CHAPTER 4: MANAGEMENT OF A PUBLIC ACCOUNTING PRACTICE

Multiple Choice Questions

1. In connection with the component of "Governance and Leadership", a CPA fin's SCM system should ordinarily
prove that all personnel
a.Have the knowledge required to enable them to fulfill responsibilities assigned
2. Quality management for a CPA firm, as referred to in auditing standards, applies to
d. Auditing and accounting and review services
3. The least important component in the evaluation of a CPA firm's system of quality management would concern its
policies and procedures with respect to
d. Determination of audit fees
4. A basic objective of a CPA firm is to provide professional services that conform with professional standards.
Reasonable assurance of achieving this basic objective is provided through
b. A system of quality management
5. The primary purpose of establishing a system of quality management and procedures for deciding whether to
accept a new client is to
c. Minimize the likelihood of association with clients whose management lacks integrity
6. The nature and extent of a CPA fir's system of quality management and procedures depend on
a
The CPA Firm's Size- yes
The Nature of the CPA Firm's Practice Yes
Cost-Benefit ConsiderationsYes
7. The individual(s) assigned ultimate responsibility and accountability for the firm's system quality of management
shall have the following qualifications, except:
d. Need not know how to apply its requirements
8. The primary reason why a CPA firm establishes a system of quality management policies and procedures for
human resources is to
d. Provide reasonable assurance that staff personnel will have the capability, competence and commitmént
to ethical principles required to enable them to fulfill their responsibilities in accordance with professional
standards and regulatory and legal requirements
9. in pursuing its system of quality management objectives with respict to assigning personnel to engagements, a
CPA firm may use policies and procedures such as the following, except
b. Requiring timely identification of the staff requirements of specific engagements so that enough qualified personnel
can be made available
10. The ultimate responsibility and accountability for the system of quality management (SOM) in a firm may rest with
the following, except:
C. Managing food of partners
11. Whoever is assigned to take responsibility of the system of quality management should possess the following
qualifications, except:
a.Appropriate expenses
b. Knowledge
c. Masteral degree in Business Administration
d. Influence and authority
12. The firm shall design and implement in its SOM a risk assessment process that will accomplish the following,
except:
a. Establishing quality objectives
b. Identify and assess quality risks
c. Design and implement response to address the quality risks
d. Pinpoint the leader who will be responsible for the successful implementations of the SOM
13. Under the component of "Governance and leadership" of the SQM, the firm is required to establish the
environment that supports the system of SQM as follows, except:
d. Leadership disregards the resource needs including financial
resources
14. Under the component "Relevant Ethical Requirements" firms are required to establish the following quality
objectives, except:
a. The network, firms, individuals in the network or service provides need not be concerned with the ethical
requirements to which the firm and the firm's engagement are subject
15. On "Engagement Performance" component, a firm shall establish the following quality objectives among the
others as follows
C. The nature, timing and extent of direction and supervision of engagement teams and review of the work
performed is appropriate based on the nature of the engagements and the resources assigned
16.In relation to engagement performance, the following quality objectives must be established by the firm to ensure
that
a. Engagement teams exercise appropriate professional skepticism
b. Consultation on different or conclusions matter is undertaken and the conclusions agreed are implemented
c. Engagement documentation is asserted in a timely basis after the date of the engagement report and maintained
and retained to meet the needs of the firm and comply with law, regulation, relevant ethical requirement or
professional standard
d. All of the above
17. Which of the requirements of SOM is related to the establishment of quality objectives that addresses
appropriately developing, suing, maintaining and allocating resources in a timely manner to enable the design,
implementation and operation of the SQM?
c. Resources
18. The accounting firm should establish policies and procedures assigned to promote an internal culture based on
the recognition that quality is essential in performing engagements. This may be communicated through the following
means except
с.Publication in PICPA newsletter.
19. In pursuing its system of quality management objectives with respect to acceptance of a client, a CPA firm is not
likely to
d. Review the personnel practices of the proposed client.
20. In pursuing its system of quality management objectives with respect to independence, a CPA firm may use
policies and procedures such as the following except
b.Prohibiting employees from owning shares of the stock of publicly traded companies.
21. Which of the following is not a component of the system of quality management that should be considered by a
firm of independent auditors?
c. Keeping records of quality control policies and procedures
22. A firm of CPAs may use policies and procedures such as notifying professional personnel as to the names of
audit clients having publicly held securities and confirming periodically with such personnel that prohibited relations
do not exist. This is done to achieve effective quality control in which of the following areas?
c. Ethical requirements
23. A CPA establishes a system of quality management policies and procedures for deciding whether to accept a
new client or to continue to perform services for a current client. The primary purpose for establishing such policies
and procedures is to
d. Minimize the likelihood of association with clients whose management, lacks integrity.
24. In pursuing its quality control objectives, a CPA firm may maintain records indicating which of its partners or
employees were previously employed by its clients. Which quality management component would this be most likely
to satisfy?
C.Ethical requirements
25. A process comprising-an ongoing consideration and evaluation of the firm's systern or quality management
including a periodic inspection orig selection of completed engagements designed to provide the firm with reasonable
scuranet that is system of quality management is operating
effectively.
b.Monitoring
26. Which of the following does a firm need not establish and maintain a system of quality management for?
c. Maximizing revenue
27. This refers to an approximation of the amount of an item in the absence of a precise means of measurement.
d. Accounting estimate
29. A requirement that working papers be reviewed by the supervisor, and any deficiencies be discussed with the
preparer is an example of a quality management procedure in the area of:
c. Human resources.