Auditing and Attestation Flashcards
7 cards from real AICPA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Auditing and Attestation flashcards as text
Which condition must exist for an auditor to issue a going concern explanatory paragraph in an otherwise unmodified opinion?
Answer: Substantial doubt about the entity's ability to continue as a going concern
Under AU-C 570, if substantial doubt about going concern exists after considering management's plans, the auditor adds an explanatory paragraph to the audit report.
What is the primary purpose of a management representation letter?
Answer: To obtain written confirmation of management's oral representations and acknowledge their responsibilities
The management representation letter confirms oral statements made during the audit and reminds management of their responsibility for the financial statements and disclosures.
Under attestation standards, a practitioner performing a review of prospective financial statements should issue a:
Answer: Report expressing limited assurance that no material modifications are needed
A review of prospective financial statements provides limited (negative) assurance, concluding that nothing came to the practitioner's attention indicating the statements are not presented in conformity with AICPA guidelines.
Attribute sampling is most commonly used by auditors to:
Answer: Test the operating effectiveness of internal controls
Attribute sampling estimates the rate of deviation (exception rate) in a population to test whether controls are operating effectively.
Which of the following best describes 'significant deficiency' in internal control?
Answer: A deficiency less severe than a material weakness but important enough to merit attention by those charged with governance
A significant deficiency is less severe than a material weakness but significant enough that those charged with governance should be informed.
An auditor uses the work of a specialist to value a unique piece of artwork owned by the client. If the specialist's findings are used as audit evidence, the auditor:
Answer: Still retains full responsibility for the audit opinion
Using a specialist's work does not reduce the auditor's responsibility for the audit opinion; the auditor must evaluate the specialist's competence, objectivity, and work product.
When auditing related-party transactions, the primary auditor concern is that these transactions are:
Answer: Disclosed and not recorded at arm's-length terms without disclosure
Related-party transactions may not occur at arm's length and require specific disclosure; the auditor must determine if transactions are properly identified, authorized, and disclosed.