CPA Auditing and Attestation (AUD)

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CPA Auditing and Attestation (AUD) › CPA Auditing and Attestation (AUD)

Questions 1 - 10
1

A member of the AICPA performing an audit, review, compilation, or other professional services must abide by:

Professional competence

Strict audit procedures

PCAOB procedures

All of the answer choices are correct

Explanation

PCAOB procedures are to be obeyed for public company engagements. In addition to professional competence, there is due professional care, planning and supervision, and sufficient relevant data.

2

When a preparer conducts a preparation engagement, the accountant should:

Issue a disclaimer of opinion if he or she is unable to include a statement on each page of the financial statements

Perform a compilation engagement if he or she is unable to include a statement on each page of the financial statements

Both

Neither

Explanation

With a preparation requirement, the preparer must include a statement on each page of the financials. If he or she cannot, these two options are the only options.

3

A review engagement should express which of the following terms:

Managements objectives

Managements responsibilities

Auditors Responsibilities

All of the answer choices are correct

Explanation

AR Section 90; review of financial statements. Section .04 states that the engagement determines: management responsibility, the auditor’s responsibility, and management objectives.

4

Agreed-upon procedures can be performed as long as the following conditions are present:

Practitioner independence

Party agreement

Sufficient procedures

All of the answer choices are correct

Explanation

All of these factors must be present for an agreed-upon procedure engagement to be conducted.

5

Government Accounting Standards

Require a written report on internal control

Require a written report on compliance with applicable laws and regulations

May require a duty to report fraud

All of the answer choices are correct

Explanation

Under GASB standards the auditor is required to report on internal control. The written report is also required to establish compliance with applicable laws and regulations and may require a duty to report fraud.

6

Each of the following types of controls is considered to be an entity-level control, except those:

Pertaining to the company's risk assessment process

Regarding the company's annual shareholder meeting

Addressing policies over significant risk management policies

Relating to the control environment

Explanation

Entity level controls include controls related to the control environment, the risk assessment process, and the policies over risk management policies. Controls regarding the company's annual shareholder meeting are controls related to a specific event rather than the entity as a whole.

7

“Responsibilities Principle” requires a member to:

uphold a client’s wishes

maintain public confidence

Provide information to those requesting

All of the above

Explanation

Under the AICPA code of professional conduct, the responsibility principle refers to maintaining public trust.

8

Sufficient evidence refers to:

Type of evidence

Amount of evidence

Quality of evidence

Approved evidence

Explanation

Sufficient evidence refers to the amount of evidence. It is sufficient in quantity to enable the auditor to express a reasonable judgment.

9

Of the following duties included in the inventory cycle, which should be segregated to maintain proper internal controls?

Purchasing

Receiving

Warehousing

All of the answer choices are correct

Explanation

All of these duties, in addition to shipping, would need to be segregated in order to maintain proper internal controls.

10

In developing an overall audit strategy, the auditor should consider:

Findings from substantive tests performed at interim dates

Preliminary evaluations of materiality, audit risk, and internal control

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

Explanation

In developing an overall audit strategy, an auditor should consider preliminary evaluations of materiality, audit risk, and internal control.

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