Practice Test 9 - CPA Auditing & Attestation (AUD)

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

Start practice test

1. An auditor is required to exercise professional skepticism when considering the risk of material misstatement due to fraud. Which of the following best exemplifies the application of professional skepticism?
2. Under these circumstances, the auditor should
3. You are auditing an issuer in an audit engagement conducted under PCAOB standards. The company records inventory at standard cost and applies a variance analysis control to adjust to actual; however, you observed large unfavorable purchase price variances were not investigated and were instead allocated to ending inventory to meet gross margin targets. Controls exist but appear subject to management override. Which audit procedure should the auditor perform to verify inventory valuation?
4. Which of the following statements best describes the primary objective of an auditor's report on compliance for a major program performed under the Uniform Guidance?
5. You are auditing an issuer in an integrated audit. The company performs quarterly control self-assessments, but results are compiled by the same process owners being evaluated, and negative findings are frequently removed before reporting to management. There is no independent validation by internal audit. Which internal control component needs strengthening?
6. Which of these deficiencies is the auditor required to communicate in writing to those charged with governance?
7. Which of the following best distinguishes the auditor's responsibility for "other information" from their responsibility for "required supplementary information" (RSI)?
8. A CPA audits an issuer under PCAOB standards. The auditor is unable to obtain sufficient appropriate evidence regarding an investee accounted for under the equity method because the investee's financial information is unaudited and access is denied; the investment and related earnings are material but not pervasive to the consolidated financial statements. No other issues exist. What type of audit opinion should be issued?
9. The auditor's judgment could be most negatively impacted by the "availability heuristic," which could cause the auditor to:
10. Based on this information, what is the projected misstatement for the entire population?
11. You are planning an audit of a nonissuer entity that has experienced rapid growth funded by short-term borrowing. Management has delayed vendor payments and is negotiating with lenders for covenant waivers. What risk factor should the auditor focus on during planning?
12. A nonissuer client engaged your firm for an audit of its financial statements. After the engagement begins, management asks the auditor to also provide a report on prospective financial information for potential investors. The client's industry is cyclical and forecasts are highly sensitive to assumptions, increasing engagement risk. Based on the provided facts, what modification to the engagement terms is necessary?
13. An accountant is engaged to perform a review of a nonpublic entity's interim financial statements in accordance with SSARS. During the review, the accountant becomes aware of conditions that indicate substantial doubt about the entity's ability to continue as a going concern. What is the accountant's primary responsibility?
14. A CPA firm agreed to perform a year-end audit of a privately held medical clinic (a nonissuer). Midway through planning, the clinic acquires a second location and begins billing through a new third-party platform, increasing risks related to revenue completeness and data access. Based on these changed circumstances, what modification to the engagement terms is most appropriate?
15. You are auditing a nonissuer apparel manufacturer under AICPA standards. A supply chain disruption caused raw material shortages and forced the company to purchase substitute materials at higher prices, and customer demand shifted away from certain product lines, creating excess finished goods. Management has not evaluated whether certain inventory items are obsolete and continues to value them at standard cost without considering net realizable value. What is the most appropriate audit procedure given the industry trend?
16. You are auditing a nonissuer entity and the CFO requests that you omit a going concern emphasis paragraph even though substantial doubt remains and adequate disclosure is required. The CFO states that including such language will "destroy the company" and offers to increase your firm's consulting work if you comply. What measure should be taken to address the integrity challenge?
17. Management has asserted that the company is a going concern despite significant recurring operating losses and negative cash flows. Which of the following pieces of audit evidence would be most persuasive in supporting management's assertion and mitigating the going concern uncertainty?
18. During an integrated audit of an issuer, the auditor identifies that the company's control over management review of monthly financial results consists of a meeting with no documented follow-up on unusual fluctuations. This year, "other income" increased significantly due to one-time vendor rebates that were booked based on emails rather than executed agreements. Other income is material to earnings. Which testing procedure should the auditor implement?
19. You are auditing a nonissuer in an audit engagement. The client values inventory at weighted average cost, but you identified the system is including purchase returns as positive quantities, inflating unit costs. Internal controls include monthly inventory reconciliations, but the reconciliation does not investigate unusual cost fluctuations. Which audit procedure should the auditor perform to verify inventory valuation?
20. During an audit of an issuer, internal control assessment analytics identify that 18% of purchase orders were approved after the goods receipt date, and 6% of invoices were paid without a three-way match exception being documented as resolved; these rates increased significantly in the last quarter. Management states the enterprise resource planning (ERP) system "sometimes timestamps incorrectly" but provides no system change logs. Which action should the auditor take based on the data analytics results?

Practice tests