The SEC approves the PCAOB’s rules
The members of the PCAOB are appointed by the SEC
The SEC approves the PCAOB’s budget
The SEC determines which audit firms will be inspected by the PCAOB

In 2003, the PCAOB adopted certain auditing standards of the ASB as interim standards
In 2003, the PCAOB developed over 100 new auditing standards
In 2003, the PCAOB developed audit standards to audit all companies, private and public
In 2003, the PCAOB adopted all the standards of the AICPA to save time in the development of new standards

The PCAOB receives its authority from the SEC
Auditing standards issued by the PCAOB must be approved by the SEC
Anyone who wants to purchase stock on a U.S. stock exchange must follow the rules of the SEC
All audit firms performing audits of public companies are registered with and agree to comply with the auditing procedures established by the PCAOB

The PCAOB receives its authority from the SEC
Auditing standards issued by the PCAOB must be approved by the U.S. Congress
Anyone who wants to purchase stock on a U.S. stock exchange must follow the rules of the SEC
All audit firms performing audits of public companies are registered with and agree to comply with the auditing standards established by the PCAOB

residence
valuation and allocation
accuracy
classification

existence or occurrence
valuation and allocation
accuracy
categorization

existence or occurrence – for both classes of transactions and account balances
completeness – account balances
valuation and allocation – for account balances
rights and obligations – for classes of transactions and account balances
accuracy – for classes of transactions and account balances
both A and C
both B and D

existence or occurrence – for both classes of transactions and account balances
completeness – for both classes of transactions and account balances
valuation and allocation – for classes of transactions and account balances
rights and obligations – for classes of transactions and account balances
accuracy – for classes of transactions and account balances
both A and B
both C and D
both D and E

determine the nature, timing, and extent of inherent risk assessment procedures
identify and assess the risk of misstatement
determine the nature, timing, and extent of audit procedures
establish an amount below which misstatements will always be evaluated as immaterial
C and D

determine the nature, timing, and extent of inherent risk assessment procedures
identify and assess the risk of material misstatement
determine the nature, timing, and extent of internal control procedures
establish an amount below which misstatements will always be evaluated as immaterial

inaccuracies in gathering or processing data used to audit the financial statements
the use of auditing standards that may be unreasonable or inappropriate
differences between the amount or classification of a financial statement item and what should have been reported under generally accepted auditing standards
omissions of financial statement explanations
financial statement disclosures that are not in accordance with generally accepted accounting principles

the use of auditing standards that the auditor may consider unreasonable or inappropriate
inaccuracies in gathering or processing data used to audit the financial statements
differences between the amount or classification of a financial statement item and what should have been reported under generally accepted accounting principles
omissions of financial statement explanations
financial statement disclosures that are not in accordance with generally accepted auditing standards

The internal control function in a company is a process designed by management and others charged with governance to provide reasonable assurance that the financial statements are prepared in accordance with the COSO financial reporting framework.
Management develops internal controls to prevent or detect misstatements in the financial statements.
The auditor reviews the internal controls developed by management to assess whether the internal controls are effective in detecting misstatements.
The auditing standards define internal controls over financial statements as processes designed by management and others charged with governance to provide assurance that company responsibilities are met.

Significant deficiencies are reported in a management letter.
Material weaknesses are verbally reported to the audit committee.
Deficiencies that fail to reach the level of significant deficiencies or material weaknesses are reported in a management letter.
Significant deficiencies and material weaknesses may be verbally reported to both management and the audit committee.

a control deficiency or a combination of control deficiencies that adversely affects the company’s ability to initiate, authorize, record, process, or report internal financial data reliably in accordance with an applicable financial reporting framework
a control deficiency or a combination of control deficiencies that adversely affects the company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with an applicable financial reporting framework
a control deficiency or combination of control deficiencies that result in more than a remote likelihood that a material misstatement in the financial statements would not be prevented or detected
a control deficiency or combination of control deficiencies that results in a remote likelihood that a material misstatement in the financial statements would not be prevented or detected

a definition of a significant deficiency and a material weakness
a statement that the objective of the audit is to report on the financial statements and to provide assurance on internal controls
a statement that the communication is intended solely for the use of stockholders, the board of directors, the audit committee, and management
a statement that there is no such thing as absolute assurance

Compare sales revenue, accounts receivable, sales returns and allowance, bad debt expense, and allowance for uncollectible accounts for the current year to the prior year. Investigate changes from the auditor’s expectations that appear to be unreasonable.
Compare sales revenue, accounts payable, sales returns and allowance, bad debt expense, and allowance for uncollectible accounts for the current year to the prior year. Investigate changes from the auditor’s expectations that appear to be unreasonable.
Calculate the accounts receivable turnover ratio and the number of days outstanding in accounts receivable for the current and prior years. Investigate a change from the auditor’s expectations if it appears to be unreasonable.
Calculate the accounts receivable turnover ratio and the number of days outstanding in accounts payable for the current and prior years. Investigate a change from the auditor’s expectations if it appears to be unreasonable.
Consider the number of vendor accounts for the current year and the prior year and new accounts added and lost in each year.
both A and C
both B and E

knowledge of the client’s industry
knowledge of current political conditions
knowledge of prior economic conditions
an understanding of the client’s competitors
an understanding of the business under audit
both A and E
both B and C

existence and occurrence
accuracy
valuation or allocation
completeness
presentation and disclosure
both A and B
both A and D

the balance in accounts receivable is immaterial
the use of confirmations would be effective if the amounts were significant
the auditor can reduce the risk of issuing an audit opinion to an acceptable low level without confirming accounts receivable
the client believes that confirmations are not necessary