The following questions deal with audits by CPA firms. Choose the best response.
a. Which of the following best describes why an independent auditor is asked to express an opinion on the fair presentation of financial statements?
(1) It is difficult to prepare financial statements that fairly present a company’s financial position, operations, and cash flows without the expertise of an independent auditor.
(2) It is management’s responsibility to seek available independent aid in the appraisal of the financial information shown in its financial statements.
(3) The opinion of an independent party is needed because a company may not be objective with respect to its own financial statements.
(4) It is a customary courtesy that all stockholders of a company receive an independent report on management’s stewardship of the affairs of the business.
b. Independent auditing can best be described as
(1) a branch of accounting.
(2) a discipline that attests to the results of accounting and other functional operations and data.
(3) a professional activity that measures and communicates financial and business data.
(4) a regulatory function that prevents the issuance of improper financial information.
c. Which of the following professional services is an attestation engagement?
(1) A consulting service engagement to provide computer-processing advice to a client.
(2) An engagement to report on compliance with statutory requirements.
(3) An income tax engagement to prepare federal and state tax returns.
(4) The compilation of financial statements from a client’s financial records.
d. Which of the following attributes is likely to be unique to the audit work of CPAs as compared to the work performed by practitioners of other professions?
(1) Due professional care.
(2) Competence.
(3) Independence.
(4) Complex body of knowledge.
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