1. The CPA firm will lose its independence if:

a. a staff auditor providing audit services to the client acquires stock in that client.
b. a staff tax preparer who provides 15 hours of non-audit services to the client acquires stock in that client.
c. a staff tax preparer who provides 15 hours of non-audit services to the client acquires stock in that client.
d. a staff tax preparer who provides 15 hours of non-audit services to the client acquires stock in that client.

2. An auditor strives to achieve independence in appearance to

a. maintain public confidence in the profession.
b. be in a position to offer other services to the client.
c. comply with the generally accepted accounting principles.
d. maintain a biased mental attitude.

3. Several months after an unqualified audit report was issued, the auditor
discovers the financial statements were materially misstated. The client’s CEO
agrees that there are misstatements, but refuses to correct them. She claims
that “confidentiality” prevents the CPA from informing anyone.

a. The CEO is correct and the auditor must maintain confidentiality.
b. The CEO is incorrect, but because the audit report has been issued it is too late.
c. The CEO is correct, but to be ethically correct the auditor should violate the confidentiality rule and disclose the error.
d. The CEO is incorrect, and the auditor has an obligation to issue a revised audit report, even if the CEO will not correct the financial statements.

4. Which of the following groups would not be involved in an operational
audit?

a. Functional audits.
b. Organizational audits.
c. Single Audit Act audits.
d. Special assignment audits.

5. Auditing standards _______ external auditors to use the internal auditors for
direct assistance on the audit.

a. discourage
b. prohibit
c. encourage
d. permit