GLIMPSE OF A CPA'S MIND

1. Auditing standards differ from auditing procedures in that procedures relate to a) Measure of performance. b) Audit principles. c) Acts to be performed. d) Audit judgments. 2. The independent auditor of 1900 differs from the auditor of today in that the 1900 auditor was more concerned with the a) Validity of the income statement. b) Determination of fair presentation of financial statements. c) Improvement of accounting systems. d) Detection of irregularities. 3. The first general standard of generally accepted auditing standards which states, in part, that the examination is to be performed by a person or persons having adequate technical training, requires that an auditor have a) Education and experience in the field of auditing. b) Ability in the planning and supervision of the audit work. c) Proficiency in business and financial matters. d) Knowledge in the areas of financial accounting. 4. The first standard of field work, which states that the work is to be a

1. If I believe in the basic principle of a risk-reward relationship, my conclusion regarding security ratings and yields between an Aaa bond and a Baa bond would be that: A. the Aaa bond would have the lower yield.  (CORRECT ANSWER)                         B.  the Aaa bond would have the higher yield.                         C. the Baa bond would have lower default risk. D. default risks would differ but yields would be equal. 2. A firm's degree of operating leverage (DOL) depends primarily upon its A. sales variability.                         B. level of fixed operating costs.                         C. closeness to its operating break-even point./(CORRECT ANSWER)                         D. debt-to-equity ratio. 3. An EBIT-EPS indifference analysis chart is used for             A. evaluating the effects of business risk on EPS.                         B. examining EPS results for alternative financing plans at varying EBIT levels./ (CORRECT ANSWER)