A$"it 0 %) 8inancial Statement A$"it 

Answer  Terms +e@$ire" to have a written report %iff #hallenging Objective LO 1-9 AA#S +eflective thin,ing s,ills



:) %isc$ss the similarities an" "ifferences between financial statement a$"its< operational a$"its< an" compliance a$"its4 Hive an example of each type4 Answer 8inancial statement a$"its< operational a$"its< an" compliance a$"its are similar in that each type of a$"it involves acc$m$lating an" eval$ating evi"ence abo$t information to ascertain an" report on the "egree of correspon"ence between the information an" establishe" criteria an"3or proce"$res< r$les< or reg$lations4 The "ifferences between each type of a$"it are the information being examine" an" the criteria $se" to eval$ate the information4 An operational a$"it eval$ates the efficiency an" effectiveness of any part of an organi=ations operating proce"$res an" metho"s4 At completion of an operational a$"it< management normally expects recommen"ations for improving operations4 >n operational a$"iting< the reviews are not limite" to acco$nting4 >t is more "iffic$lt to objectively eval$ate whether the efficiency an" effectiveness of operations meets establishe" criteria than it is for compliance an" financial statement a$"its4 Also< establishing criteria for eval$ating the information in an operational a$"it is extremely s$bjective4 Th$s< operational a$"iting is more li,e management cons$lting than what is $s$ally consi"ere" a$"iting4 A compliance a$"it is con"$cte" to "etermine whether the a$"itee is following specific proce"$res< r$les< or reg$lations set by some higher a$thority4 +es$lts of compliance a$"its are typically reporte" to management< li,e in the operational a$"its< rather than to o$tsi"e $sers as is "one with financial statement a$"its4 A financial statement a$"it is con"$cte" to "etermine whether financial statements are state" in accor"ance with specifie" criteria< normally the B4S4 or international stan"ar"s4 A$"itors not only foc$s on acco$nting transactions< b$t also foc$s on an integrate" approach in which both the ris, of misstatements an" the operating controls are consi"ere"4 The a$"itor m$st have a thoro$gh $n"erstan"ing of the entity an" its environment4 An example of a financial statement a$"it wo$l" be the ann$al a$"it of >2 #orporation< in which the external a$"itors examine >2s financial statements to "etermine the "egree of correspon"ence between those financial statements an" generally accepte" acco$nting principles4 An example of an operational a$"it wo$l" be an internal a$"itors eval$ation of whether the companys comp$teri=e" payroll-processing system is operating efficiently an" effectively4 An example of a compliance a$"it wo$l" be an >+S a$"itors examination of an entitys fe"eral tax ret$rn to "etermine the "egree of compliance with the >nternal +even$e #o"e4 Terms 8inancial statement a$"its< operational a$"its an" compliance a$"its %iff #hallenging Objective LO 1-9 AA#S Analytic s,ills



;) To perform an a$"it< it is necessary for the information to be in a verifiable form an" there m$st be some criteria by which the a$"itor can eval$ate the information4 %etail the information an" criteria that wo$l" be $se" when 7A) an in"epen"ent #!A firm a$"its a companys historical financial statements4 7) an >nternal +even$e Service a$"itor a$"its that same companys tax ret$rn4 7#) an internal a$"itor performs an operational a$"it to eval$ate whether the companys comp$teri=e" payroll processing system is operating efficiently an" effectively4 Answer 7A) The information $se" by a #!A firm in a financial statement a$"it is the financial information in the companys financial statements4 The most commonly $se" criteria are applicable B4S4 generally accepte" acco$nting stan"ar"s or >nternational 8inancial +eporting Stan"ar"s 7>8+S)4 7) The information $se" by an >+S a$"itor is the financial information in the companys fe"eral tax ret$rn4 The criteria $se" are the internal reven$e co"e an" interpretations4 7#) The information $se" by an internal a$"itor when performing an operational a$"it of the payroll system co$l" incl$"e vario$s items s$ch as the n$mber of errors ma"e< costs inc$rre" by the payroll "epartment< an" n$mber of payroll recor"s processe" each month4 The criteria wo$l" consist of company stan"ar"s for "epartmental efficiency an" effectiveness4 Terms >nformation an" criteria $se" by #!A firm< >nternal +even$e Service a$"itor< an" internal a$"itor %iff *asy Objective LO 1-1 an" LO 1-9 AA#S +eflective thin,ing s,ills F) The primary p$rpose of a compliance a$"it is to "etermine whether the financial statements are prepare" in compliance with generally accepte" acco$nting principles4 A) Tr$e ) 8alse Answer  Terms #ompliance a$"it %iff 2o"erate Objective LO 1-9 AA#S +eflective thin,ing s,ills 1() +es$lts of compliance a$"its are typically reporte" to the companys management rather than to a broa" spectr$m of o$tsi"e $sers4 A) Tr$e ) 8alse Answer A Terms #ompliance a$"it %iff 2o"erate Objective LO 1-9 AA#S +eflective thin,ing s,ills



Learning Objective 1-: 1) 2atch the engagement "escribe" to the 7A) type of a$"it an" 7) a$"itor that wo$l" perform the engagement4 *ach engagement will have an answer from List-A an" List-4 An answer can be $se" once< more than once< or not at all4 List A - Type of Audit: a4 8inancial Statement b4 #ompliance c4 Operational

List B - Type of Auditor: "4 >nternal e4 *xternal f4 Hovernment g4 >+S

*ngagement 14 *val$ate a companys payroll processing for economy4 .4 *val$ate3"etermine if ban, covenants are being met4 54 *val$ate financial statements that are to be s$bmitte" to a ban,4 64 *val$ate the promptness of materials inspection in a man$fact$rers receiving "epartment4 '4 %etermine if 2e"icare reimb$rsements are in accor"ance with the Gealthcare 8inancing A"ministration 7G#8A)4 94 %etermine if the tax ret$rn of a m$ltinational corporation is in accor"ance with the tax co"e4 :4 %etermine if a p$blic school is properly applying their reimb$rsement for the payment-in-,in" program4 ;4 %etermine the effectiveness of a %epartment of %efense project4 Answer 14 c< " .4 b< " 54 a< e 64 c< " '4 b< f 94 b< g :4 b< e ;4 c< f Terms 8inancial statement a$"itE #ompliance a$"itE Operational a$"itE Types of a$"itors %iff #hallenging Objective LO 1-9 an" LO 1-: AA#S Analytic s,ills



.) %isc$ss the similarities an" "ifferences between the roles of in"epen"ent a$"itors< HAO a$"itors< internal reven$e agents< an" internal a$"itors4 Answer The roles of all fo$r types of a$"itors are similar in that they involve the acc$m$lation an" eval$ation of evi"ence abo$t information to ascertain an" report on the "egree of correspon"ence between the information an" establishe" criteria4 The "ifferences in their roles center aro$n" the information a$"ite" an" the criteria $se" to eval$ate that information4 >n"epen"ent a$"itors primarily a$"it companies financial statements4 HAO a$"itors primary responsibility is to perform the a$"it f$nction for #ongress4 >+S a$"itors are responsible for the enforcement of fe"eral tax laws4 >nternal a$"itors primarily perform operational an" compliance a$"its for their employing company4 Terms +oles of in"epen"ent a$"itors< HAO a$"itors< internal reven$e agents an" internal a$"itors %iff 2o"erate Objective LO 1-: AA#S +eflective thin,ing s,ills 5) The primary role of the Bnite" States Heneral Acco$nting Office is the enforcement of the fe"eral tax laws as "efine" by #ongress an" interprete" by the co$rts4 A) Tr$e ) 8alse Answer  Terms !rimary role of Bnite" States Heneral Acco$nting Office %iff 2o"erate Objective LO 1-: AA#S +eflective thin,ing s,ills Learning Objective 1-; 1) The three re@$irements for becoming a #!A incl$"e all b$t which of the following? A) Bniform #!A examination re@$irement ) *"$cational re@$irements #) #haracter re@$irements %) *xperience re@$irement Answer # Terms +e@$irements for becoming a #!A %iff 2o"erate Objective LO 1-; AA#S +eflective thin,ing s,ills



.) The $se of the #ertifie" !$blic Acco$ntant title is reg$late" by A) the fe"eral government4 ) state law thro$gh a licensing "epartment or agency of each state4 #) the American >nstit$te of #ertifie" !$blic Acco$ntants thro$gh the licensing "epartments of the tax an" a$"iting committees4 %) the Sec$rities an" *xchange #ommission4 Answer  Terms #ertifie" !$blic Acco$ntant title %iff 2o"erate Objective LO 1-; AA#S +eflective thin,ing s,ills 5) List an" "isc$ss the three primary re@$irements to become a #!A4 Answer The three primary re@$irements for becoming a #!A are D Educational requirement 4 An $n"ergra"$ate "egree or a gra"$ate "egree with a major in acco$nting is re@$ire"4 2ost states now re@$ire 1'( semester ho$rs for licens$re an" some states re@$ire 1'( semester ho$rs before ta,ing the #!A exam4 D Uniform CPA examination requirement 4 This is a fo$r-part< comp$ter-base" examination with components on a$"iting an" attestation< financial acco$nting an" reporting< reg$lation< an" b$siness environment an" concepts4 Some states also re@$ire a separate ethics re@$irement4 D Experience requirement 4 The experience re@$irement varies from state to state with some states re@$iring no experience< while other states re@$ire $p to two years of a$"it experience4 Terms !rimary re@$irements to become #!A %iff *asy Objective LO 1-; AA#S +eflective thin,ing s,ills


Arens--Auditing and Assurance Services 15e

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