Chapter 1   The Demand for Audit and Other Assurance Services

Learning Objective 1-1

• The Sarbanes-Oxley Act applies to which of the following companies?                                                                           A) All companies.                                                                                                                                                                       B) Privately held companies.                                                                                                                                                    C) Public companies.                                                                                                                                                                  D) All public companies and privately held companies with assets greater than $500 million.

Answer: C

Terms: Sarbanes-Oxley Act

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking skills

Topic: SOX

• Which of the following is considered audit evidence?

A)

Answer: C

Terms: Audit evidence

Diff: Moderate

Objective: LO 1-1

AACSB: Reflective thinking skills

1  Evidence is paramount to audit and attestation engagements. List the four basic types of audit evidence.

Answer: The four types of audit and attestation evidence include:

1. Electronic and documentary data about economic transactions
2. Written and electronic communications with outsiders
3. Observations by the auditor
4. Oral testimony of the auditee (client)

Terms: Basic types if audit evidence

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking skills

• The criteria by which an auditor evaluates the information under audit may vary with the information being audited.

1. A) True B) False Answer: A

Terms: Criteria which an auditor evaluates information

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking skills

• The criteria used by an external auditor to evaluate published financial statements are known as generally accepted auditing standards.

1. A) True B) False Answer: B

Terms: Criteria used by external auditor to evaluate published financial statements

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking skills

• The Sarbanes-Oxley Act establishes standards related to the audits of privately held companies.

1. True
2. False

Answer: B

Terms: Sarbanes-Oxley Act

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking skills

Topic: SOX

• The Sarbanes-Oxley Act is widely viewed as having ushered in sweeping changes to auditing and financial reporting.

1. A) True B) False

Answer: A

Terms: Sarbanes-Oxley Act

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking skills

Topic: SOX

• Only companies that file annual statements with the Securities and Exchange Commission are required to have an annual external audit.

1. A) True B) False Answer: B

Terms: Required to have an annual external audit

Diff: Easy

Objective: LO 1-1

AACSB: Reflective thinking skills

Learning Objective 1-2