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1 | | Generally accepted accounting principles (GAAP) are distinguished from generally accepted auditing standards (GAAS) in that: |
| | A) | GAAP are the principles for presentation of financial statements and underlying transactions, while GAAS are the standards auditors should follow when conducting an audit. |
| | B) | GAAP are the principles auditors follow when conducting an audit, while GAAS are the standards for presentation of financial statements and underlying transactions. |
| | C) | GAAP are promulgated by the SEC, while GAAS are promulgated by the FASB. |
| | D) | When GAAP are violated, sufficiently strong GAAS may make up for most GAAP deficiencies. |
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2 | | When GAAS do not provide "hard and fast rules," they provide subjective guidance which allows auditors to: |
| | A) | Tailor their audit to procedures requested by management. |
| | B) | Only apply those standards that are important to the audit. |
| | C) | Accurately interpret the profession's Code of Professional Conduct. |
| | D) | Use adequate professional judgment when applying the standards. |
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3 | | The Sarbanes-Oxley Act requires that auditors of publicly traded companies in the United States perform an integrated audit that includes providing an audit report on a company’s
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| | A) | Financial statements--Yes; Compliance with laws and regulations--Yes |
| | B) | Financial statements--Yes; Compliance with laws and regulations--No |
| | C) | Financial statements--No; Compliance with laws and regulations--Yes |
| | D) | Financial statements--No; Compliance with laws and regulations--No |
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4 | | The Generally Accepted Auditing Standards of fieldwork pertain most directly to: |
| | A) | The planning of the audit. |
| | B) | The required training and proficiency of the auditors. |
| | C) | Due professional care in the performance of the audit. |
| | D) | Improving internal control as a result of the audit. |
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5 | | The primary difference between financial statement errors and fraud is that: |
| | A) | Errors are intentional misstatements by management, while fraud involves unintentional mistakes or omissions. |
| | B) | Errors are unintentional mistakes or omissions, while fraud involves intentional misstatements. |
| | C) | There is no difference as errors and fraud have the same meaning. |
| | D) | Errors are more likely to provide an indication that an illegal act has occurred. |
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6 | | Auditor responsibility for identifying "direct effect" illegal acts differs from their responsibility for detecting: |
| | A) | Errors. |
| | B) | Indirect effect illegal acts. |
| | C) | Fraud. |
| | D) | Management fraud. |
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7 | | The level of assurance provided by an audit of detecting a material misstatement is referred to as: |
| | A) | Absolute assurance. |
| | B) | High assurance. |
| | C) | Negative assurance. |
| | D) | Reasonable assurance. |
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8 | | Which of the following is not a function of the Public Company Accounting Oversight Board? |
| | A) | Conduct inspections of registered public accounting firms. |
| | B) | Establish or adopt auditing standards. |
| | C) | Promulgate accounting principles. |
| | D) | Register public accounting firms that prepare audit reports of publicly traded companies. |
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9 | | If the scope of the auditors procedures in conducting an audit are significantly limited by management, the audit opinion will most likely be a(n): |
| | A) | Adverse opinion. |
| | B) | Qualified opinion. |
| | C) | Scope limitation opinion. |
| | D) | Disclaimer of opinion. |
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10 | | Of those categories of accounting principles listed, which has the highest level of authority? |
| | A) | Other accounting literature. |
| | B) | Promulgations of statutory rulings. |
| | C) | Pronouncements of bodies composed of expert accountants, not exposed for public comment. |
| | D) | Widely recognized practices and pronouncements. |
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