Questions 1. Why is it important that people and organizations have trust in the financial reporting process? 2. What is the Securities and Exchange Commission? 3. What types of companies fall under the jurisdiction of the SEC? 4. Who has the SEC given responsibility to for setting generally accepted accounting principles (GAAP) in the United Sta 5. Who is the Emerging Issues Task Force? 6. Why doesn't the SEC examine all the financial statements submitted to it to ensure their accuracy? 7. For what must public companies hire an auditing firm before they submit their financial statements to the SEC? 8. Why would a nonpublic company have its statements audited? 9. What is a CPA? 10. Which organization sets standards for and regulates firms who audit public companies? 11. Which act established the Public Company Accounting Oversight Board? 12. Which organization sets standards for and regulates firms who do not audit public companies? 13. What type of assurance does an audit provide? 14. Why do audits not provide absolute assurance that financial statements are presented fairly according to GAAP? 15. What are internal controls? 16. How is an auditor's work affected by a company's internal controls? 17. What principles guide the implementation of an internal control system? 18. What are examples of internal control procedures? 19. To whom is the audit report addressed? 20. What is an unqualified opinion? 21. Why would an auditor include an explanatory paragraph in an audit report? 22. Why would an auditor not give an unqualified opinion! True or False 1 3. 4. 5. 6. 7 8. 9 10 11 12 The quality of a company's internal controls has no effect on the work of an auditor. Acquiring the CPA designation requires a candidate to pass an exam, meet education requirements, and meet expe The SEC is the current accounting standard setting body in the United States The inclusion of an explanatory paragraph in an audit report is an indication that the financial statements should n The PCAOB oversees auditors of public companies Nonpublic companies have no reason to have an audit of their financial statements performed. If one manager approval is a good internal control then two approvals is always better. An individual who handles cash should not also be able to do the record keeping for cash. Audits are paid for by the creditors and investors of a company. CPAs can work for large, multinational firms, or for small, local firms. Auditors provide reasonable assurance that financial statements are fairly presented in accordance with U.S. GAA The Financial Accounting Standards Board is a governmental agency