Audit

Auditing and Assurance Services, 14e (Arens)

Chapter 2 The CPA Profession

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 Audit Standards Board.

Answer: A

Terms: Legal rights to perform audits

Diff: Moderate

Objective: LO 2-1

AACSB: Reflective thinking skills

2) The four categories for describing the size of audit firms include: the Big Four international firms; national firms; regional and local firms; and small firms. Which of the following is not a characteristic of a small firm?

A) Most have fewer than 25 professionals.

B) They perform audits on small and not-for-profit businesses.

C) Tax services are more important to their practice than auditing.

D) They do not audit publically traded companies.

Answer: D

Terms: Four categories for describing size of audit firms

Diff: Moderate

Objective: LO 2-1

AACSB: Reflective thinking skills

3) Sarbanes-Oxley and the Securities Exchange Commission restrict auditors from providing many consulting services to their publically traded audit clients. Which of the following is true for auditors of publically 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 or II

Answer: B

Terms: Sarbanes-Oxley and Securities Exchange Commission restrictions

Diff: Moderate

Objective: LO 2-1

AACSB: Reflective thinking skills

Topic: SOX

4) Which of the following statements is true as it relates to limited liability partnerships?

A) Only senior partners are liable for the partnership's debts.

B) Partners have no liability in a limited liability partnership arrangement.

C) Partners are personally liable for...