Question Details

ACCT 431
CHAPTER 2
1) Which of the following is not true for audit firms 
who audit publically traded companies?
2) A basic objective of a CPA firm is to provide 
professional services to conform to professional 
standards. Reasonable assurance of achieving this 
basic objective is provided through:
3) Within the context of quality control, the primary 
purpose of continuing professional education and 
training activities is to enable a CPA firm to provide 
its personnel with:
4) The purpose of establishing quality control 
policies and procedures to accept or continue a 
client relationship is to:
5) Which of the following is an element of the CPA's 
quality control system that should be considered in 
establishing it's quality control policies and 
procedures?
6) Which one of the following is not true regarding 
the American Institute of Certified Public 
Accountants peer review requirement?
7) Discuss the relationship between quality control 
and generally accepted auditing standards.
Answer:  For a CPA firm, quality control 
8) List and describe the six elements of quality 
control. Who establishes the standards for quality 
control?
9) Listed below are policies or procedures that the 
Crystal Cove audit firm has in place. For each 
identified policy or procedure state if it is a 
Generally Accepted Audit Standard (GAAS) or a 
Quality Control Standard.
Audit firm Policy or Procedure
1. Independence in mental attitude.
2. A client evaluation form.
3. All personnel participate in continuing professional education.
4. Conducting the audit with professional skepticism.
5. Answering an independence questionnaire.
6. Understand the client industry.
7. Audit staff workpapers are reviewed by audit seniors, then managers.
8. Audit staff are supervised.
Standards Category
a. GAAP Standards
b. Quality Control Standards









10) The following are definitions of terms that are 
listed on the right. Match the definition with its 
associated term. Each term can be used once, more 
than once or not at all.
Definition
1. An organizational structure where professional services are provided by one or more shareholders.
2. The grantor of the right to practice public accounting.
3. A report filed to indicate a significant event.
4. Sets professional standards and rules for auditors.
5. Oversees accounting firms who audit public companies.
6. An organizational structure where the owners are taxed like a partnership and have limited personal liability.
7. A report that is filed when a company wishes to issue new securities.
8. The methods used to ensure the firm meets its professional responsibilities to clients and others.
9. Assists in providing investors with reliable information.
10. Requires annual inspections of accounting firms auditing > 100 issuers.
11. Practice monitoring by a CPA firm for another CPA firm.
12. Fulfilling duties diligently and carefully.
13. Requires a registration statement.
Audit Term
a. AICPA
b. PCAOB
c. Securities Exchange Commision
d. Form 10-k
e. IAASB
f. Form S-1
g. Due professional care
h. Limited Liability Partnership
i. Professional Corporation
j. Limited Liability Company
k. Peer review
l. 1933 Securities Act
m. 1934 Securities Act
n. Form 8-k
o. State Regulation
p. Code of Professional Conduct
q. Quality Control Standards
r. GAAS Standards
11) Quality controls are established for the entire 
CPA firm whereas GAAS are applicable to the 
individual engagement.