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Practice Test 7 - CPA Auditing & Attestation (AUD)

20 questions. Answer them in any order, then submit to see your score and every explanation.

  1. An issuer requests that its auditor perform an audit of the company's financial statements for inclusion in a registration statement. The auditor will obtain reasonable assurance and express an opinion on the financial statements. Under these circumstances, which engagement should be performed?
  2. An auditor is engaged to audit the financial statements of a nonissuer that are prepared in conformity with a special-purpose framework (cash basis). To avoid misunderstandings, the engagement letter should include a statement that
  3. During an audit of a nonissuer wholesaler, the auditor proposes an adjustment to write down obsolete inventory by $240,000. Management records $200,000 and argues the remaining $40,000 is 'close enough.' Overall materiality is $500,000 and performance materiality is $300,000; other uncorrected misstatements total $290,000. Which factor would most likely affect the auditor's decision regarding the misstatement?
  4. As part of a single audit under the Uniform Guidance, what is the auditor's reporting responsibility concerning the Schedule of Expenditures of Federal Awards (SEFA)?
  5. Which planned substantive procedure would provide the most persuasive evidence in response to the high estimation uncertainty for the allowance for doubtful accounts?
  6. A nonissuer engages you to perform an examination of a compliance schedule under AICPA attestation standards (AT-C). The schedule includes a note stating it is prepared on a cash basis, but the engagement letter and applicable criteria require accrual basis; management refuses to change the basis or disclose the departure as a departure from the criteria. Which modification is required for the report?
  7. An accountant performing a review concludes there is substantial doubt about an entity's ability to continue as a going concern. Management has included adequate disclosures regarding this matter in the financial statements. How should the accountant's review report be modified?
  8. An auditor's final evaluation of the sufficiency and appropriateness of audit evidence is most influenced by the:
  9. You are auditing an issuer and send positive confirmations to customers. One response is received from a domain that differs slightly from the customer's known domain (e.g., ".co" instead of ".com") and the response confirms the balance exactly, but the customer's accounts payable contact is different from prior-year correspondence. Which factor would most likely lead the auditor to question the reliability of a confirmation response?
  10. An accountant is engaged to perform a compilation engagement for a nonissuer retailer on financial statements prepared using a special purpose framework. Management refuses to include substantially all disclosures because "the bank only wants the numbers," and the omission is not intended to mislead. Which report modification is appropriate given the circumstances?
  11. An engagement team member on the audit of an issuer has a credit card issued by a bank that is also the issuer audit client. The card has a $3,000 balance that is paid in full each month, and the terms are standard for the general public. Based on SEC/PCAOB standards, which response is correct?
  12. An auditor is planning an audit of a nonissuer entity with significant estimates for allowance for credit losses. Economic conditions in the entity's primary market have deteriorated, and management changed its estimation methodology late in the year. How should the auditor adjust the audit plan for identified risks?
  13. You are the auditor of an issuer and are nearing completion of the audit. A key specialist needed to evaluate an environmental remediation liability becomes unavailable, and management will not provide an alternative specialist's report for three weeks, pushing the expected report date past the Form 10-K filing deadline. Which information should the auditor prioritize in communication with governance?
  14. A nonissuer retailer is being audited and uses a cloud-based point-of-sale (POS) provider that processes sales transactions and transmits daily sales summaries to the general ledger. The SOC 1 Type 1 report is dated three months before year-end and describes controls over completeness of sales transmission but does not test operating effectiveness; it also identifies that user management must review daily exception reports for failed transmissions. Based on the SOC 1 report, which audit procedure is most appropriate?
  15. What is a primary limitation of using a pre-printed standard internal control questionnaire (ICQ) to document an auditor's understanding of a business process?
  16. In evaluating the feasibility of management's plan, which of the following pieces of evidence would be the most persuasive?
  17. You are auditing a nonissuer wholesale distributor under AICPA standards. A regional fuel shortage and trucking capacity constraints caused delivery delays and increased freight costs, and customers began rejecting late shipments more frequently. Management recorded revenue when goods left the warehouse (FOB shipping point) but changed certain contracts to FOB destination late in the year to retain customers. What is the most appropriate audit procedure given the industry trend?
  18. A CPA firm audits an ERISA plan under Department of Labor requirements. The plan sponsor asks the auditor to represent the plan during a Department of Labor investigation related to late remittance of employee contributions, including drafting responses and negotiating with investigators. Under DOL requirements, which situation would impair auditor independence?
  19. During an audit of a nonissuer real estate company, the auditor finds that depreciation expense is understated by $150,000 due to an incorrect useful life. Overall materiality is $1.0 million and the clearly trivial threshold is $50,000. Management agrees to correct the current-year depreciation but refuses to restate prior-year comparative amounts presented for consistency. Which action should the auditor take regarding the identified misstatement?
  20. A nonissuer client has requested a CPA to provide a service that results in a report expressing an opinion on the company's compliance with specific provisions of a debt covenant. The report will be restricted to the client and the lender. Which type of engagement should the CPA perform?

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