ABA Audit & Attestation Services 2 — Questions and Answers
Question 1: Which type of audit opinion is issued when financial statements are presented fairly in all material respects in accordance with GAAP?
- Qualified opinion
- Unmodified opinion (Correct answer)
- Adverse opinion
- Disclaimer of opinion
Correct answer: Unmodified opinion
An unmodified (clean) opinion means the auditor found no material misstatements and the statements conform to GAAP.
Question 2: An auditor discovers that the client's management has intentionally misstated inventory values. This situation most likely requires the auditor to:
- Issue a qualified opinion
- Issue an adverse opinion
- Withdraw from the engagement (Correct answer)
- Increase substantive testing only
Correct answer: Withdraw from the engagement
Intentional misstatement by management (fraud) impairs the auditor-client relationship and typically requires withdrawal from the engagement.
Question 3: Under attestation standards, a practitioner performing an agreed-upon procedures engagement reports findings to:
- The general public
- The SEC only
- Specified parties who agreed to the procedures (Correct answer)
- All known creditors
Correct answer: Specified parties who agreed to the procedures
Agreed-upon procedures reports are restricted to the specified parties who agreed to and are responsible for the sufficiency of the procedures.
Question 4: Which sampling method gives every item in the population an equal chance of being selected?
- Systematic sampling
- Haphazard sampling
- Simple random sampling (Correct answer)
- Block sampling
Correct answer: Simple random sampling
Simple random sampling ensures each item has an equal and independent probability of selection, making it statistically representative.
Question 5: Analytical procedures used during the planning phase of an audit are primarily intended to:
- Detect all material misstatements
- Identify unusual relationships that may indicate risk areas (Correct answer)
- Replace substantive tests for low-risk accounts
- Satisfy documentation requirements
Correct answer: Identify unusual relationships that may indicate risk areas
Planning-stage analytical procedures help identify areas with higher risk of misstatement so the auditor can allocate resources effectively.
Question 6: Which of the following best describes 'audit risk'?
- The risk that the auditor will lose their license
- The risk that a material misstatement exists and the auditor fails to detect it (Correct answer)
- The risk that internal controls will fail
- The risk that management will commit fraud
Correct answer: The risk that a material misstatement exists and the auditor fails to detect it
Audit risk is the risk that the auditor expresses an inappropriate opinion when financial statements are materially misstated.
Question 7: When an auditor lacks independence, what report should be issued for a compilation engagement?
- A qualified compilation report
- No report can be issued under any circumstance
- A compilation report with a paragraph disclosing the lack of independence (Correct answer)
- An adverse opinion
Correct answer: A compilation report with a paragraph disclosing the lack of independence
SSARS allows a compilation report to be issued when the accountant lacks independence, provided the lack of independence is disclosed in the report.
ABA Audit & Attestation Services 2
Which type of audit opinion is issued when financial statements are presented fairly in all material respects in accordance with GAAP?