MaoEn/USCPA_AUD_Data huggingface dataset:
Which of the following will impair independence under the U.S. Department of Labor's independence rules for audits of employee benefit plans?
	A.	
A former employee of the benefit plan works for the audit firm but does not participate in the benefit plan audit.
	B.	
The accountant is engaged to audit both the employee benefit plan and the financial statements of the plan sponsor.
	C.	
The auditor also serves as an investment advisor to the employee benefit plan.
	D.	
An actuary from the audit firm provides services to the employee benefit plan.

Choice "C" is correct. Under DOL rules, independence is impaired when an auditor also serves as an investment advisor to the employee benefit plan.
Choice "A" is incorrect. Under DOL rules, independence is not impaired when a former employee of the plan works for the audit firm, as long as the employee has completely disassociated from the plan and does not participate in auditing the plan's financial statements for any period of the individual's employment with the plan.
Choice "B" is incorrect. Under DOL rules, independence is not impaired when an auditor audits both the employee benefit plan and the financial statements of the plan sponsor.
Choice "D" is incorrect. Under DOL rules, an actuary from the auditor's firm may provide services to the employee benefit plan without impairing independence.
Which of the following accounting services may an accountant perform without being required to comply with Statements on Standards for Accounting and Review Services?
I.
Preparing a working trial balance.
II.
Preparing standard monthly journal entries.
	A.	
II only.
	B.	
I only.
	C.	
Both I and II.
	D.	
Neither I nor II.

Choice "C" is correct. An accountant can prepare a working trial balance and prepare standard monthly journal entries without being required to comply with SSARS as long as the performance of these services does not carry forward into the preparation of financial statements.
Choice "A" is incorrect. A working trial balance can be prepared.
Choice "B" is incorrect. Monthly journal entries can be prepared.
Choice "D" is incorrect. Both of these services can be rendered as long as they do not carry forward into the preparation of financial statements.
Which of the following factors most likely would cause an accountant not to accept an engagement to compile the financial statements of a nonissuer?
	A.	
The entity's intention to omit from the financial statements substantially all of the disclosures required by GAAP.
	B.	
A lack of segregation of duties in the entity's accounting and payroll departments.
	C.	
Indications that reports of asset misappropriation are not investigated by management.
	D.	
Management's acknowledgement that the financial statements will be included in a written personal financial plan.

Choice "C" is correct. Indications that reports of asset misappropriation are not investigated by management most likely would cause an accountant not to accept an engagement to compile the financial statements of a nonissuer. Asset misappropriation involves theft of an entity's assets and should be investigated by management. Lack of interest in investigating this would raise concern about the attitude of management, and most likely that would cause the accountant to not accept the engagement.
Choice "A" is incorrect. An accountant may compile financial statements that omit substantially all disclosures required by GAAP as long as the report clearly indicates the omission and the omission is not intended to mislead users of the financial statements.
Choice "B" is incorrect. Lack of segregation of duties in the entity's accounting and payroll departments most likely would not affect the accountant's decision to accept an engagement. An effective internal control environment is not a precondition for accepting a compilation engagement.
Choice "D" is incorrect. Compiled financial statements may be included in a written personal financial plan.
A person identified as an audit committee financial expert of an issuer generally must have acquired the attributes of a financial expert through any of the following experiences, except:
	A.	
As a principal financial officer, principal accounting officer, controller, public accountant, or auditor.
	B.	
Actively supervising a principal financial officer or principal accounting officer.
	C.	
Serving on at least one other issuer's audit committee or disclosure committee of the board of directors.
	D.	
Assessing the performance of public accountants with respect to preparation, auditing, or evaluation of financial statements.

Choice "C" is correct. Experience on an audit committee or disclosure committee of a board of directors would not enable one to acquire the attributes of a financial expert. Such experience must be acquired through involvement as a principal financial officer, principal accounting officer, controller, public accountant, auditor, or one who actively supervises or assess the performance of one of these financial jobs. Serving on at least one other issuer's audit committee or disclosure committee is not required.
Choices "A", "B", and "D" are incorrect per the above explanation.
According to the standards of the profession, which of the following activities may be required in exercising due care?
Consulting with
experts
Obtaining specialty
accreditation
	A.	
No
No
	B.	
Yes
Yes
	C.	
No
Yes
	D.	
Yes
No

Choice "D" is correct. Exercise of due care dictates consultation or referral when a professional engagement exceeds the CPA's personal competence. There is no requirement to obtain specialty accreditation.
When planning a review of an audit client's interim financial statements, which of the following procedures should the accountant perform to update the accountant's knowledge about the entity's business and its system of internal control?
	A.	
Inquire of the entity's outside legal counsel about the status of any previous pending litigation and any new litigation involving the entity.
	B.	
Select a sample of material revenue transactions occurring during the interim period and examine supporting documentation.
	C.	
Perform analytical procedures on selected accounts by comparing the interim amounts to the amounts for the previous audited fiscal year end.
	D.	
Consider the results of audit procedures performed with respect to the current-year's financial statements.

Choice "D" is correct. Considering the results of audit procedures that have previously been performed and how they correspond to the current year's financial statements is a step that may be performed during the planning stage to update the accountant's knowledge of the client.
Choice "A" is incorrect. Inquiry of the client's legal counsel is not required in a review engagement.
Choice "B" is incorrect. Examination of supporting documentation for specific transactions would not be performed during a review; this is an audit procedure. A review consists principally of inquiry and analytical procedures.
Choice "C" is incorrect. Analytical procedures performed on specific accounts would be done after the understand-learn-inquiry phases. Establishing an understanding with the client is first, followed by learning/obtaining a sufficient understanding of the entity and its environment, including the applicable financial reporting framework and the entity's system of internal control. The third phase consists of inquiries addressed to the appropriate individuals, followed by the analytical procedures.
To compile financial statements of a nonissuer in accordance with Statements on Standards for Accounting and Review Services, an accountant should:
	A.	
Obtain a general understanding of the client's business transactions.
	B.	
Make inquiries of significant customers, vendors, and creditors.
	C.	
Review bank statement reconciliations.
	D.	
Identify material misstatements in the financial statements.

Choice "A" is correct. In order to compile a nonissuer's financial statements, the accountant should obtain an understanding of the client's transaction types and frequency of transactions.
Choice "B" is incorrect. Making inquiries would be done as part of a review, not a compilation.
Choice "C" is incorrect. Reviewing banks statement reconciliations is an audit test and is not required for a compilation.
Choice "D" is incorrect. The accountant is not required to identify material misstatements in the financial statements for a compilation.
An accountant is required to comply with the provisions of Statements on Standards for Accounting and Review Services when:
I.
Reproducing client-prepared financial statements, without modification, as an accommodation to a client.
II.
Preparing standard monthly journal entries for depreciation and expiration of prepaid expenses.
	A.	
II only.
	B.	
Neither I nor II.
	C.	
Both I and II.
	D.	
I only.

Choice "B" is correct. Statements on Standards for Accounting and Review Services (SSARS) provide standards with respect to preparations, compilations and reviews of financial statements. SSARS do not apply to the reproduction of client-prepared financial statements or to the preparation of standard monthly journal entries.
Choices "D", "A", and "C" are incorrect, based on the above explanation.
An auditor's independence is considered impaired if the auditor has:
	A.	
An automobile loan from a client bank, collateralized by the automobile.
	B.	
A joint, closely-held business investment with the client that is material to the auditor's net worth.
	C.	
An immaterial, indirect financial interest in a client.
	D.	
A mortgage loan, executed with a financial institution client on March 1,1990, that is material to the auditor's net worth.

Choice "B" is correct. According to the Independence Rule, independence is impaired with an audit client if the auditor has a direct financial interest regardless of materiality, or a material indirect financial interest in the client. A joint, closely-held business investment with the client that was material would be a clear violation.
Choice "A" is incorrect because fully collateralized auto loans with financial institution clients are permissible.
Choice "C" is incorrect because an immaterial indirect financial interest is permissible.
Choice "D" is incorrect. Although such a loan made today would impair independence, there is an exception made for such loans executed prior to February 5, 2001.
According to the standards of the profession, which of the following activities may be required in exercising due care?
Consulting with
experts
Obtaining specialty
accreditation
	A.	
Yes
No
	B.	
No
Yes
	C.	
Yes
Yes
	D.	
No
No

Choice "A" is correct. Exercise of due care dictates consultation or referral when a professional engagement exceeds the CPA's personal competence. There is no requirement to obtain specialty accreditation.
Which of the following would be acceptable for a CPA firm?
	A.	
Using a CPA partnership name that includes the names of past owners.
	B.	
Designating itself as "Members of the AICPA" when not all CPA owners are members.
	C.	
Designating itself as CPAs when not all of its owners are CPAs.
	D.	
Continuing to use a partnership name five years after becoming a sole practitioner.

Choice "A" is correct. It is acceptable to use the names of one or more past owners.
Choice "B" is incorrect. A firm may not designate itself as "Members of the AICPA" when not all CPA owners are members.
Choice "C" is incorrect. A firm may not designate itself as CPAs when not all of its owners are CPAs.
Choice "D" is incorrect. A firm may not continue to use a partnership name for more than two years after becoming a sole practitioner.
In which of the following circumstances would a covered member's independence be impaired with respect to a nonissuer client?
	A.	
The member is designated to serve as guardian of a friend's children if the need arises, and the friend's estate, which would be held in trust for the children, holds significant stock ownership in a client entity.
	B.	
The member owns municipal utility bonds issued by a client, and the bonds are not material to the member's wealth.
	C.	
The member belongs to a client golf club that requires members to acquire a share of the club's debt securities.
	D.	
The member's spouse qualifies because of geographical residence to belong to a client's credit union, and all transactions with the credit union are conducted under normal operating practices.

Choice "B" is correct. Although the bonds are not material in relation to the member's total wealth, independence is still impaired because the ownership of the bonds represents a direct financial interest in the client and a violation of the Independence Rule.
Choice "A" is incorrect. Independence is not violated because the member is the children's guardian, but is not a trustee of the estate held in trust for the children.
Choice "C" is incorrect. According to an AICPA ethics ruling, as long as the membership in the golf club is essentially a social matter, the covered member's association with the golf club would not impair independence because the debt ownership is not considered to be a direct financial interest.
Choice "D" is incorrect. Independence is not impaired by membership in a client credit union.
To ensure that the audit report for an issuer is prepared in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the report must:
	A.	
Attest to, and report on, the efficiency and effectiveness of the issuer's system of internal control.
	B.	
Be prepared within 60 days of the end of the issuer's fiscal year-end unless extenuating circumstances, as outlined in the act, are publicly disclosed.
	C.	
Attest to and report on the internal control assessment made by the management of the issuer.
	D.	
Be prepared within 60 days of the issuer's fiscal year-end, be certified by the Public Company Accounting Oversight Board, and be publicly disclosed.

Choice "C" is correct. Section 404 of the Sarbanes-Oxley Act of 2002 requires the company's external auditors to attest to, and report on, the internal control assessment made by management of the issuer.
Choice "A" is incorrect. Section 404 of the Sarbanes-Oxley Act of 2002 requires the company's external auditors to attest to, and report on, management's assessment of the effectiveness, not efficiency, of the issuer's system of internal control.
Choice "B" is incorrect. Section 404 of the Sarbanes-Oxley Act of 2002 does not require the audit report to be prepared within 60 days of the end of the issuer's fiscal year.
Choice "D" is incorrect. The audit report on the effectiveness of the issuer's systems of internal control is not certified by the Public Company Accounting Oversight Board.
The concept of materiality would be least important to an auditor when considering the:
	A.	
Discovery of weaknesses in a client's internal control.
	B.	
Adequacy of disclosure of a client's illegal act.
	C.	
Decision whether to use positive or negative confirmations of accounts receivable.
	D.	
Effects of a direct financial interest in the client on the CPA's independence.

Choice "D" is correct. Any direct financial interest in a client impairs independence, even if it is immaterial.
Choice "A" is incorrect. A material weakness in internal control will affect the nature, timing, and extent of audit procedures, whereas an immaterial weakness in internal control may have little impact on the audit.
Choice "B" is incorrect. A material illegal act may require disclosure in or adjustment to the financial statements, whereas an immaterial illegal act may not require disclosure.
Choice "C" is incorrect. An auditor is likely to use positive confirmations for material accounts receivable, but may consider negative confirmations for immaterial receivable balances.
Audit engagement team members should remain alert for evidence of noncompliance with which of the following relevant ethical requirements?
	A.	
Performing audit procedures efficiently and within expected time budgets.
	B.	
Performing professional responsibilities with the highest sense of integrity.
	C.	
Maintaining confidentiality of client information by not including it in the audit documentation.
	D.	
Maintaining a suspicious attitude, presuming that the client is dishonest until evidence proves otherwise.

Choice “B” is correct. A CPA should perform professional responsibilities with the highest sense of integrity. Audit engagement team members should remain alert for evidence of noncompliance with this ethical requirement.
Choice “A” is incorrect. There is no ethical requirement that audit procedures should be performed efficiently and within expected time budgets.
Choice “C” is incorrect. A CPA can include confidential client information in audit documentation. However, a CPA should not disclose any confidential client information without the specific consent of the client unless it falls under certain circumstances.
Choice “D” is incorrect. There is no ethical requirement that the auditor needs to maintain a suspicious attitude or presume that the client is dishonest until evidence proves otherwise. There is a requirement in GAAS to maintain professional skepticism throughout the audit, which involves having a questioning mind and critically assessing audit evidence received. The auditor neither assumes that management is dishonest nor assumes unquestioned honesty when exercising professional skepticism.
On August 1, Year 1, the former controller of a company becomes an audit manager with a public accounting firm. The new audit manager had been employed at the company for the past 10 years, resigned from the position on July 15, Year 1, and completed disassociation from the company on September 1, Year 1. According to the AICPA Code of Professional Conduct, in which, if any, of the following attest engagements involving the company could this manager participate without affecting the accounting firm's independence?
	A.	
A repeat audit for the public accounting firm, awarded on August 15, Year 1, of financial statements covering August 1, Year 1, through July 31, Year 2
	B.	
A first-time audit for the public accounting firm, awarded on September 15, Year 1, of financial statements covering November 1, Year 1, through October 31, Year 2
	C.	
A first-time audit for the public accounting firm, awarded October 15, Year 1, of the comparative financial statements covering January 1, Year 1, through December 31, Year 1, and January 1, Year 2, through December 31, Year 2
	D.	
Because of the former position as controller of the company, the new audit manager cannot participate directly in any attest engagements involving the company

Choice "B" is correct. The manager may participate in an audit of a period that begins after his or her employment and disassociation with the client. Therefore, an audit covering a period beginning November 1, Year 1, is acceptable because the manager completed disassociation from the company on September 1, Year 1. This engagement was not awarded until after the manager was disassociated.
Choice "A" is incorrect. Since the engagement covers a portion of the year during which the manager was still associated with the client, the manager could not participate as a member of the engagement team for an audit covering a period beginning August 1, Year 1.
Choice "C" is incorrect. Since the engagement covers a portion of the year during which the manager was employed by the client, the manager could not participate as a member of the engagement team for an audit covering a period beginning January 1, Year 1.
Choice "D" is incorrect. The manager may participate in attest engagements involving the company if the engagement does not cover any period of his or her former employment with the client.
Under the ethical standards of the profession in the United States, which of the following circumstances would impair independence in the audit of an issuer but would not impair independence in the audit of a nonissuer?
	A.	
The audit firm provided a loan to the client during the prior year.
	B.	
The firm performing the financial statement audit also designed and implemented the client's financial information system.
	C.	
The lead partner has worked on the audit engagement of a client for 10 years.
	D.	
The audit firm has an immaterial direct financial interest in the client.

Choice "C" is correct. The ethical standards that apply to the audits of issuers (SOX/PCAOB/SEC) require that the lead partner rotate off the audit engagement after five years. The AICPA Code of Professional Conduct, which is followed when auditing nonissuers, does not require audit partner rotation.
Choice "A" is incorrect. Loans to or from clients, other than loans from financial institutions under normal lending policies, are prohibited for audits of issuers and nonissuers under all ethical standards.
Choice "B" is incorrect. All U.S. ethical standards prohibit the performance of financial information systems design and implementation services for audit clients.
Choice "D" is incorrect. Any direct financial interest in a client impairs independence, whether the client is an issuer or a nonissuer.
A registered public accounting firm is conducting an audit of an issuer. Which of the following services may the auditor provide to the client while maintaining independence?
	A.	
Originating source data underlying the balance sheet.
	B.	
Preparing an organizational chart of the accounting department.
	C.	
Maintaining accounting records.
	D.	
Drafting documents that form the basis of financial statements filed with the SEC.

Choice "B" is correct. A registered public accounting firm auditing an issuer must follow the independence rules applicable to the PCAOB. Prohibited services include activities, among others, such as bookkeeping, appraisal, valuation, or actuarial services, or management functions. As the preparation of an organizational chart does not impact the preparation of the financial statements and is not listed as a prohibited service, this service would not impair independence under rules applicable to the PCAOB.
Choice "A" is incorrect. Originating source data underlying the balance sheet is considered bookkeeping, which is a prohibited service under the PCAOB independence rules.
Choice "C" is incorrect. Maintaining accounting records is considered bookkeeping, which is a prohibited service under the PCAOB independence rules.
Choice "D" is incorrect. Drafting documents that form the basis of the financial statements filed with the SEC is considered bookkeeping, which is a prohibited service under the PCAOB independence rules.
Which of the following statements is incorrect regarding the SEC's partner rotation rules?
	A.	
All audit partners must rotate off the audit engagement after five years.
	B.	
Small firms may be exempted from the partner rotation requirement.
	C.	
The lead and concurring partners are subject to a five-year time-out period.
	D.	
Other audit partners are subject to a two-year time-out period.

Choice "A" is correct. This statement is incorrect. Under the SEC's rules, the lead and concurring partner must rotate off the engagement after five years and other audit partners must rotate after seven years.
Choice "B" is incorrect. This statement is correct. Small firms with fewer than five clients who are issuers may be exempted from the partner rotation rules.
Choices "C" and "D" are incorrect. These statements are correct. The lead and concurring partners are subject to a five-year time-out period before they can return to an engagement. Other audit partners are subject to a two-year time-out period.