CPA Auditing and Attestation (AUD) : CPA Auditing and Attestation (AUD)
Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)
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Example Questions
Example Question #13 : Quality Control, Engagement Acceptance, Planning, & Internal Control
Materiality levels are set by:
SEC
AICPA
Professional Judgement
FASB
Professional Judgement
Materiality levels are set by the judgment of the auditor. The auditor may use industry standards to help in determining the materiality level, however, experience and judgment are the final determinants.
Example Question #171 : Cpa Auditing And Attestation (Aud)
In developing an overall audit strategy, the auditor should consider:
Whether the inquiry of the client's attorney identifies any litigation, claims, or assessments not disclosed in the financial statements
Whether the allowance for sampling risk exceeds the achieved upper precision limit
Preliminary evaluations of materiality, audit risk, and internal control
Findings from substantive tests performed at interim dates
Preliminary evaluations of materiality, audit risk, and internal control
In developing an overall audit strategy, an auditor should consider preliminary evaluations of materiality, audit risk, and internal control.
Example Question #172 : Cpa Auditing And Attestation (Aud)
During the initial planning phase of an audit, the auditor would most likely:
Discuss the timing of the audit procedures with the client's management
Inquire of the client's attorney as to whether any unrecorded claims are probable of assertion
Evaluate the reasonableness of the client's accounting estimates
Identify specific internal control activities that are likely to prevent fraud
Discuss the timing of the audit procedures with the client's management
Procedures that an auditor may consider in planning the audit include discussing the type, scope, and timing of the audit with the client's management.
Example Question #174 : Cpa Auditing And Attestation (Aud)
The users of a company's set of financial statements would be:
Shareholders
Both
Creditors
Neither
Both
Both creditors and shareholders would need access to reliable financial statements in order to decide if the company is worth investing in or lending money to.
Example Question #15 : Quality Control, Engagement Acceptance, Planning, & Internal Control
Risk is communicated in the audit report as:
adequate assurance
absolute assurance
reasonable assurance
minimal assurance
reasonable assurance
The concept of reasonable assurance is used to guide the auditor when assigning and assessing risk in the audit process.
Example Question #1 : The Audit Process Risk Assessment
Risk of material misstatement exists at:
Neither A and B
The overall financial statement level
Both A and B
In each transaction
Both A and B
The risk of misstatement appears at the transactional level as well as the financial statement level. The statements can be materially misstated in the aggregate based on a series of misstated transactions or on the whole.
Example Question #1 : The Audit Process Risk Assessment
Inherent risk is defined as:
Due to factors other than internal control
Risk that material misstatement would not be detected by internal controls in place
Risk that was not detected by appropriate internal controls
None of the above
Due to factors other than internal control
Inherent risk is defined as risk that exists outside the audit process. It is sometimes termed industry risk.
Example Question #173 : Cpa Auditing And Attestation (Aud)
The objective of performing analytical procedures in planning an audit is to identify the existence of:
Acts of noncompliance with laws and regulations that went undetected because of internal control weaknesses.
Recorded transactions that were not properly authorized
Unusual transactions and events
Related party transactions
Unusual transactions and events
The objective of performing analytical procedures during planning is to discover unusual transactions or events that may have an impact on the planning of the financial statement audit.
Example Question #174 : Cpa Auditing And Attestation (Aud)
An auditor compared the current year gross margin with the prior year gross margin to determine if the cost of sales is reasonable. What type of audit procedure was performed?
Test of details
Test of transactions
Analytical procedures
Test of controls
Analytical procedures
Analytical procedures are evaluations of financial information made by a study of plausible relationships among data and they include comparisons between the current year and prior year's financial information.
Example Question #175 : Cpa Auditing And Attestation (Aud)
If the management of a company with recently audited financial statements refuses to make a revision to the statements as a result of a material inconsistency, the auditor should __________.
Either
Withdraw from the engagement
Modify the audit opinion
Neither
Either
An auditor may modify the opinion of his or her audit if management refuses to correct a material issue, or withdraw from the engagement altogether.
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